EXHIBIT 10.5

KEY EMPLOYEE INCENTIVE COMPENSATION PROGRAM

FISCAL YEAR 1999

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 1999 Plan was approved by the Board of Directors on June 25,
1999. The period April 1, 1999 through March 31, 1999 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 2, FY1999 Incentive Pool
Funding Matrices.

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 (3/31/99) $ 90,000 $ 70,000

Target Incentive Award 20% (18,000) 15% (10,500)

Pre-Tax Profit ($15M) 19.3% ($15M) 19.3%
Revenue ($111M) 50.0% ($111M) 50.0%
Combined Pool Funding Factor 69.3% 69.3%

Personal Contribution Modifier 95% 120%

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

Example 1:

69.3% X 95% = 65.8% X $ 18,000 = $11,844.00

Example 2:

69.3% X 120% = 83.2% X $ 10,500 = $8,736.00

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
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.

ATTACHMENT 1

I acknowledge receiving a copy of the Plan Document Fiscal 1999 Key Employee
Incentive Compensation Program for the period April 1, 1999 through March 31,
1999. 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 President/CEO and the Board of Directors have the sole discretionary
authority for interpreting the provisions of the plan, determining
eligibility, and approving any payout.

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Employee Name (PLEASE PRINT)

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Employee Signature

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Date