Fiscal 2006 Key Employee Incentive Compensation Plan



 Exhibit 10.22 
 PLAN DOCUMENT 
 Key Employee Incentive Compensation Program 
 Fiscal Year 2006 
  

			
	 	  	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 2006 Incentive Pool Funding Matrices 

  

	 	2.	Letter Acknowledging Participation 

  

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	A.	Purpose 

 The purpose of the Key Employee Incentive
Compensation Program is to encourage and reward performance that 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, 2005
through March 31, 2006 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 employees hired after the beginning of the plan year that are approved as participants will have prorated incentive awards. 

  

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

  

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	 	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 operating income threshold must be achieved before any funding of the incentive pool takes place. The level of achievement of both operating income and
revenue goals determines the total amount of the pool. Refer to Attachment 1, FY 2006 Incentive Pool Funding Matrices. NOTE: operating income thresholds exclude consideration of amortization of intangibles resulting from tethys product.


 It is recognized that certain unforeseen events or inequities could develop in the plan as established. Any merger and/or
acquisition may require modification of thresholds and targets. Consideration will be given to unusual circumstances. The Compensation Committee may give such consideration and the Committee’s decision will be final. 
  

	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 April 1, 2005 of the current Plan Year.


  

	4.	Target Incentive Award: Participants selected for participation in the plan will be assigned to one of several target incentive award categories. In general, 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 operating income, revenue 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 April 1, 2005 of the current Plan Year). If the targets are not met at 100%, but
above the threshold, the payout will be reduced. If the targets and the individual performance are exceeded to the outstanding level the payout could reach 150% of target award. 
  

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	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 operating income 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 all required federal, state and local withholding. 
 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 operating income threshold is met. If the operating income is below the established threshold, the pool will
not be funded. If the operating income and revenue objectives are met just at threshold, the pool will be funded at 3.7%. 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. 

  

	 	2.	Examples 

  

															
	 	  	 	 	 	Example 1	 	 	 	 	 	Example 2	 
	 Employee’s annual base salary (4/01/05)
	  			 	$	110,000	 	 			 	$	80,000	 
					
	 Target Incentive Award
	  	20	%	 	 	(22,000	)	 	15	%	 	 	(12,000	)
					
	 Operating Income ($6.8M)
	  			 	 	40.37	%	 			 	 	40.37	%
	 Revenue ($86.4M)
	  			 	 	47.59	%	 			 	 	47.59	%
		  			 	 	 	 	 			 	 	 	 
	 Combined Pool Funding Factor
	  			 	 	87.96	%	 			 	 	87.96	%
					
	 Personal Contribution Modifier
	  			 	 	90	%	 			 	 	120	%

  

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	 Corp
	  	 	  	Personal	 	 	 	  	Total Indiv.
Award
Modifier	 	 	 	  	Target
Incentive
Award	  	 	  	Incentive
Payment
	 Example 1:
	  		  			 		  			 		  			  		  		
									
	 87.96%
	  	X	  	90	%	 	=	  	79.16	%	 	X	  	$	22,000	  	=	  	$	17,416.08
									
	 Example 2:
	  		  			 		  			 		  			  		  		
									
	 87.96%
	  	X	  	120	%	 	=	  	105.55	%	 	X	  	$	12,000	  	=	  	$	12,666.00

  

	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 designated life insurance 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/CEO 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 2006 Key Employee Incentive Compensation Program” for the period April 1, 2005 through March 31, 2006. 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 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