Prepared by MERRILL CORPORATION




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Exhibit 10.4  


 
 

PLAN DOCUMENT
  Key Employee Incentive Compensation Program
  Fiscal Year 2001    
  


 
 

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	 	 





Attachments:




	1.
	Fiscal
Year 2001 Incentive Pool Funding Matrices



	2.
	Letter
Acknowledging Participation 






 





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  


    The period April 1, 2000 through March 31, 2001 is considered the "Plan Year" and 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. 




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. Refer to Attachment 1, FY2001 Incentive Pool Funding Matrices.



	2.
	Incentive Payout:  Payout occurs when the pool is funded, when 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. 



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	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. 




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 






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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. 








	2.
	Examples





	 
	 	 
	 	Example 1
	 	 
	 	Example 2
	 
	
 	
 	

 	
 	
 	

 	
 	

 	
 	
 	

 	
 
	Employee's annual base salary (3/31/00)	 	 	 	$	110,000	 	 	 	$	80,000	 
	

Target Incentive Award	
 	

20%	
 	
 	

(22,040	
)	

15%	
 	
 	

(12,000	
)
	 	Pre-Tax Profit  ($36.5M)	 	 	 	 	58.0	%	 	 	 	58.0	%
	 	Revenue  ($103M)	 	 	 	 	48.1	%	 	 	 	48.1	%
	 	 	 	 	
	 	 	 	
	 
	 	Combined Pool Funding Factor	 	 	 	 	106.1	%	 	 	 	106.1	%
	 	

Personal Contribution Modifier	
 	

 	
 	
 	

90	
%	

 	
 	
 	

120	
%






	 
	 	Corp
 
	 	 
	 	Personal
	 	 
	 	Total Indiv.

Award

Modifier
	 	 
	 	Target

Incentive

ward
	 	 
	 	Incentive

Payment
	 	 

	 	 	Example 1:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	106.1%	 	X	 	90%	 	=	 	95.49%	 	X	 	$	22,040	 	=	 	$	21,046	 	 
	

 	
 	

 	
 	

 	
 	

 	
 	

 	
 	

 	
 	

 	
 	
 	

 	
 	

 	
 	
 	

 	
 	

 
	 	 	Example 2:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	106.1%	 	X	 	120%	 	=	 	127.32%	 	X	 	$	12,000	 	=	 	$	15,278	 	 





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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Attachment 2  


I
acknowledge receiving a copy of the Plan Document "Fiscal Year 2001 Key Employee Incentive Compensation Program" for the period April 1, 2000 through March 31, 2001. I have read and
understand the terms of this Plan, and also understand that this plan neither constitutes a contract of employment nor a representation as to my future earnings. The Letter of Notification and the
Plan constitute the entire agreement and supersede any prior written and oral agreements. I understand that participants are eligible for payment only when corporate and individual performance
measures are met. I understand that should I terminate employment or submit notice of termination on or before the date of payout I forfeit all rights to the payout. Further, I understand that the The
Plan Committee and the Board of Directors have the sole discretionary authority for interpreting the provisions of the plan, determining eligibility, and approving any payout. 



	 	 	

	 	 	Employee Name (PLEASE PRINT)
	

 	
 	


	 	 	Employee Signature
	

 	
 	


	 	 	Date




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PLAN DOCUMENT Key Employee Incentive Compensation Program Fiscal Year 2001

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