Fiscal 2005 Executive Incentive Compensation Program



 Exhibit 10.16 
  
 CONFIDENTIAL TREATMENT 
  
 PLAN DOCUMENT 
  
 Executive Incentive Compensation Program 
  
 Fiscal Year 2005 
  
 1.0 Intent 
  
 The intention of the Executive
Incentive Compensation Program for Fiscal Year 2005 is to provide incentives to eligible Exar Corporation executives for achieving or surpassing established revenue and pre-tax profit goals derived from the FY 2005 Financial Plan. (see Attachment 1,
FY 2005 Financial Plan). 
  
 2.0 Management Participant Qualifications

  

	 	2.1	Direct participation is limited to a small group of executives who have an important influence on the operation, profits, and future of Exar. Generally, only the corporate officers
and the directors of major staff or line functions may be eligible. 

  

	 	2.2	Participation shall be recommended by the President/CEO and is subject to concurrence by the Compensation Committee of the Board of Directors. 

  

	 	2.3	An invitation to participate and the information divulged in connection with the program must be considered private and not be discussed with others. 

  
 3.0 Funding of the Incentive Plan Pool 
  

	 	3.1	General: 

  
 The Incentive Plan Pool will be funded upon achievement of certain revenue and pre-tax profit goals. The pre-tax profit goal must be met at the pre-established threshold levels before any pool funding takes place.
Further, this plan will not be funded unless there is funding and payout for the Fiscal Year 2005 Key Employee Incentive Program. 
  

	 	3.2	Calculation for Pool Funding 

  
 The size of the executive pool is the sum of the fiscal year 2005 annual base salary of the participants times their respective target award percentages.
The pool size will be modified according to the actual revenue and profit performance levels compared to the approved financial plan for fiscal year 2005. Use the table in Attachment 2 to determine the pool size. For example, if the actual revenue
level were [***], the pool for revenue achievement would be [***]. If the pre-tax profit were [***], the pool for the pre-tax profit achievement would be [***]. The total pool would be [***] ([***] + [***]). (See Attachment 3 for example).

  

	***	Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with
the Commission. 









	 	3.3	Calculation for Individual Payout 

  
 The individual payout is determined by factoring one’s actual FY’05 base salary, individual target award percentage, actual corporate revenue
and pre-tax profit results, and personal performance factors. (See Attachment 3 for example of individual calculation). 
  
 4.0 Rules 
  

	 	4.1	Pre-tax profits or revenues generated by “creative accounting” or by system changes will be excluded for purposes of this program. 

  

	 	4.2	In calculating incentive compensation, “salary” will be the total base compensation for the fiscal year, excluding any incentive pay, bonus payments, auto allowance, etc.


  

	 	4.3.	It is recognized that certain unforeseen events or inequities could develop in the plan as established. Consideration will be given to unusual circumstances. Such consideration may
be given by the Compensation Committee and the Committee’s decision will be final. 

  

	 	4.4	Payments will be made in accordance with the final annual statements as audited by the Company’s independent Certified Public Accountants. Amounts earned should be paid prior
to June 15. 

  

	 	4.5	In order to remove any deterrent to a “Purchase Acquisition”, the write-off of in-process R&D will be added back to profits for calculation of pre-tax profit.


  

	 	4.6	The Compensation Committee determines the target award for participants. 

  

	 	4.7	The program is to be in force for FY2005, and only those who are in the employ of the company and still a member of the eligible executive group through the date of payout will
qualify for payments. 

  

	 	4.8	As business conditions, participants’ position, or the corporation’s needs change, the Compensation Committee reserves the right to modify or cancel at any time with prior
notice this Incentive Program, and participants should not presume continued participation in an Incentive Program. 

  

					
	Attachments:	 	1.	 	FY2005 Approved Financial Plan
	 	 	2.	 	FY2005 Incentive Pool Funding Matrices
	 	 	3.	 	Example of Individual Calculation/Formula for Payment

  

 2 








 CONFIDENTIAL TREATMENT 
  
 Attachment 1 
  
  
 [***] 
  

	***	Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with
the Commission. 

  

 3 








 CONFIDENTIAL TREATMENT 
  
 Attachment 2 
  
  
 [***] 
  

	***	Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with
the Commission. 

  

 4 








 CONFIDENTIAL TREATMENT 
  
 Attachment 3 
  
 Example 
  
 Example: 
  
 Executive 
  

								
	Base Salary	  	:	  	[	***]	 	 
				
	Target Award (T.A.)	  	:	  	[	***]%	 	($[***])
				
	Max Award	  	:	  	[	***]%	 	($[***])
				
	Individual Performance Factor (MBO’s)	  	:	  	[	***]%	 	 

  
 Corporate Results: 
  

									
	 	 	 	 	 	 	 % of
 Target

	 	 Pool
 Funding %


	a.	 	Revenue Achievement	 	$[***]	 	[***]%	 	[***]%
					
	b.	 	Profit Achievement	 	$[***]	 	[***]%	 	[***]%
	 	 	 	 	 	 	 	 	

	 	 	Corporate Modifier (sum of a,b Pool Funding)	 	[***]%

  
 Formula: 
  

																	
	 $[***]
	 	X	 	[***]	 	x	 	[***]	 	X	 	[***]	 	=	 	        $[***]
									
	 é
	 	 	 	é	 	 	 	é	 	 	 	é	 	 	 	            é
									
	 Base
 Salary
	 	 	 	Target Award	 	 	 	Corp. Modif.	 	 	 	Indiv. Perf. Modif.	 	 	 	         Preliminary
           Payout
       Calculation


  
 Available
Executive Pool 
  

							
	 @ Target
	  	=	  	$	[	***]
			
	 Corp. Performance
	  	=	  	 	[	***]%
			
	 Final Pool (from Attachment 2)
	  	=	  	$	[	***]
	 Rev. $[***]
	  	 	  	 	 	 
	 PBT $[***]
	  	 	  	 	 	 

  
 If the sum of the
preliminary payout calculations for all participants exceeds the final pool, participant payouts are reduced proportionately. 
  
  

	***	Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with
the Commission.