EXHIBIT 10.6
PLAN DOCUMENT
EXECUTIVE INCENTIVE COMPENSATION PROGRAM
FISCAL YEAR 1999 PLAN
1.0 INTENT
The intention of the Executive Incentive Compensation Program for Fiscal
Year 1999 is to provide incentives to eligible Exar Corporation executives
for achieving or surpassing established revenue and pre-tax profit goals
derived from the FY 1999 Financial Plan. (See Attachment 1, FY 1999
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 or
Executive Vice-President/CFO 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 1999 Key Employee
Incentive Program.
3.2 Calculation for Pool Funding
The size of the executive pool is the sum of the fiscal year 1999
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 1999. Use the table in
Attachment 2 to determine the pool size. For example, if the
actual revenue level were $110M, the pool for revenue achievement
would be $479.5K. If the pre-tax profit were $17.8M, the pool for
the pre-tax profit achievement would be $515K. The total pool
would be $990.9K ($475.9K + $515K). (See Attachment 4 for example)
3.3 Calculation for Individual Payout
The individual payout is determined by factoring one's base
salary, individual target award percentage, actual corporate
revenue and pre-tax profit results, and personal performance
factors. (See Attachment 4 for example of individual calculation)
52
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 will be made at
year end only, and the decision of the Compensation Committee 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. (See Attachment 3, Participants)
4.7 The program is to be in force for FY'99, 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.
53