EXHIBIT 10.12
EXAR CORPORATION
PLAN DOCUMENT
KEY EMPLOYEE INCENTIVE COMPENSATION PROGRAM
FISCAL YEAR 1995
(APRIL 1, 1994 - MARCH 31, 1995)
PLAN DOCUMENT
KEY EMPLOYEE INCENTIVE COMPENSATION PROGRAM
FISCAL YEAR 1995
CONTENTS:
A. PURPOSE
B. EFFECTIVE DATES
C. PLAN CHANGES
D. PLAN ADMINISTRATION
E. PARTICIPATION
F. OVERALL PLAN CONCEPTS
G. PROCEDURE
H. METHOD OF CALCULATION
J. CHANGES IN STATUS
K. INTERPRETATION OF PLAN TERMS
L. ATTACHMENTS
LETTER NOTIFICATION OF ELIGIBILITY
APPROVED PERFORMANCE MEASURES
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, department, and personal objectives.
B. EFFECTIVE DATE
This fiscal 1995 Plan was approved by the Board of Directors. The period April
1, 1994, through March 31, 1995 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 and the Senior Vice President/CFO with the
staff support of the Human Resources Manager. 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, and amend and
modify the plan administration, as necessary. The President 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 and 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, employee individual 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 plan is funded when ALL the established corporate
objectives are met as determined by the Board of Directors. The minimum
threshold for ALL of the corporate objectives must be met before the incentive
pool is funded.
(2) INCENTIVE PAYOUT: Payout occurs when the bonus pool is funded, when the
established major departmental objectives are satisfactorily met as determined
by the Plan committee, 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 all
CORPORATE, DEPARTMENT, and INDIVIDUAL personal targets are met at exactly 100%,
then the participant's performance incentive will be 15% of his annual base
salary (as of March 31, prior to the beginning of the plan year) if targets are
not met at 100%, but within the threshold of the target, the payout will be
reduced. If the targets 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. The participant will be provided a copy of
the corporate performance measures and the department performance measures. Any
changes in the plan or the measurement criteria must be approved in writing by
the President 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 90 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 all corporate objectives
are met. If any one of the objectives is below the established threshold the
pool will NOT be funded. If the objectives are met just at the threshold the
pool will be funded at 50%. If the target 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) Department Incentive Pool: This pool is funded from the corporate
incentive pool and is based on the department meeting or exceeding the threshold
of performance objectives established by senior executives and approved by the
Board of Directors. The sum of the individual payouts in a department cannot
exceed the department pool. Further, the sum of the department pools cannot
exceed the corporate pool.
(c) Personal Contribution Modifier: Each participant is able to modify the
amount of payout, based on individual contribution to Exar's success. The
personal objectives are related to the participant's critical job
responsibilities which are linked directly to departmental or corporate
objectives. The payout can be modified (increased/decreased) based on appraisal
by appropriate managers and approved by senior executives and by the Board.
(2) Illustrative
Corporate Performance Department Performance Personal Contribution
- --------------------- ---------------------- ---------------------
determines total X determines share of X modifier determines
size of corporate corporate pool amount of
pool finding awarded to department payout
(3) Examples:
Example 1 Example 2
Employees annual
base salary (3/31/94) $70,000 $70,000
Target Incentive Award 20% (14,000) 15% (10,500)
Corporate Performance 105% 120%
Department Performance 92% 110%
Personal Contribution Modifier 85% 95%
EXAMPLE 1:
Target
Total Individual Incentive Incentive
Corp. Dept. Personal Award Modifier Award Payment
- ---- ----- -------- ---------------- --------- ---------
105% x 92% x 85% = 82.11% x $14,000 = $11,495.40
EXAMPLE 2:
120% x 110% x 95% = 125.4% x $10,500 = $13,167.00
Reference Plan Document (page 4, Paragraph H (1)(a), (b), (c))
The sums of the department pools cannot exceed the corporate pool. Further, the
sum of individual payouts in a department cannot exceed the departmental pool.
J. 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 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 in the last quarter of the plan year are not eligible in that year.
5. Rehired employees who were previously eligible as participants in this Plan
must be approved as any other new participant.
K. 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.
I acknowledge receiving a copy of the Plan Document Fiscal 1995 Key Employee
Incentive Compensation Program for the period April 1, 1994 through March 31,
1995. 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 supersedes any prior written and oral agreements. I
understand that participants are eligible for payment only when corporate,
departmental, 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 President and the Board of Directors have the sole discretionary authority
for interpreting the provisions of the plan, determining eligibility, and
approving any bonus payout.
Employee Name___________________________________
Employee Signature______________________________
Date____________________________________________