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                                  EXHIBIT 10.4


                   KEY EMPLOYEE INCENTIVE COMPENSATION PROGRAM

                                FISCAL YEAR 2000

                                    CONTENTS


                            A.   Purpose

                            B.   Effective Dates

                            C.   Plan Changes

                            D.   Plan Administration

                            E.   Participation

                            F.   Overall Plan Concepts

                            G.   Procedure

                            H.   Method Of Calculation

                            I.   Changes In Status

                            J.   Interpretation Of Plan Terms


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A.    PURPOSE

      The purpose of the Key Employee Incentive Compensation Program is to
      encourage and reward performance which contributes to the Company's
      success. Financial incentives which complement base salary will be
      awarded to participants in the plan for achieving corporate and
      personal objectives.

B.    EFFECTIVE DATE

      This fiscal 2000 Plan was approved by the Board of Directors on
      April 20, 1999. The period April 1, 1999 through March 31, 2000 will be
      used for purposes of determining performance achievement and for payout
      calculations.

C.    PLAN CHANGES

      The Company, at its sole discretion through the Board of Directors, may
      amend, alter, or cancel this Key Employee Incentive Compensation
      Program at any time.

D.    PLAN ADMINISTRATION

      The Key Employee Incentive Compensation Program will be administered by
      the Plan Committee consisting of the President/CEO and the Executive
      Vice President/CFO with the staff support of the Human Resources
      Director. The role of the Plan Committee is to interpret the provisions
      and intent of the plan, evaluate and determine eligibility and
      measurement criteria, assess performance results, amend and modify the
      plan administration, and communicate the Plan provisions to
      participants, as necessary. The President/CEO will approve the final
      recommendations to be submitted for Board of Directors' approval.

E.    PARTICIPATION

      Eligibility in the annual incentive plan is determined by the
      recommendations of senior management and the approval of the
      President/CEO and the Board of Directors.

      1.   NEW HIRES

             (a) New hires after the beginning of the plan year who are
                 approved as participants will have prorated incentive awards.

             (b) New hires in the final quarter (January 1 - March 31) of the
                 plan year are not eligible to participate for that plan year.

      2. Since this is an ANNUAL plan, participation is established annually.
         Participants in previous year(s) are not automatically included in
         subsequent years. A number of factors may change from year to year,
         such as: business conditions, individual employee contribution,
         criticality of certain positions, etc.

      3. Inclusion in the plan does not constitute a guarantee of employment or
         specific earnings.

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F.    OVERALL PLAN CONCEPTS

      1.  INCENTIVE POOL: The pre-tax profit threshold must be achieved
          before any funding of the incentive pool takes place. The total
          amount of the pool is determined by the level of achievement of
          both pre-tax profit and revenue goals.

      2.  INCENTIVE PAYOUT: Payout occurs when the pool is funded, when the
          Corporate objectives are satisfactorily met and when personal
          performance is satisfactory.

      3.  INCENTIVE AMOUNT: Individual payments are expressed as a percent of
          the participant's annual base pay as of March 31 prior to the plan
          year.

      4.  TARGET INCENTIVE AWARD: Participants selected for participation in
          the plan will be assigned to one of several target incentive award
          categories. The higher the level of importance of the position to
          the success of the Company, the higher the percentage of target
          incentive award.

          For Example:

          Assume the participant is approved for a target incentive award of
          15%, and the pre-tax target and INDIVIDUAL personal targets are met
          at exactly 100%, then the participant's performance incentive will
          be 15% of his/her annual base salary (as of March 31, prior to the
          beginning of the plan year). If the target is not met at 100%, but
          within the threshold of the target, the payout will be reduced. If
          the target and the individual performance are exceeded to the
          outstanding level the payout could reach 150% of target award. In
          the above example that would be 22.5% of annual base salary (15% x
          150%).

G.    PROCEDURE

      The employee selected for inclusion in this Key Employee Incentive
      Compensation Program will be notified in writing and provided a copy of
      the corporate pre-tax profit target and revenue target. Any changes in
      the plan or the measurement criteria must be approved in writing by the
      President/CEO and the Board of Directors.

      Payment will be subject to ordinary deductions, such as FICA, SDI, and
      income taxes. No other deduction will be made.

      Payment, when earned, will be made as soon as administratively
      possible, generally not later than 75 days after the end of the plan
      year.

H.    METHOD OF CALCULATION

      1.     ESSENTIAL ELEMENTS OF CALCULATION

             (a)   INCENTIVE POOL FUNDING: The pool is funded when the
                   corporate pre-tax profit threshold is met. If the profit
                   is below the established threshold, the pool will NOT be
                   funded. If the profit and revenue objectives are met just
                   at threshold, the pool will be funded at 23.2%. If the
                   objectives are met at 100%, the pool will be funded at
                   100%. If the objectives are exceeded to the OUTSTANDING
                   level, the pool will be funded at 150%.

             (b)   PERSONAL CONTRIBUTION MODIFIER: Each participant's payout
                   can be modified based on individual contribution to Exar's
                   success. The personal objectives are related to the
                   participant's critical job responsibilities and are linked
                   directly to departmental or corporate objectives. The
                   payout can be modified (increased/decreased) based on
                   appraisal by appropriate managers and approved by the
                   President/CEO and by the Board.

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2.     EXAMPLES

<TABLE>
<CAPTION>
                                                                             Example 1             Example 2
                                                                             ---------             ---------
       <S>                                                         <C>     <C>             <C>     <C>
       Employee's annual base salary (3/31/00)                               $  90,000               $  70,000

       Target Incentive Award                                          20%     (18,000)         15%    (10,500)

               Pre-Tax Profit                                        ($9.0M)      51.1%       ($9.0M)     51.1%
               Revenue                                                ($82M)      62.5%      ($82.0M)     62.5%
               Combined Pool Funding Factor                                      113.6%                  113.6%

               Personal Contribution Modifier                                       95%                    120%
</TABLE>

<TABLE>
<CAPTION>
                                                      Total Indiv.          Target Incentive             Incentive
             Corp                  Personal          Award Modifier               Award                   Payment
             ----                  --------          --------------              ------              ------------------
             <S>                   <C>              <C>                     <C>                      <C>
             Example 1:

             113.6%          X        95%       =   107.92%             X       $ 18,000        =        $19,425.60

             Example 2:

             113.6%          X       120%       =   136.32%             X       $ 10,500        =        $14,313.60
</TABLE>

I.    CHANGES IN STATUS

      1.     Participants who give notice of termination or who terminate
             employment, voluntarily or involuntarily, prior to the date of
             payout are not eligible for payment.

      2.     Participants who retire or become totally disabled during the
             plan year will receive the eligible award payment on a prorated
             basis.

      3.     If a participant dies during the plan year the employee's
             beneficiary will receive the entire eligible payment.

      4.     Employees who, during the plan year, are promoted to incentive
             eligible positions and are approved by the President and the
             Board of Directors for inclusion in the Plan may receive
             payments on a prorated basis. Employees promoted into incentive
             eligible positions in the last quarter of the plan year are not
             eligible in that year.

      5.     Rehired employees who were previously eligible as a participant
             in this Plan must be approved as any other new participant.

J.    INTERPRETATION OF PLAN TERMS

      The Plan Committee, with the approval of the Board of Directors, is
      responsible for the interpretation of this plan. Any resolution or
      dispute regarding eligibility, determination of procedures,
      measurements, or awards is the sole responsibility of the Plan
      Committee with Board of Directors' approval.

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