Exhibit 10.1


 


Silicon Laboratories Inc.


 


2006 Bonus Plan


 


Overview


 


Silicon Laboratories
Inc. (“Silicon Labs”) is committed to sharing its success with the people who
make it possible — the Silicon Labs employees.  The Compensation Committee
of the Board of Directors approved this 2006 Bonus Plan (the “Plan”) to
encourage participation by Silicon Labs employees in achieving company goals
and to permit Silicon Labs employees to share in the rewards of our
success.  The term of this Plan is for the 2006 fiscal year.


 


Eligible
Employees


 


To be eligible to
participate in the Plan, a person must be a regular full-time or part-time
employee of Silicon Labs or one of its wholly-owned subsidiaries and not a
participant in any other bonus plan or cash incentive plan (including any sales
commission plan) unless participation under the Plan is permitted under the
terms of such other plan .


 


Bonus
Calculation


 


Our business strategy
has always been for Silicon Labs to be a growth company with strong
profitability.  Accordingly, bonuses under the Plan will be largely
dependent on Silicon Labs’ adjusted operating income as a percentage of
revenue, rounded to the nearest tenth of a percent with 0.05% rounded up (the “Adjusted
Operating Income %”).  Adjustments will be made from time to time at the
sole discretion of the Compensation Committee to include or exclude certain
items.  An example of a potential adjustment would be the exclusion of an
expense item such as the amortization of deferred stock compensation.  Bonuses
may also be made dependent on individual or company performance criteria as
established by the Compensation Committee (or its designee).  In addition to adjusted operating income,
such alternative criteria may include, without limitation, revenue, revenue by
product area(s), gross margin, gross margin by product area(s) or
management-based objectives set by the Compensation Committee (or its designee)
such as the introduction of new products.


 


Unless an eligible
employee receives written notice from the CEO of Silicon Labs that different
bonus criteria is applicable to such employee, such employee’s bonus will be
determined on a quarterly basis as follows:


 


	
   

  	
   

  	
  Adjusted Operating Income

  %

  	
   

  	
  Bonus as a percent of Eligible

  Earnings for such Quarter

  	
   

  
	
  Maximum

  	
   

  	
  325

  	
  %

  	
  15

  	
  %

  
	
  Target

  	
   

  	
  20

  	
  %

  	
  10

  	
  %

  
	
  Less than Target

  	
   

  	
  15

  	
  %

  	
  7

  	
  %

  
	
  Less than Target

  	
   

  	
  10

  	
  %

  	
  5

  	
  %

  
	
  Minimum

  	
   

  	
  5

  	
  %

  	
  3

  	
  %

  
	
  No bonus

  	
   

  	
  <5

  	
  %

  	
  0

  	
  %

  



 


As illustrated by the
chart above, the bonus is 3% at 5% Adjusted Operating Income %.  The bonus
increases by 0.04% for every 0.1% increase in Adjusted Operating Income % over
the 5% minimum until reaching Adjusted Operating Income % of 15%.
 Thereafter, the bonus increases by 0.06% for every 0.1% increase in
Adjusted Operating Income % until reaching the Target Adjusted Operating Income
% of 20%.  Thereafter, the bonus increases by 0.1% for every 0.1% increase
in Adjusted Operating Income % until reaching the Maximum at Adjusted Operating
Income % of 25%.  The bonus shall be rounded to the nearest tenth of a
percent with 0.05% rounded up.


 





















 


Eligible
Earnings


 


Bonuses are paid as a
percentage of Eligible Earnings earned by such employee during such
quarter.  Eligible Earnings include only an employee’s base salary or
hourly wages.  Eligible Earnings do not include, among other things, disability
pay, bonus payments from a previous bonus period or other payments that are
taxable but not considered regular earnings.  For non-exempt employees,
overtime pay would be considered Eligible Earnings.


 


Timing
of Payments


 


Bonus checks will
generally be issued within approximately one month after the end of each
quarterly period.


 


General
Provisions


 


•Bonuses
are subject to all applicable taxes and other required deductions.


 


•The
Plan will not be available to employees subject to the laws of any jurisdiction
which prohibits any provisions of this Plan or in which tax or other business
considerations make participation impracticable in the judgment of the
Compensation Committee.


 


•The
Plan does not constitute a guarantee of employment nor does it restrict Silicon
Labs’ rights to terminate employment at any time or for any lawful reason.


 


•The Plan does
not create vested rights of any nature nor does it constitute a contract of
employment or a contract of any other kind.  The Plan does not create any
customary concession or privilege to which there is any entitlement from
year-to-year, except to the extent required under applicable law.  Nothing
in the Plan entitles an employee to any remuneration or benefits not set forth
in the Plan nor does it restrict Silicon Labs’ rights to increase or decrease
the compensation of any employee, except as otherwise required under applicable
law.


 


•The
Plan shall not become a part of any employment condition, regular salary,
remuneration package, contract or agreement, but shall remain gratuitous in all
respects.  Bonuses are not to be taken into account for determining
overtime pay, severance pay, termination pay, or any other form of pay or
compensation.


 


•The
Plan is provided at Silicon Labs’ sole discretion and Silicon Labs may modify
or eliminate it at any time, individually or in the aggregate, prospectively or
retroactively, without notice or obligation. In addition, there is no
obligation to extend or establish a similar plan in subsequent years.


 


•The
Plan shall not be pre-funded. Silicon Labs shall not be required to establish
any special or separate fund or to make any other segregation of assets to
assure the payment of bonuses.


 


•All
references to a quarterly period refer to fiscal quarters of Silicon Labs.


 


•This
Plan constitutes the entire arrangement regarding the Plan, supersedes any
prior oral or written description of the Plan and may not be modified except by
a written document that specifically references this Plan and is signed by the
Silicon Labs CEO.


 


•An
employee must be employed on the first day of the quarter in order to be
eligible to receive a bonus with respect to such quarter.


 





















 


•Employees
who resign or are terminated prior to the actual payment of a bonus shall not
receive a bonus.


 


•Employees
who are separated from employment with Silicon Labs due to divestiture,
closure, or dissolution of a business are not eligible to receive a bonus.


 


•Independent
contractors, consultants, individuals who have entered into an independent
contractor or consultant agreement, temporary employees and contract employees
are not eligible to participate in the Plan.


 


•The
bonus for an otherwise eligible employee who has died prior to the end of a
quarter while actively employed will be paid to the decedent’s estate.