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

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.

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.

2. EXAMPLES

Example 1 Example 2
--------- ---------

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%

Total Indiv. Target Incentive Incentive
Corp Personal Award Modifier Award Payment
---- -------- -------------- ------ ------------------

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

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.