Exhibit
10.7


 


Silicon Laboratories Inc.


 


2004 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 2004 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 2004 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).


 


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 performance criteria or other company financial
performance criteria as established by the Compensation Committee (or its
designee).


 


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

  	
   

  	
  330

  	
  %

  	
  15

  	
  %

  
	
  Target

  	
   

  	
  25

  	
  %

  	
  10

  	
  %

  
	
  Less than Target

  	
   

  	
  20

  	
  %

  	
  7

  	
  %

  
	
  Less than Target

  	
   

  	
  15

  	
  %

  	
  5

  	
  %

  
	
  Minimum

  	
   

  	
  10

  	
  %

  	
  3

  	
  %

  
	
  No bonus

  	
   

  	
  <10

  	
  %

  	
  0

  	
  %

  



 


As illustrated by the chart above, the bonus
is 3% at 10% Adjusted Operating Income %.  The bonus increases by 0.04%
for every 0.1% increase in Adjusted Operating Income % over the 10% minimum
until reaching Adjusted Operating Income % of 20%.  Thereafter, the bonus
increases by 0.06% for every 0.1% increase in Adjusted Operating Income % until
reaching the Target Adjusted Operating Income % of 25%.  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 30%.  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.


 


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