Prepared by MERRILL CORPORATION

EXAR CORPORATION

DONALD L. CIFFONE, JR.

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RPbs3dTVPzO8o8fK1NqyeTpf70AjFHhZ2DJaDr2Jc1tBZYJqDJF0Oma0toic0I17 iMFphgJushdZtt4YcLTkOg== 0000912057-01-522260.txt : 20010703 0000912057-01-522260.hdr.sgml : 20010703 ACCESSION NUMBER: 0000912057-01-522260 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010702 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXAR CORP CENTRAL INDEX KEY: 0000753568 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 941741481 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-14225 FILM NUMBER: 1673138 BUSINESS ADDRESS: STREET 1: 2222 QUME DR STREET 2: PO BOX 49007 CITY: SAN JOSE STATE: CA ZIP: 95131 BUSINESS PHONE: 5106687000 MAIL ADDRESS: STREET 1: 48720 KATO RD CITY: FREMONT STATE: CA ZIP: 94538-1167 10-K405/A 1 a2053414z10-k405a.htm 10-K405/A Prepared by MERRILL CORPORATION
QuickLinks -- Click here to rapidly navigate through this document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K/A

/x/	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2001

/ /	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File No. 0-14225

EXAR CORPORATION
(Exact Name of registrant as specified in its charter)

Delaware		94-1741481
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer (Identification No.)

48720 Kato Road, Fremont, CA 94538
(Address of principal executive offices, Zip Code)

Registrant's telephone number, including area code: (510) 668-7000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

COMMON STOCK
(Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in any definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /x/

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of May 31, 2001 was $897,022,994 based on the last sales price reported for such date.

The number of shares outstanding of the Registrant's Common Stock was 38,848,982 as of May 31, 2001.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company's Definitive Proxy Statement filed not later than 120 days after the close of the fiscal year are incorporated by reference into Part III, Items 10, 11, 12 and 13 of this Report.

PART I

This Annual Report on Form 10-K (the "Annual Report") contains certain forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to, among other things, the Company's future financial position, products, business development, strategy and management's plans and objectives for future operations. Forward-looking statements generally can be identified by the use of forward-looking terminology such as, "believe," "may," "will," "intend," "expect," "estimate," "continue," "ongoing," and "potential" or similar expressions or the negative of those terms or expressions. These statements involve known and unknown risks, uncertainties and other factors, which may cause the Company's actual results, performance or achievements to differ materially from those expressed or implied by such forward-looking statements. Such factors include, among others, the information contained under the captions "Part I, Item 1. Business," and "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in particular, "Risk Factors," for a more detailed description of these significant risks and uncertainties.

ITEM 1. BUSINESS

Overview

Exar Corporation ("Exar" or the "Company") designs, develops and markets high-performance, high-bandwidth mixed-signal (analog and digital) silicon solutions for the worldwide communications infrastructure. The Company uses its high-speed, analog and mixed-signal design expertise, system-level knowledge and standard CMOS (Complementary Metal Oxide Semiconductor) process technologies to offer ICs (integrated circuits) for the communications markets that address transmission standards, such as T/E carrier, ATM (Asynchronous Transfer Mode) and SONET/SDH (Synchronous Optical Network/Synchronous Digital Hierarchy). Additionally, Exar provides solutions for the serial communications market as well as the video and imaging markets. Exar's major customers include Alcatel, Cisco, Hewlett-Packard, Lucent, Nokia and Tellabs.

Industry Background

Communications technology has evolved from simple analog voice signals transmitted over networks of copper telephone lines to complex analog and digital voice and data signals transmitted over hybrid networks of media, such as copper, coaxial and fiber optic cables. This evolution has been driven by large increases in the number of users and the complexity and variety of the data transmitted over networks, resulting from:

•: the substantial growth in the Internet and its transformation from a text-based medium to a multimedia platform containing pictures, video and sound;
•: the growth of wireless communications; and
•: the increased demand for remote network access and higher speed, higher bandwidth communication between LANs (Local Area Networks) and WANs (Wide Area Networks).

The majority of installed communications systems were designed to transmit only voice communications, and are therefore inadequate for the high-bandwidth transmission of both voice and data. As a result, new equipment is being deployed to augment existing transmission media and increase their bandwidth. Access to the public network is typically based on asynchronous technologies, such as T/E carrier over copper wire. The demand for greater bandwidth is driving a migration from lower-speed T1/E1 to higher-speed T3/E3 transmission rates. The T1/E1 standard permits the transmission of data at 1.5 Mbps (Megabits per second)/2.0 Mbps, and the T3/E3 standard permits the transmission of data at 45 Mbps/34 Mbps. The backbone of the public network is built on an optical

fiber transmission medium that employs synchronous technologies such as SONET/SDH. Similar to the utilization of faster transmission rates over copper wire, SONET/SDH protocols such as OC-3 (Optical Carrier) (155 Mbps) and OC-12 (622 Mbps) are being upgraded to OC-48 (2.5 gigabits per second or Gbps) and OC-192 (10 Gbps) to increase the bandwidth over a single optical fiber.

To address the evolving requirements of communications networks, OEMs (Original Equipment Manufacturers) must develop and introduce increasingly sophisticated systems at a rapid rate. To achieve the performance and functionality required of these systems, communications OEMs utilize increasingly complex communications ICs, which now account for a significant portion of the value-added proprietary content of these systems. As a result of the new equipment introductions, the proliferation of transmission standards, and the difficulty of designing and producing these ICs, equipment suppliers are increasingly outsourcing the design and production of the ICs incorporated into their systems.

These trends have created a significant opportunity for IC suppliers that can design cost-effective solutions for high-speed communications. The worldwide T/E carrier IC market has experienced steady growth, and Dataquest estimates that it will reach $802 million by 2002. The ATM IC market has also experienced steady growth and Dataquest projects it will reach $733 million during the same time period. The SONET/SDH IC market reached $1.3 billion in 1999, and Dataquest estimates that it will grow at a compound annual growth rate of 55% to $5.0 billion by 2002.

The key ICs contained in a typical communications system include physical interface, access control, channel processor, bus interface and switch fabric devices. The physical interface device consists of a transmitter and receiver that, when integrated, is called a transceiver. Transceivers interface with the physical transmission media, such as copper wire or optical fiber. Most of these high-speed, mixed-signal ICs convert parallel digital inputs into a single analog bit stream that is up to 32 times faster than the original signal. Transceivers therefore serve as a bridge between analog transmission media and the digital devices that process data. Access control circuits are digital ICs that format, or frame, the data and perform error checking. The bus interface manages the transfer of data along numerous channels between elements, such as the channel processor and the switch fabric, which work together to shape, route and control the data.

Because physical interface and access control ICs interface with the transmission media and are critical to increasing bandwidth, these ICs must offer high-speed and robust performance. Therefore, communications equipment OEMs seek IC suppliers that possess extensive analog and digital expertise to provide high-speed, mixed-signal solutions to bridge the analog physical world and the digital computing environment. This must be coupled with system-level expertise so that a supplier can quickly bring to market high-performance, highly-reliable ICs with optimal feature sets.

The Exar Solution

Exar designs, develops and markets high-performance, high-bandwidth mixed-signal ICs for use in the worldwide communications infrastructure. The Company's analog and mixed-signal design expertise, combined with its systems understanding, enables the Company to provide physical interface and access control solutions for WAN communications equipment. Exar offers ICs based upon the T/E carrier, ATM and SONET/SDH transmission standards. In addition, the Company provides solutions for the serial communications market and the video and imaging markets. Exar believes its products offer its customers the following benefits:

•: increased bandwidth through the integration of multiple channels on a single device;
•: reduced system noise/jitter to improve data integrity;
•: reduced overall system cost through the integration of multiple functions on a single device; and

•: accelerated time to market by allowing customers to focus on core competencies and outsource standards-based solutions.

Key elements of the Company's solution include:

Leading Analog and Mixed-Signal Design Expertise. Exar has 30 years of experience in developing analog and mixed-signal ICs. As a result, the Company has developed a significant base of knowledge in these areas and a library of design elements. For example, the Company believes that it has particularly strong expertise in the design of high-speed, low-jitter phase lock loops, which are key elements in Exar's mixed-signal transceiver products. As a result, Exar can provide its customers with products that typically exceed standard specifications and allow them flexibility in designing other parts of their systems.

Broad Product Offerings. Exar offers a variety of physical interface and access control products based upon the T1/E1, T3/E3, ATM and SONET/SDH transmission standards. Exar is currently developing multiple channel products for each transmission standard enabling its customers to minimize board space and overall cost in multi-port applications.

Comprehensive Solutions to Enhance System Integration. The combination of Exar's design and system level expertise allows it to provide a solution that encompasses hardware, software and applications support. Using its solutions, Exar believes that OEMs can efficiently integrate the Company's devices into their systems, better leverage their development resources and reduce their time to market.

Compelling Price/Performance Solutions. The Company uses its systems expertise and its analog, digital and mixed-signal design techniques to architect high-performance products based on standard CMOS process technologies. Exar believes that these CMOS processes are proven, stable, predictable and able to meet the application speed and power/performance requirements at a lower price point than other semiconductor manufacturing processes.

Strategy

Exar's objective is to be the leading provider of high-performance, high-bandwidth IC solutions for the worldwide communications infrastructure. To achieve this objective, Exar employs the following strategies:

Focus on High-Growth Communications Markets. Exar targets high-growth communications markets, including T/E carrier, ATM and SONET/SDH. The Company has built substantial expertise in the areas of analog and mixed-signal design, systems architecture and applications support. Exar believes that the integration of these capabilities enables the Company to develop solutions addressing the high-bandwidth requirements of communications systems OEMs.

Leverage Analog and Mixed-Signal Design Expertise to Provide Integrated System Level Solutions. Utilizing Exar's strong analog and mixed-signal design expertise, the Company can integrate mixed-signal physical interface devices with digital access control devices. The Company is currently developing products that integrate transceivers with jitter attenuator framers/ATM UNIs on a single IC and are exploring opportunities to integrate other functions. These configurations would enable OEMs to use less board space and reduce their overall system cost.

Expand the Company's Revenue Content Per System. Exar's analog and mixed-signal design expertise has enabled the Company to build what it believes to be a technological lead and a strong market position in T3/E3 transceivers. The Company intends to leverage this lead and its established customer relationships to capture design wins for its access control products, thereby increasing the Company's overall revenue content per system.

Strengthen and Expand Strategic OEM Relationships. Exar's customer base includes Alcatel, Cisco, Hewlett-Packard, Lucent, Nokia and Tellabs. To promote the early adoption of its solutions, the Company actively seeks collaborative relationships with strategic OEMs during product development. The Company believes that OEMs recognize the value of its early involvement because designing their system products in parallel with the Company's development can accelerate their time to market. In addition, Exar believes that collaborative relationships help the Company to obtain early design wins and to reduce the risk of market acceptance of its new products.

Leverage Broad Product Portfolio to Accelerate Communications Product Development. Exar believes it has developed a strong presence in the serial communications market as well as the video and imaging markets, where the Company has leading industry customers, proven technological capabilities and a strong product portfolio. The Company's design expertise has enabled it to offer a diverse portfolio of both industry standard and proprietary UARTs (Universal Asynchronous Receiver Transmitters). The Company also has established important customer relationships in Taiwan for its high-performance, low-power video products and continues to work closely with key customers such as Hewlett-Packard for its imaging products. Exar's sales to these markets provide the Company with resources to invest in and accelerate its communications product development.

Use Standard CMOS Process Technologies to Provide Compelling Price/Performance Solutions. Exar primarily designs its products to be manufactured using standard CMOS processes. The Company believes that these processes are proven, stable and predictable and benefit from the extensive semiconductor-manufacturing infrastructure devoted to CMOS processes. Therefore, the Company believes that it can achieve a higher level of performance at a lower cost than others employing alternative processes.

Leverage Fabless Semiconductor Model. Exar has longstanding relationships with world-class third-party assembly, test and wafer foundries to manufacture the Company's ICs. The Company's fabless approach allows it to avoid substantial capital spending, obtain competitive pricing, reduce time to market, reduce technology and product risks, and facilitate the migration of the Company's products to new process technologies, which reduce costs and optimize performance. By leveraging the fabless model, Exar can focus on its core competencies of IC design and development.

Products

Exar designs, develops and markets high-performance, high-bandwidth physical interface and access control solutions for the worldwide communications infrastructure. The Company's current IC products for the communications market are designed to respond to the growing demand for high-speed networking equipment based on transmission standards such as T/E carrier, ATM and SONET/SDH. The Company also designs, develops and markets IC products that address the needs of the serial communications market and the video and imaging markets. Exar uses its design methodologies to develop products ranging from ASSPs (Application Specific Standard Products), designed for industry-wide applications, to semi-custom solutions for specific customer applications. These complementary products enable the Company to offer a range of solutions for its customers' applications.

Communications

Exar's products for T/E carrier, ATM and SONET/SDH applications include high-speed analog, digital and mixed-signal physical interface and access control ICs. The physical interface IC consists of a transmitter and receiver that, when integrated, is called a transceiver chip. Transceivers interface with the physical transmission media. Most of these high-speed, mixed-signal ICs convert parallel digital inputs into a single analog bit stream that is up to 32 times faster than the original signal. Access

control circuits are digital circuits that format, or frame, the data and perform error checking. The figure below illustrates where the Company's products are employed within WAN equipment.

Types of Communications ICs Used in WAN Equipment

Exar's communications products include transmitters and receivers, transceivers, jitter attenuators, framers, ATM UNIs (ATM User Network Interfaces) and an M13 multiplexer. These products are used in SONET/SDH multiplexers, private branch exchanges (PBX), central office switches and digital cross connects. The Company refreshed its physical interface solution in 1999 with an integrated single chip transceiver. Subsequently, the Company announced two, three, and four-channel versions of this transceiver that meet the same performance levels while requiring less board space and lower overall power in multi-port applications. The Company introduced its integrated, multi-channel jitter attenuator IC family, a proprietary solution that allows OEMs to meet difficult jitter tolerance specifications while reducing overall system costs. Exar's access control products include framers, ATM UNIs and an M13 multiplexer. These newer products are achieving greater market acceptance as Exar's strong transceiver products have allowed it to compete for adjacent component opportunities. The Company also supplies a family of V.35 transceiver and multiprotocol products used for high-speed data transmission, primarily in networking equipment such as routers and bridges.

The following table describes some of the Company's key communications products:

Product Description		Applications
OC-48 framer		SONET/SDH add/drop multiplexers, ATM switches, routers and digital cross connects
T3/E3/STS-1 1, 2, 3, 4-channel transceivers and T3/E3/STS-1 1-channel receiver and transmitter		SONET/SDH multiplexers and digital cross connects
T3/E3 1, 3, 4-channel jitter attenuators		Multiplexers, switches and digital cross connects
T3/E3 M13 multiplexer		Multiplexers, frame relay and Internet access switches
T3/E3 1, 2, 3, 4, 6, 8-channel framers		Multiplexers and digital cross connects
T3/E3 1, 4-channel ATM UNIs		ATM switches/routers/hubs
E1 4-channel transceiver and framer		Routers, Internet access equipment, frame relay and ATM switches/routers/hubs
E1 multi-channel transceivers		Multiplexers, frame relay and ATM switches/routers/hubs
T1/E1 1, 4, 8-channel transceivers		Routers, Internet access equipment, frame relay and ATM switches/routers/hubs
T1 1, 4, 8-channel framers		Routers, Internet access equipment, frame relay and ATM switches/routers/hubs
T1/E1 clock adaptors		Frame relay access devices and remote access servers
Multiprotocol serial interface		Multiplexers, access equipment and routers
V.35 serial interface		Multiplexers, access equipment and routers

The Company expects to introduce a number of new communications ICs in fiscal year ending March 31, 2002 to provide an expanded line of T/E carrier products as well as SONET/SDH products. The T/E carrier products are expected to include multi-channel, multi-function ICs that integrate transceivers, jitter attenuators, framers and ATM UNIs. SONET/SDH product introductions are expected to focus on data aggregation combining T3/E3 capability with OC-3 (155 Mbps) or OC-12 (622 Mbps) functions.

Serial Communications

UARTs convert data streams from parallel to serial, enabling a serial data stream to communicate with a central processing unit, or CPU. Exar sells its UART products to the remote access, data collection, industrial automation and handheld/mobile markets. Many of these products include high-performance features, such as automated flow control and large First-In First-Out, or FIFO, buffers. The Company has designed a highly integrated quad, or four channel, UART with FIFO circuitry, which the Company believes is the de-facto industry standard for quad FIFO UARTs used in multi-channel networking applications.

The following table describes the Company's key serial communications products:

Product Description		Applications
8-channel PCI UART with 64 byte FIFO		PCI interface for network control management
8-channel UART with 64 byte FIFO		Network management, remote access servers and point of sale systems
1, 2, 4-channel UART with 128 byte FIFO		Process control systems
1, 4-channel UART with 64 byte FIFO		Personal digital assistants and GPS
1, 2, 4-channel UART with 16 byte FIFO		Hub management, high-speed modems and PC I/O cards
2-channel UART with 8 byte FIFO		Process control systems, switches and serial port equipment
2-channel UART with 16 byte FIFO		Process control systems, switches and serial port equipment
2-channel UART		Serial port equipment

During the current fiscal year, the Company expects to expand its family of PCI multi-channel UARTs to include two channel as well as four channel devices.

Video and Imaging

The video market is composed of several segments, including digital still cameras, or DSCs, PC video cameras, security cameras, camcorders and digital camcorders. Among these applications, one of the fastest growing segments is DSCs. To create images that are more comparable to film cameras and include features such as steady-shot and digital zoom, DSCs and digital camcorders are requiring higher-resolution and higher-speed data acquisition subsystems, also known as analog front ends, or AFEs, and analog-to-digital converters, or ADCs.

Exar supplies high-performance ADCs and integrated AFEs for products such as DSCs, digital copiers, scanners and multifunctional peripherals, or MFPs, which incorporate scanning, faxing and copying functions in a single integrated system. The Company uses advanced design techniques and process technologies to integrate low-power converter architectures with surrounding analog functions, reducing total system cost.

The following table describes some of the Company's key video and imaging products:

Product Description		Applications
12bit/20 or 30 Msps AFEs		High speed scanners, DSCs, camcorders and video conferencing
10bit/18, 20 or 27 Msps AFEs		DSCs, camcorders and video conferencing
3-channel 12, 14 or 16bit/6 or 12 Msps AFEs		Scanners, MFPs and digital color copiers
10bit/20 or 40 Msps ADC		High-end DSCs and broadcast video
8bit/6 Msps ADC		Video boards, scanners and battery powered devices
8, 10 or 12 bit serial input DAC (digital-to-analog converter)		Voltage control and power control for wireless equipment

During fiscal year ending March 31, 2002, the Company plans to focus its product development efforts on a custom chip for high-speed scanner applications.

Sales and Customers

Exar markets its products in the United States through 24 independent sales representatives and four independent, non-exclusive distributors, as well as through the Company's own direct sales force. The Company currently has sales support offices in or near Atlanta, Boston, Chicago, Dallas, Los Angeles and Fremont, California. The Company is represented internationally by 25 sales representatives and distributors. In addition, the Company is represented in Europe by its wholly-owned subsidiaries, Exar Ltd. and Exar SARL, and in the Asia/Pacific Region by its wholly-owned subsidiaries, Exar Japan and Exar Taiwan.

Some of the Company's larger customers include the following:

Communications		Serial Communications		Video and Imaging
• ADC Telecommunications, Inc. • Alcatel Alsthom S.A. • Cisco Systems, Inc. • Fujitsu Ltd. • Lucent Technologies, Inc. • Marconi Communications Plc. • Nokia Corporation • Tellabs, Inc.		• Cisco Systems, Inc. • Digi International, Inc. • LM Ericsson Telephone Co. • Rose Electronics		• Altek Corp. • Canon, Inc. • Eastman Kodak Company • Hewlett-Packard Company • Logitech International S.A. • Sharp Electronics Corp.

For the fiscal year ended March 31, 2001, no single customer accounted for more than 10% of the Company's sales.

Manufacturing

Exar outsources all of its fabrication and assembly, as well as the majority of its testing operations. This fabless manufacturing model allows the Company to focus on its core competencies of product design and development.

The Company uses world-class independent wafer foundries, such as Chartered Semiconductor Manufacturing, or Chartered, and Taiwan Semiconductor Manufacturing Company, or TSMC. Chartered and TSMC manufacture all of the Company's CMOS products. Rohm Co. Ltd. manufactures all of the Company's Bipolar products and Chartered manufactures most of the Company's BiCMOS (combines bipolar and CMOS process) products. The Company does not have long term supply agreements with Chartered or TSMC. The Company's supply agreement with Rohm expires in 2006. The majority of the Company's current products are implemented in standard CMOS. The Company uses CMOS manufacturing processes to take advantage of that technology's lower power consumption, cost-effectiveness, foundry availability and ever-increasing speed. Currently, most of the Company's new product development is being implemented in CMOS.

Wafers are usually shipped to the Company's subcontractors in Asia for wafer test and assembly, where they are cut into individual die and packaged. Most of the Company's assembly work is performed by independent contractors in Hong Kong, Indonesia, and Singapore. Following assembly, final test and quality assurance is performed either at the Company's Fremont, California facility or at its subcontractors' facilities in Asia. The Company conducts electrical testing of both wafers and packaged ICs. The combination of various functions makes the test process for analog and mixed-signal devices particularly difficult. Test operations require the programming, maintenance and use of sophisticated computer-based test systems and complex automatic handling systems.

Research and Development

Exar believes that the continued introduction of new products in its target markets is essential to its growth. The Company is focused on developing solutions addressing the high-bandwidth requirements of communications systems OEMs. As of March 31, 2001, the Company's research and development staff consisted of 141 employees, 61 of whom hold advanced engineering degrees. The Company successfully recruited 26 engineers during the fiscal year ended March 31, 2001, while experiencing minimal attrition. Over the next year, Exar will continue to seek to hire strategic technical and marketing personnel.

Competition

The semiconductor industry is intensely competitive and is characterized by rapid technological change and a history of price reductions as production efficiencies are achieved in successive generations of products. Although the market for analog and mixed-signal integrated circuits is generally characterized by longer product life cycles and less dramatic price reductions than the market for digital integrated circuits, the Company faces substantial competition in each market in which it participates. Competition in the Company's markets is based principally on technical innovation, product features, timely introduction of new products, quality and reliability, performance, price, technical support and service. The Company believes that it competes favorably in all of these areas.

Because the IC markets are highly fragmented, the Company generally encounters different competitors in its various market areas. Competitors with respect to the Company's communications products include Conexant Systems Inc., PMC-Sierra and TranSwitch. In addition, the expansion of the Company's communications product portfolio may in the future bring it into competition with other established communications IC companies, such as Applied Micro Circuits Corporation and Vitesse Semiconductor. Competitors in the Company's other markets include Analog Devices Inc., Philips Electronics and Texas Instruments, Inc.

Backlog

Exar defines backlog to include OEM orders and distributor orders for which a delivery schedule has been specified for product shipment occurring primarily during the succeeding six months.

At March 31, 2001, Exar's backlog was $18.1 million, compared with $20.6 million at March 31, 2000. Exar believes that the decrease in the Company's backlog was primarily due to inventory accumulation and channel adjustments within the communications product market.

Sales are made pursuant to purchase orders for current delivery of standard items or agreements covering purchases over a period of time, which are frequently subject to revision and cancellation. Lead times for the release of purchase orders depend upon the scheduling practices of the individual customer, and the Company's rate of bookings varies from month-to-month. In addition, Exar's distributor agreements generally permit the return of up to 10% of the purchases annually for purposes of stock rotation and also provide for credits to distributors in the event Exar reduces the price of any product. Because of the possibility of changes in delivery schedules and quantities actually purchased, cancellations of orders, distributor returns or price reductions, Exar's backlog as of any particular date is not necessarily indicative of actual sales for any succeeding period. Customers can cancel a significant portion of their backlog at their discretion without substantial penalty.

Intellectual Property Rights

The Company has 90 patents issued and 29 patent applications pending in the U.S. The Company has 11 patents issued and 17 patent applications pending in various foreign countries. None of the Company's domestic and foreign patents that have been issued will expire in the near future unless the

Company chooses not to pay renewal fees. To protect the Company's intellectual property, the Company also relies on a combination of mask work registrations, trademarks, copyrights, trade secrets, employee and third-party nondisclosure agreements and licensing arrangements. The Company has also entered into license agreements from time to time to gain access to externally developed products or technologies.

There can be no assurance that others will not independently develop substantially equivalent intellectual property or otherwise gain access to the Company's trade secrets or intellectual property, or disclose such intellectual property or trade secrets, or that the Company can meaningfully protect its intellectual property. Furthermore, there can be no assurance that the Company's pending patent applications or any future applications will be approved, or that any issued patents will provide the Company with competitive advantages, or will not be challenged by third parties, or that if challenged, will be found to be valid or enforceable, or that the patents of others will not have an adverse effect on the Company's ability to do business. Furthermore, there can be no assurance that others will not independently develop similar products, duplicate the Company's products, or design around any patents that may be issued to the Company.

The Company cannot be sure that its products or technologies do not infringe patents that may be granted in the future pursuant to pending patent applications or that the Company's products do not infringe any patents or proprietary rights of third parties. Occasionally, the Company is informed by third parties of alleged patent infringement. In the event that any relevant claims of third-party patents are supported as valid and enforceable, the Company could be prevented from selling the Company's products or could be required to obtain licenses from the owners of these patents or be required to redesign the Company's products to avoid infringement. The Company cannot assure that licenses would be available to the Company on acceptable terms, or at all, or that the Company would be successful in any attempts to redesign its products or processes to avoid infringement. The Company's failure to obtain these licenses or to redesign the Company's products could negatively harm its business.

Employees

As of March 31, 2001, the Company employed 288 full-time employees, with 141 in engineering and product development, 42 in operations, 57 in marketing and sales and 48 in administration. Of the 141 engineering and product development employees, 61 hold advanced degrees. The Company's ability to attract, motivate and retain qualified personnel is essential to its continued success. None of the Company's employees is represented by a collective bargaining agreement, nor has the Company ever experienced any work stoppage. The Company believes its employee relations are good.

Facilities

Exar's executive offices, marketing and sales, research and development and engineering operations are located in two buildings in Fremont, California that the Company owns, consisting of approximately 151,000 square feet. Additionally, the Company owns approximately 5.3 acres of undeveloped property adjacent to its headquarters, which is presently being held for future office expansion. The Company leases additional space for sales offices in or near Boston; Atlanta; Dallas; Chicago; Los Angeles; Kawasaki, Japan; Velizy, France; Remseck, Germany; and Taipei, Taiwan.

MANAGEMENT

The names of the Company's executive officers and directors, and their ages as of May 31, 2001, are as follows:

Name	Age	Position
Donald L. Ciffone, Jr.	45	Chief Executive Officer, President, Director
Michael Class	43	Vice President, Worldwide Sales
Roubik Gregorian	51	Chief Technology Officer, Senior Vice President/General Manager, Communications Division
Ronald W. Guire	52	Executive Vice President, Chief Financial Officer, Assistant Secretary and Director
Susan J. Hardman	39	Vice President, Corporate Marketing
Thomas R. Melendrez	47	Corporate Vice President, General Counsel, Secretary
Stephen W. Michael	54	Vice President, Operations Division
Raimon L. Conlisk	78	Chairman of the Board of Directors
Frank P. Carrubba	63	Director
James E. Dykes	63	Director
Richard Previte	66	Director

Donald L. Ciffone, Jr. joined Exar as Chief Executive Officer and President in October 1996 and was appointed director at that time. From August 1996 to October 1996, Mr. Ciffone was Executive Vice President of Toshiba America, the U.S. semiconductor subsidiary of Toshiba Semiconductor. Prior to joining Toshiba, he served from 1991 to 1996 in a variety of senior management positions including Senior Vice President of the VLSI Product Divisions at VLSI Technology, Inc. From 1978 to 1991, Mr. Ciffone held a variety of marketing and operations positions at National Semiconductor, Inc. Mr. Ciffone holds an M.B.A. from the University of Santa Clara.

Michael Class joined Exar as Director of Western Area Sales in 1996. In January 1998, he was promoted to the position of Vice President, North American/European Sales and was promoted to Vice President, Worldwide Sales in July 1999. Mr. Class has over 20 years of experience in the semiconductor industry, most recently with IC Works, Inc. as Area Sales Manager for Western U.S. and Canada. Prior to joining IC Works, Mr. Class held various sales management positions with Intel Corporation and VLSI from 1979 to 1995. He holds a B.S. in Electrical Engineering from Lehigh University and an M.B.A. from LaSalle University.

Roubik Gregorian joined Exar in March 1995 as Vice President, Startech Division, when the Company acquired Startech Semiconductor, Inc., where he served as President. He was appointed Chief Technology Officer and Vice President of the Communications Division in June 1996, and to his current position as Chief Technology Officer, Senior Vice President/General Manager, Communications Division, in June 1998. Prior to joining Startech in 1994, Dr. Gregorian was Vice President of Research and Development and Chief Technology Officer for Sierra Semiconductor, Inc. Dr. Gregorian has been issued 16 patents and received his M.S.E.E. and Ph.D. in Electrical Engineering from the University of California at Los Angeles, as well as an M.S.E.E. from Tehran University.

Ronald W. Guire joined Exar in July 1984 and has been a director since June 1985. He has served as Chief Financial Officer since May 1985 and Executive Vice President since July 1995. Mr. Guire is also Chairman of the Board of Xetel Corporation, an electronics contract manufacturer. Mr. Guire was a partner in the certified public accounting firm of Graubart & Co. from 1979 until he joined Exar in July 1984. Mr. Guire holds a B.S. in Accounting from California College of Commerce.

Susan J. Hardman joined Exar in February 1997 and became Vice President, Corporate Marketing in February 2000. Prior to this position, she served as Senior Director of Business Development as well as Director of Marketing for the Company's communication products. Ms. Hardman has over 17 years experience in the semiconductor industry. From 1989 to 1997, Ms. Hardman was with VLSI in a variety of management positions, most recently as Director of Product Marketing for VLSI's networking products division. From 1983 to 1989, she was with Motorola holding a variety of engineering roles. Ms. Hardman holds a B.S. in Chemical Engineering from Purdue University and an M.B.A. from the University of Phoenix.

Thomas R. Melendrez joined Exar in April 1986 as Corporate Attorney. He was promoted to Director, Legal Affairs in July 1991, and again to Corporate Vice President, Legal Affairs in March 1993. In March 1996, Mr. Melendrez was promoted to his current position of Corporate Vice President, General Counsel. Mr. Melendrez has over 20 years legal experience in the semiconductor and related industries. He received a B.A. from the University of Notre Dame, a J.D. from the University of San Francisco, and an M.B.A. from Pepperdine University.

Stephen W. Michael joined Exar as Vice President New Market Development in September 1992. In July 1995, he was appointed to his current position of Vice President, Operations Division. Mr. Michael has over 25 years of semiconductor industry experience, most recently as Vice President and General Manager, Analog and Custom Products with Catalyst Semiconductor. He joined Catalyst in 1987 and served in various senior positions.

Raimon L. Conlisk joined Exar as a director in August 1985, was appointed Vice Chairman of the Board in August 1990, and was appointed Chairman of the Board in April 1995. Mr. Conlisk has also served as a director since 1991 and was appointed Chairman of the Board in December 1997 of SBE, Inc., a manufacturer of communications and computer products. From 1977 to 1999, Mr. Conlisk was President of Conlisk Associates, a management consulting firm serving high-technology companies in the United States and foreign countries. From 1991 to 1998, Mr. Conlisk served as a director of Xetel Corporation, a contract manufacturer of electronic equipment. Mr. Conlisk was also President from 1984 to 1989, a director from 1970 and Chairman from 1989 until retirement in June 1990, of Quantic Industries, Inc., a privately held manufacturer of electronic systems. From 1970 to 1973 and from 1987 to 1990, Mr. Conlisk served as a director of the American Electronics Association.

Frank P. Carrubba joined Exar as a director in August 1998. Dr. Carrubba served as Executive Vice President and Chief Technical Officer of Royal Philips Electronics, headquartered in Eindhoven, the Netherlands, from 1991 until his retirement in 1997. From 1982 to 1991, Dr. Carrubba was with the Hewlett-Packard Company, where he was a member of the Group Management Committee and was Director of H-P Laboratories. Prior to joining Hewlett-Packard, he spent 22 years as a member of the technical staff at IBM Corporation's Thomas J. Watson Research Laboratory in Yorktown Heights, New York. Dr. Carrubba was one of the original inventors of RISC Architecture, for which he was named Inventor of the Year in 1992. Dr. Carrubba is also a director of Coherent, Inc., a developer and manufacturer of lasers, laser systems and precision optics.

James E. Dykes joined Exar as a director in May 1994. Mr. Dykes served as President and CEO of the Signetics division of North American Philips Corporation, a manufacturer of industrial and consumer electronics, from 1989 to 1993 and, from 1987 to 1988, as President and CEO of TSMC, a semiconductor foundry in Taiwan. Prior to joining TSMC, Mr. Dykes held various management positions with other semiconductor and related companies, including General Electric Company, a diversified international manufacturer of defense, electrical and other products, and Harris Semiconductor, Inc., a manufacturer of integrated circuits. From August 1994 to June 1997, Mr. Dykes served as President and Chief Operating Officer of Intellon Corp., a wireless network communications company. From July 1997 until his departure in July 1998, Mr. Dykes served as Executive Vice President, Corporate Development of the Thomas Group, Inc., an international, professional consulting

firm providing solution to improve business processes. Mr. Dykes is also a director of the Thomas Group Inc., Cree Inc., a silicon carbide materials and electronics company, and Thesus Logic, Inc., a privately held semiconductor company.

Richard Previte joined Exar as a director in October 1999. Mr. Previte is Chief Executive Officer and Chairman of the Board of Directors of MarketFusion since January 2000. He was a director of Advanced Micro Devices, or AMD, from 1990 to April 2000 and Vice Chairman from 1999 to April 2000. Additionally, Mr. Previte served as Chairman of the Board of Vantis Corporations, a subsidiary of AMD, from 1997 to June 1999, and acted as Chief Executive Officer from February 1999 to June 1999. Mr. Previte served as President of AMD from 1990 to 1999, Executive Vice President and Chief Operating Officer from 1989 to 1990 and Chief Financial Officer and Treasurer from 1969 to 1989.

ITEM 2. PROPERTIES

The Company's corporate headquarters are located in Fremont, California, consisting of approximately 151,000 square feet. The land and building are owned by the Company and house Exar's principal administrative, test, engineering, marketing, customer service and sales departments. Additionally, the Company owns approximately 5.3 acres of undeveloped property adjacent to its headquarters, which is presently being held for future office expansion.

ITEM 3. LEGAL PROCEEDINGS

There are no material legal actions pending or contemplated.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of fiscal 2001, no matter was submitted to a vote of security holders through the solicitation of proxies or otherwise.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Common Stock of Exar is traded on the Nasdaq National Market under the symbol "EXAR." The following table sets forth the range of high and low sales prices for the Company's Common Stock for the periods indicated, as reported by Nasdaq, as adjusted for a three-for-two stock split effected on February 15, 2000 and a two-for-one stock split effected on October 19, 2000. The listed quotations represent inter-dealer prices without retail markup, markdown or commissions.

	COMMON STOCK PRICES
	HIGH		LOW
FISCAL 2001
Quarter ended March 31, 2001	$	37.50	$	16.81
Quarter ended December 31, 2000	$	64.19	$	20.31
Quarter ended September 30, 2000	$	62.56	$	40.25
Quarter ended June 30, 2000	$	46.06	$	21.00
FISCAL 2000
Quarter ended March 31, 2000	$	49.81	$	19.00
Quarter ended December 31, 1999	$	21.54	$	10.50
Quarter ended September 30, 1999	$	13.00	$	8.50
Quarter ended June 30, 1999	$	8.46	$	5.29

The Company has never paid dividends on its Common Stock and presently intends to continue this policy in order to retain earnings for use in its business. The Company had approximately 191 stockholders of record as of May 31, 2001. The Company believes it has in excess of 3,900 beneficial stockholders. The last sales price for Exar's Common Stock, as reported by Nasdaq on May 31, 2001, was $23.09 per share.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following selected financial data should be read in conjunction with the Consolidated Financial Statements and Notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this report. Historical periods have been

restated to reflect the three-for-two stock split effected on February 15, 2000 and a two-for-one stock split effected on October 19, 2000.

		YEARS ENDED MARCH 31,
		2001		2000		1999		1998		1997
		(In thousands, except per share amounts)
Consolidated Statements of Operations Data:
Net Sales		$	112,924	$	78,554	$	71,868	$	102,015	$	92,343
Gross Profit			66,956		44,402		38,482		50,078		36,883
Income (Loss) From Operations			18,146		3,946		4,051		8,986		(15,238	)
Net Income (Loss)			28,434		15,115		5,424		7,518		(9,197	)
Net Income (Loss) Per Share:
	Basic	$	0.75	$	0.52	$	0.19	$	0.27	$	(0.34	)
	Diluted	$	0.66	$	0.47	$	0.19	$	0.26	$	(0.34	)
Shares Used in Computation of Net Income (Loss) Per Share:
	Basic		38,097		28,953		28,176		27,978		27,212
	Diluted		42,849		32,394		28,800		29,190		27,212

	AS OF MARCH 31,
	2001		2000		1999		1998		1997
	(In thousands)
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term investments	$	401,044	$	380,158	$	81,410	$	79,307	$	53,532
Working Capital		412,772		393,570		91,885		90,395		68,822
Total Assets		499,348		438,433		138,296		143,669		125,537
Long-term Obligations		476		574		664		745		880
Retained Earnings		100,673		72,239		57,124		51,700		44,182
Stockholders' Equity		483,997		425,041		125,757		123,729		109,817

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company designs, develops and markets high-performance, high-bandwidth mixed-signal (analog and digital) silicon solutions for the worldwide communications infrastructure. The Company also provides solutions for the serial communications market as well as the video and imaging markets. The Company's major customers include Alcatel, Cisco, Hewlett-Packard, Lucent, Nokia and Tellabs.

Over the past several years, the Company has actively refocused its business on products for the communications markets. In the 1970's, the Company designed, manufactured and marketed custom and general purpose analog circuits supporting many different applications. In the 1980's, the Company transitioned its products to analog and mixed-signal application specific standard products, or ASSPs, focusing on telecommunications, data communications, computer peripherals and consumer electronics. Through the mid-1990's, the Company continued this product transition through internal development and strategic acquisitions and moved to a fabless semiconductor business model. In 1997, the Company chose to focus its product strategy and development efforts on the communications markets. For that year, the Company's communications products represented 43.2% of its net sales. For the year ended March 31, 2001, the Company's communications product sales increased to 73.8% of its net sales.

The Company's international sales represented 32.4%, 32.8% and 36.5% of the Company's net sales for the years ended March 31, 2001, 2000 and 1999. These international sales consist primarily of export sales from the United States denominated in United States Dollars. Such international sales and operations give rise to exposures from changes in currency exchange rates as a result of the Company's foreign operating expenses being denominated in foreign currency. The Company has adopted a set of practices to minimize its foreign currency risk, which include the occasional use of foreign currency exchange contracts to hedge operating results from its foreign subsidiaries. Although foreign sales may be subject to tariffs in certain countries or with regard to certain products, the Company's profit margin on international sales of ICs, adjusted for differences in product mix, is not significantly different from that realized on the Company's sales to domestic customers.

The Company generally recognizes product revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectibility is probable. The Company's distributor agreements generally permit the return of up to 10% of their purchases annually for purposes of stock rotation and also provide for credits to distributors in the event the Company reduces the price of any product. The Company records an allowance, at the time of shipment, based on authorized and historical patterns of returns, price protection and other concessions.

The Company's gross margins vary depending on product mix, competition, the volume of products manufactured and sold, its suppliers' ability to achieve certain manufacturing efficiencies and the cost of materials procured from its suppliers. Exar's newer analog and mixed-signal products, especially its communications products, generally have higher gross margins than its more mature products, and margins of any particular product may erode over time.

Results of Operations

The following table sets forth for the periods indicated the percentage relationship to net sales of certain cost, expense and income items. The table and subsequent discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto.

	Fiscal Years Ended March 31,
	2001		2000		1999
Net sales	100.0	%	100.0	%	100.0	%
Cost of sales	40.7		43.5		46.5

Gross profit	59.3		56.5		53.5
Research and development	21.1		23.6		20.7
Selling, general and administrative	22.1		27.2		25.3
Goodwill amortization	—		.7		.9
Restructuring and other charges	—		—		1.0

Operating income	16.1		5.0		5.6
Other income, net	23.3		23.2		6.6

Income before income taxes	39.4		28.2		12.2
Income taxes	14.2		9.0		4.6

Net income	25.2	%	19.2	%	7.6	%

Product Line Sales as a Percentage of Net Sales

The following table sets forth product line revenue information as a percentage of net sales. The table and subsequent discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto.

	Fiscal Years Ended March 31,
	2001		2000		1999
Communications	73.8	%	74.2	%	57.1	%
Video and Imaging	21.3		18.1		21.4
Other	4.9		7.7		21.5

	100.0	%	100.0	%	100.0	%

Fiscal Year Ended March 31, 2001 Compared to Fiscal Year Ended March 31, 2000

Net sales. Net sales for the fiscal year ended March 31, 2001 increased by 43.8% to $112.9 million, compared to $78.6 million for the fiscal year ended March 31, 2000. This increase was primarily due to a 43.1% or $25.1 million increase in sales of the Company's communications products. This increase was also due in part to favorable market conditions in the overall semiconductor industry and the growth of the Company's network transmission products and serial communications products,

as both of these product lines gained market acceptance and previous design wins matured into production of network transmission products.

In the fiscal year ended March 31, 2001, sales to domestic customers increased by 44.5% from $52.8 million to $76.3 million. International sales increased by 41.9% from $25.8 million to $36.6 million for the fiscal year ended March 31, 2001.

Cost of sales. Cost of sales as a percentage of net sales for the fiscal year ended March 31, 2001 decreased to approximately 40.7%, compared to 43.5% for the fiscal year ended March 31, 2000. The resulting improvement in gross margins is attributed to lower costs from increased production efficiencies associated with higher shipment levels and greater revenue contribution from new devices with higher gross margins that reached production. Furthermore, the Company has experienced a favorable shift in product mix toward higher margin products resulting from the growth in communications revenue, primarily from transmission products sales.

Research and development. Research and development ("R&D") expenses for the fiscal year ended March 31, 2001 were $23.8 million, or 21.1% of net sales, compared to $18.6 million, or 23.6% of net sales for the fiscal year ended March 31, 2000. The dollar increase in R&D spending reflects the Company's ongoing R&D efforts relating to transmission products. The increase in R&D was primarily due to new product development resulting in higher expenditures for supplies and services necessary to support the overall growth in R&D. In the future, the Company expects to increase spending on R&D activities to support growth, particularly for transmission products. The Company expects research and development expenses to continue to fluctuate as a percentage of net sales as a result of the timing of expenditures and changes in the level of net sales.

Selling, general and administrative. Selling, general and administrative ("SG&A") expenses for the fiscal year ended March 31, 2001 were $25.0 million, or 22.1% of net sales, compared to $21.4 million, or 27.2% for the fiscal year ended March 31, 2000. The increase in expenditures was due primarily to the overall growth of the business, while the decrease in percentage of net sales reflects a higher revenue contribution from newer products with higher gross margins. In the short term, many of the selling, general and administrative expenses are fixed, causing a decline as a percentage of net sales in periods of rapidly rising sales and an increase as a percentage of net sales when sales growth is slower or declining.

Other income. Other income in the fiscal year ended March 31, 2001 increased by $8.2 million or 45% over fiscal year ended March 31, 2000. The increase was mainly the result of higher cash balances available to earn interest. Other income in the fiscal year ended March 31, 2000 includes a pre-tax $12.0 million gain on the sale of an investment related to a minority equity investment in IC Works, Inc. In April 1999, the Company received approximately 1.1 million shares of common stock in Cypress Semiconductor, Inc. in exchange for its investment in IC Works, Inc. due to the merger of Cypress Semiconductor, Inc. and IC Works, Inc. The Company sold this stock during the first and fourth quarters of fiscal 2000, resulting in a pre-tax gain of $12.0 million in other income and a related employee compensation and benefits expense of $3.0 million in costs and expenses.

Provision for income taxes. The provision for income taxes is based on income from operations. The effective tax rate for fiscal 2001 was approximately 36.1% compared with the federal statutory rate of 35%. The difference is due primarily to state income taxes partially offset by income tax credits. The effective tax rate for fiscal 2000 was approximately 31.7% compared to federal statutory rate of 35%. The difference is due to utilization of capital loss carryforwards that offset the gain on sale of the IC Works, Inc. investment and tax savings generated from utilization of the Company's foreign sales corporation partially offset by non-deductible expenses and state income taxes.

To date, inflation has not had a significant impact on the Company's operating results.

Fiscal Year Ended March 31, 2000 Compared to Fiscal Year Ended March 31, 1999

Net sales. Net sales during fiscal 2000 were $78.6 million compared to $71.9 million in fiscal 1999, an increase of 9.3%. This increase was primarily due to a 42.0% or $17.2 million increase in sale of the Company's serial communications products and increased sales of its transmission products as both of these product lines gained market acceptance and design wins. This increase was partially offset by decreases in sales of discontinued consumer and custom products in the Company's legacy product lines (due in part to the fiscal 1999 closure of one of the Company's third-party wafer fabrication facilities), as well as the sale of the Company's Silicon Microstructures business unit and related product lines in November 1998.

In fiscal 2000, sales to domestic customers increased by 15.7% to $52.8 million. International sales decreased by 1.7% to $25.8 million.

Cost of sales. Cost of sales as a percentage of net sales for the fiscal year ended March 31, 2000 represented 43.5%, compared to 46.5% for the fiscal year ended March 31, 1999. The resulting increase in gross margins is due primarily to a greater mix of communications products, which generally have higher gross margins than many of the Company's more mature products.

Research and development. R&D expenses for the fiscal year ended March 31, 2000 represented 23.6% of net sales, compared to 20.7% of net sales for the fiscal year ended March 31, 1999. R&D spending for the fiscal year ended March 31, 2000 increased by 25.1% as the Company continued to invest in the development of its communications products. These spending increases resulted from additional staffing in the communications products areas, increases in expenditures for supplies and services for the development of communications products, and an increase in employee compensation and benefits expenses associated with a pre-tax gain recognized in Other Income in the first quarter of fiscal 2000. In the future, the Company expects to increase spending on research and development activities, particularly for communications products.

Selling, general and administrative. SG&A expenses for the fiscal year ended March 31, 2000 represented 27.2% of net sales, compared to 25.3% for the fiscal year ended March 31, 1999. SG&A expenses for the fiscal year ended March 31, 2000 increased by 17.4%. The increase was due to growth in communications product sales and an increase in employee compensation and benefits expenses associated with a pre-tax gain recognized in Other Income in the first quarter of fiscal 2000.

Other income. Other income in the fiscal year ended March 31, 2000 includes a pre-tax $12.0 million gain on the sale of an investment related to a minority equity investment in IC Works, Inc. In April 1999, the Company received approximately 1.1 million shares of common stock in Cypress Semiconductor, Inc. in exchange for its investment in IC Works, Inc. due to the merger of Cypress Semiconductor, Inc. and IC Works, Inc. The Company sold this stock during the first and fourth quarters of fiscal 2000, resulting in a pre-tax gain of $12.0 million in other income and a related employee compensation and benefits expense of $3.0 million in costs and expenses.

Provision for income taxes. The provision for income taxes is based on income from operations. The effective tax rate for fiscal 2000 was approximately 31.7% compared with the federal statutory rate of 35%. The difference is due to utilization of capital loss carryforwards that offset the gain on sale of the IC Works, Inc. investment and tax savings generated from utilization of the Company's foreign sales corporation partially offset by non-deductible expenses, state income taxes and foreign income, which is taxed at rates different from U.S. income tax.

Quarterly Results

The following tables contain selected unaudited quarterly financial data for the eight quarters ended March 31, 2001 and this data as a percentage of net sales. In the opinion of management, this unaudited information has been prepared on the same basis as the audited information and includes all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the information set forth therein. Results for a particular quarter are not necessarily indicative of the results for any subsequent quarter. The data gives effect to the three-for-two stock split effected on February 15, 2000 and the two-for-one stock split effected on October 19, 2000.

		Quarter Ended
		March 31, 2001		Dec. 31, 2000		Sept. 30, 2000		June 30, 2000		March 31, 2000		Dec. 31, 1999		Sept. 30, 1999		June 30, 1999
		(In thousands, except per share amounts)
Net sales		$	21,568	$	32,515	$	31,502	$	27,339	$	23,045	$	20,708	$	18,550	$	16,251
Cost of sales			8,582		12,994		12,958		11,434		9,743		8,947		8,160		7,302

Gross profit			12,986		19,521		18,544		15,905		13,302		11,761		10,390		8,949
Research and development			5,853		5,967		6,235		5,785		4,855		4,365		4,096		5,252
Selling, general and administrative			6,127		6,575		6,243		6,025		5,451		5,194		4,826		5,913
Goodwill amortization			—		—		—		—		126		126		126		126

Operating income (loss)			1,006		6,979		6,066		4,095		2,870		2,076		1,342		(2,342	)
Other income, net			6,379		7,273		6,643		6,070		7,423		1,423		1,296		8,044

Income before income taxes			7,385		14,252		12,709		10,165		10,293		3,499		2,638		5,702
Income taxes			2,341		5,273		4,754		3,709		3,229		1,124		857		1,807

Net income		$	5,044	$	8,979	$	7,955	$	6,456	$	7,064	$	2,375	$	1,781	$	3,895

Net income per share:
	Basic	$	0.13	$	0.23	$	0.21	$	0.17	$	0.23	$	0.08	$	0.06	$	0.14

	Diluted	$	0.12	$	0.21	$	0.18	$	0.15	$	0.19	$	0.07	$	0.06	$	0.13

Shares used in the computation of net income per share:
	Basic		38,811		38,502		37,798		37,292		31,068		28,623		28,149		27,995

	Diluted		42,276		43,138		43,332		42,664		36,239		32,827		31,303		29,230

	March 31, 2001		Dec. 31, 2000		Sept. 30, 2000		June 30, 2000		March 31, 2000		Dec. 31, 1999		Sept. 30, 1999		June 30, 1999
	(As a percentage of net sales)
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	39.8		40.0		41.1		41.8		42.3		43.2		44.0		44.9

Gross profit	60.2		60.0		58.9		58.2		57.7		56.8		56.0		55.1
Research and development	27.1		18.4		19.8		21.2		21.2		21.1		22.1		32.3
Selling, general and administrative	28.4		20.2		19.8		22.0		23.7		25.1		26.0		36.4
Goodwill amortization	—		—		—		—		0.5		0.6		0.7		0.8

Operating income (loss)	4.7		21.5		19.3		15.0		12.5		10.0		7.2		(14.4	)
Other income, net	29.6		22.4		21.1		22.2		32.2		6.9		7.0		49.5

Income before income taxes	34.2		43.8		40.3		37.2		44.7		16.9		14.2		35.1
Income taxes	10.9		16.2		15.1		13.6		14.0		5.4		4.6		11.1

Net Income	23.4	%	27.6	%	25.3	%	23.6	%	30.7	%	11.5	%	9.6	%	24.0	%

Gross margins have improved due to a greater mix of communications products which generally have higher gross margins than the Company's more mature products. The sequential quarter decrease in net sales for the quarter ended March 31, 2001 was primarily due to accumulation of excess supply in inventory channels. Additionally, the general economic downturn in the United States which has lowered the demand for equipment sold by several of the Company's significant customers, many of which have announced large component inventories and declines in expected operating results, has had an impact on the Company's results of operations for the fiscal year ended March 31, 2001.

Research and development and selling, general and administrative expenses peaked in the quarter ended June 30, 1999 primarily due to $3.0 million in employee compensation and benefits expenses from a $7.0 million first quarter pre-tax gain. This pre-tax gain derived from the sale of an investment related to a minority equity investment in IC Works, Inc. included in other income. In April 1999, the Company received in excess of 1.1 million shares of common stock in Cypress Semiconductor, Inc. in exchange for its investment in IC Works, Inc. due to the merger of Cypress Semiconductor, Inc. and IC Works, Inc. The Company sold this stock during the first and fourth quarters of fiscal 2000, resulting in a pre-tax gain of $12.0 million.

Liquidity and Capital Resources

Cash and cash equivalents and short-term investments increased to $401.0 million at March 31, 2001 from $380.2 million at March 21, 2000. During fiscal 2001, operating activities provided $48.6 million in cash. Net income of $28.4 million included non-cash charges of $3.9 million of depreciation and $22.6 million of tax benefit from disqualifying dispositions from the exercise of stock options. The Company has a credit facility agreement with a domestic bank under which it may execute up to $15.0 million in foreign currency transactions. At March 31, 2001, the Company had no foreign currency contracts outstanding.

The Company's investing activities included the maturity and reinvestment of both short-term and long-term investments. Net capital and other asset expenditures during the fiscal year ended March 31, 2001 totaled $4.3 million including purchases of computer equipment and software used for product development.

During the fiscal year ended March 31, 2001, the Company repurchased 245,000 shares of the Company's common stock for $4.6 million and received $12.2 million from the issuance of 1,801,689 common stock shares upon the exercise of stock options under the Company's stock option plans and the purchase of common stock shares under the Company's employee stock purchase plan.

The Company has no material firm capital commitments.

The Company anticipates it will continue to finance its operations with cash flows from operations, existing cash and investment balances, and some combination of long-term debt and/or lease financing and additional sales of equity securities. The combination and sources of capital will be determined by management based on needs and prevailing market conditions. The Company believes that its cash and cash equivalents, short-term investments, long-term investments and cash flows from operations will be sufficient to satisfy working capital requirements and capital equipment needs for at least the next 12 months. From time to time, the Company evaluates potential acquisitions and equity investments complementary to its design expertise and market strategy, including investments in wafer fabrication foundries. To the extent that the Company pursues or positions itself to pursue these transactions, the Company could choose to seek additional equity or debt financing. There can be no assurance that additional financing could be obtained on terms acceptable to us. The sale of additional equity or convertible debt could result in dilution to its stockholders.

Financial Outlook for Fiscal Year 2002

The communications equipment sector is continuing to experience softening in demand resulting from an inventory build-up and uncertainty of future capital spending by telecommunications service providers. Exar continues to experience ongoing pressure on its bookings and backlog, which has negatively impacted, and may continue to impact Exar's results of operations.

Several of the Company's customers are experiencing a slowdown in product demand due to poor visibility at their clients, particularly the telecommunications service providers. Many of these large carriers or service providers have announced plans to reduce or delay capital expenditures. Such factors, coupled with the current macroeconomic condition in the United States, have decreased the demand for semiconductor components at a significant number of the Company's customers, many of whom have announced significant inventories and declines in expected future financial results.

The Company expects that such decrease in demand will negatively impact its revenues and gross profit for at least a significant portion of the fiscal year ending March 31, 2002. The Company has taken and will continue to take actions to control costs and reduce operating expenses while maintaining its focus on developing and marketing new broadband transmission products.

RISK FACTORS

The Company is subject to a number of risks. The following risks and other information in this Report should be considered carefully before investing in Exar.

The Company's operating results fluctuate significantly because of a number of factors, many of which are beyond the Company's control.

The Company's operating results fluctuate significantly. Some of the factors that affect the Company's quarterly and annual results, many of which are beyond the Company's control and difficult to predict, are:

•: the reduction, rescheduling or cancellation of orders by customers;
•: fluctuations in the timing and amount of customer requests for product shipments;
•: fluctuations in the manufacturing output, yields and inventory levels of the Company's suppliers;
•: changes in the mix of products that the Company's customers purchase;
•: the Company's ability to introduce new products on a timely basis;
•: the announcement or introduction of products by the Company's competitors;
•: the availability of third party foundry capacity and raw materials;
•: competitive pressures on selling prices;
•: the amounts and timing of costs associated with product warranties and returns;
•: the amounts and timing of investments in research and development;
•: market acceptance of the Company's products;
•: costs associated with acquisitions and the integration of acquired operations;
•: the ability of the Company's customers to obtain components from their other suppliers;
•: general conditions in the communications and semiconductor industries;
•: fluctuations in interest rates; and
•: general economic conditions.

The Company's markets are subject to rapid technological change; therefore, the Company's success depends on its ability to develop and introduce new products.

The markets for the Company's products are characterized by:

•: rapidly changing technologies;
•: evolving and competing industry standards;
•: changing customer needs;
•: frequent new product introductions and enhancements;
•: increased integration with other functions; and
•: rapid product obsolescence.

To develop new products for the Company's target markets, the Company must develop, gain access to and use leading technologies in a cost-effective and timely manner and continue to expand its technical and design expertise. In addition, the Company must have its products designed into its

customers' future products and maintain close working relationships with key customers in order to develop new products that meet their changing needs.

In addition, products for communications applications are based on continually evolving industry standards. The Company's ability to compete will depend on its ability to identify and ensure compliance with these industry standards. As a result, the Company could be required to invest significant time and effort and to incur significant expense to redesign its products to ensure compliance with relevant standards.

The Company cannot assure that it will be able to identify new product opportunities successfully, develop and bring to market new products, achieve design wins or respond effectively to new technological changes or product announcements by its competitors. In addition, the Company may not be successful in developing or using new technologies or in developing new products or product enhancements that achieve market acceptance. The Company's pursuit of necessary technological advances may require substantial time and expense. Failure in any of these areas could harm its operating results.

The markets in which the Company participates are intensely competitive.

The Company's target markets are intensely competitive. The Company's ability to compete successfully in its target markets depends on the following factors:

•: designing new products that implement new technologies;
•: subcontracting the manufacture of new products and delivering them in a timely manner;
•: product quality and reliability;
•: technical support and service;
•: timely product introduction;
•: product performance;
•: product features;
•: price;
•: end-user acceptance of the Company's customers' products;
•: compliance with evolving standards; and
•: market acceptance of competitors' products.

In addition, the Company's competitors or customers may offer new products based on new technologies, industry standards or end-user or customer requirements, including products that have the potential to replace or provide lower-cost or higher-performance alternatives to its products. The introduction of new products by the Company's competitors or customers could render the Company's existing and future products obsolete or unmarketable. In addition, the Company's competitors and customers may introduce products that integrate the functions performed by its ICs on a single IC, thus eliminating the need for the Company's products.

Because the IC markets are highly fragmented, the Company generally encounters different competitors in its various market areas. Competitors with respect to the Company's communications products include Conexant Systems Inc., PMC-Sierra, Inc. and TranSwitch Corporation. In addition, the expansion of the Company's communications product portfolio may in the future bring it into competition with other established communications IC companies, such as Applied Micro Circuits Corp. and Vitesse Semiconductor Corporation. Competitors in the Company's other markets include Analog Devices Inc., Philips Electronics and Texas Instruments Inc. Many of the Company's

competitors have greater financial, technical and management resources than the Company does. Some of these competitors may be able to sell their products at prices below which it would be profitable for the Company to sell its products.

If the Company is unable to further penetrate the markets for communications ICs, or if these markets fail to grow as expected, its revenues could stop growing and may decline.

A significant portion of the Company's revenues in recent periods has been, and is expected to continue to be, derived from sales of communications ICs, particularly products based on the T/E carrier and ATM transmission standards. In order for the Company to be successful, it must continue to penetrate these markets. Furthermore, if these markets fail to grow as expected, the Company's business could be harmed.

The Company's future success depends in part on the continued service of its key engineering and management personnel and its ability to identify, hire and retain additional personnel.

The Company's future success depends, in part, on the continued service of its key design engineering, sales, marketing and executive personnel and its ability to identify, hire and retain additional personnel.

The Company may not be able to continue to attract and retain engineers or other qualified personnel necessary for the development of its business or to replace engineers or other qualified personnel who may leave the Company. There is intense competition, particularly in Silicon Valley, where the Company's headquarters are located, for qualified personnel in the semiconductor industry, in particular the highly skilled design, process, software application support, and test engineers involved in the development of new communications ICs. The Company's anticipated growth is expected to place increased demands on its resources and will likely require the addition of new management personnel and the development of additional expertise by existing management personnel. Loss of the services of, or failure to recruit key design engineers or other technical and management personnel, could harm the Company's business.

The Company depends on third party foundries to manufacture its ICs.

The Company does not own or operate a semiconductor fabrication facility. Most of its products are based on CMOS processes. Although two foundries manufacture its products based on CMOS processes, most are manufactured at a single foundry. In addition, one foundry manufactures most of the Company's BiCMOS products. The Company does not have long-term wafer supply agreements with its CMOS foundries that guarantee wafer or product quantities, prices, delivery or lead times, as its CMOS foundries manufacture its products on a purchase order basis. The Company provides these foundries with rolling forecasts of its production requirements; however, the ability of each foundry to provide wafers to the Company is limited by the foundry's available capacity. Therefore, the Company's CMOS foundries could choose to prioritize capacity for other customers or reduce or eliminate deliveries to it on short notice. Accordingly, the Company cannot be certain that these foundries will allocate sufficient capacity to satisfy its requirements. In addition, the Company cannot be certain that it will continue to do business with its foundries on terms as favorable as its current terms. Other significant risks associated with the Company's reliance on third-party foundries include:

•: the lack of control over delivery schedules;
•: the unavailability of, or delays in obtaining access to, key process technologies;
•: limited control over quality assurance, manufacturing yields and production costs; and
•: potential misappropriation of the Company's intellectual property.

The Company could experience a substantial delay or interruption in the shipment of its products or an increase in its costs due to the following:

•: a sudden demand for semiconductor devices;
•: a manufacturing disruption experienced by one or more of the Company's foundries or sudden reduction or elimination of any existing source or sources of semiconductor devices;
•: time required to identify or qualify alternative manufacturing sources for existing or new products; or
•: failure of the Company's suppliers to obtain the raw materials and equipment used in the production of its ICs.

If the Company's foundries discontinue the manufacturing processes needed to meet its demands, or fail to upgrade the technologies needed to manufacture its products, the Company may face production delays.

The Company's wafer and product requirements typically represent a small portion of the total production of the foundries that manufacture its products. As a result, the Company is subject to the risk that a foundry will cease production on an older or lower-volume process that it uses to produce parts supplied to the Company. Additionally, the Company cannot be certain its foundries will continue to devote resources to the production of its products or continue to advance the process design technologies on which the manufacturing of the Company's products is based. Each of these events could increase the Company's costs and harm its ability to deliver its products on time.

The Company expects that revenues currently derived from non-communications products will decline in future periods, and its business will be harmed if its communications products fail to compensate for this decline.

The Company does not intend to increase its funding of development efforts relating to its video and imaging and other non-communications products, and as a result, revenues from these products may decline in future periods. In addition, the markets for these products are subject to extreme price competition, and the Company may not be able to reduce its costs in response to declining average selling prices. Even if the Company reduces its costs, its customers in these markets may not purchase these products. Moreover, these markets may decrease in size in the future. If the Company's communications products fail to compensate for any revenue shortfall, its business could be harmed.

The Company's dependence on third-party subcontractors to assemble and test its products subjects it to a number of risks, including an inadequate supply of products and higher materials costs.

The Company depends on independent subcontractors for the assembly and testing of its products. The Company's reliance on these subcontractors involves the following significant risks:

•: reduced control over delivery schedules and quality;
•: the potential lack of adequate capacity during periods of excess demand;
•: difficulties selecting and integrating new subcontractors;
•: limited warranties on products supplied to the Company;
•: potential increases in prices due to capacity shortages and other factors; and
•: potential misappropriation of the Company's intellectual property.

These risks may lead to delayed product delivery or increased costs, which would harm the Company's profitability and customer relationships.

To secure foundry capacity, the Company may be required to enter into financial and other arrangements with foundries, and such agreements may result in the dilution of its earnings or the ownership of its stockholders or otherwise harm its operating results.

Allocation of a foundry's manufacturing capacity may be influenced by a customer's size or the existence of a long-term agreement with the foundry. To address foundry capacity constraints, the Company and other semiconductor companies that rely on third-party foundries have utilized various arrangements, including equity investments in or loans to foundries in exchange for guaranteed production capacity, joint ventures to own and operate foundries, or "take or pay" contracts that commit a company to purchase specified quantities of wafers over extended periods. While the Company is not currently a party to any of these arrangements, it may decide to enter into these arrangements in the future. The Company cannot be sure, however, that these arrangements will be available to it on acceptable terms, if at all. Any of these arrangements could require the Company to commit substantial capital and, accordingly, could require it to obtain additional debt or equity financing. This could result in the dilution of its earnings or the ownership of its stockholders or otherwise harm its operating results.

The Company's reliance upon foreign suppliers exposes it to risks associated with international operations.

The Company uses semiconductor wafer foundries and assembly and test subcontractors throughout Asia for most of its products. The Company's dependence on these subcontractors involves the following substantial risks:

•: political and economic instability;
•: disruption to air transportation from Asia;
•: embargo affecting the availability of raw materials, equipment or services;
•: changes in tax laws, tariffs and freight rates; and
•: compliance with local or foreign regulatory requirements.

These risks may lead to delayed product delivery or increased costs, which would harm the Company's profitability and customer relationships.

The Company's reliance on foreign customers could cause fluctuations in its operating results.

International sales accounted for 32.4% of net sales for fiscal year 2001. International sales may account for an increasing portion of the Company's revenues, which would subject it to the following risks:

•: changes in regulatory requirements;
•: tariffs and other barriers;
•: timing and availability of export licenses;
•: political and economic instability;
•: difficulties in accounts receivable collections;
•: difficulties in staffing and managing foreign subsidiary and branch operations;
•: difficulties in managing distributors;
•: difficulties in obtaining governmental approvals for communications and other products;
•: limited intellectual property protection;

•: foreign currency exchange fluctuations;
•: the burden of complying with and the risk of violating a wide variety of complex foreign laws and treaties; and
•: potentially adverse tax consequences.

In addition, because sales of the Company's products have been denominated to date primarily in United States Dollars, increases in the value of the United States Dollar could increase the relative price of the Company's products so that they become more expensive to customers in the local currency of a particular country. Future international activity may result in increased foreign currency denominated sales. Furthermore, because some of the Company's customer purchase orders and agreements are governed by foreign laws, the Company may be limited in its ability to enforce its rights under these agreements and to collect damages, if awarded.

The Company relies on its distributors and sales representatives to sell many of its products.

The Company sells many of its products through distributors and sales representatives. The Company's distributors and sales representatives could reduce or discontinue sales of its products. They may not devote the resources necessary to sell the Company's products in the volumes and within the time frames that it expects. In addition, the Company depends upon the continued viability and financial resources of these distributors and sales representatives, some of which are small organizations with limited working capital. These distributors and sales representatives, in turn, depend substantially on general economic conditions and conditions within the semiconductor industry. The Company believes that its success will continue to depend upon these distributors and sales representatives. If some or all of the Company's distributors and sales representatives experience financial difficulties, or otherwise become unable or unwilling to promote and sell its products, the Company's business could be harmed.

Because the Company's communications ICs typically have lengthy sales cycles, the Company may experience substantial delays between incurring expenses related to research and development and the generation of sales revenue.

Due to the communications IC product cycle, it usually takes the Company more than 12 months to realize volume shipments after it first contacts a customer. The Company first works with customers to achieve a design win, which may take nine months or longer. The Company's customers then complete the design, testing and evaluation process and begin to ramp up production, a period which typically lasts an additional three months or longer. As a result, a significant period of time may elapse between the Company's research and development efforts and its realization of revenue, if any, from volume purchasing of the Company's communications products by its customers.

The Company's backlog may not result in future revenue.

Due to possible customer changes in delivery schedules and quantities actually purchased, cancellations of orders, distributor returns or price reductions, the Company's backlog at any particular date is not necessarily indicative of actual sales for any succeeding period. A reduction of backlog during any particular period, or the failure of the Company's backlog to result in future revenue, could harm the Company's business.

The Company's operating expenses are relatively fixed, and it may order materials in advance of anticipated customer demand. Therefore, the Company has limited ability to reduce expenses quickly in response to any revenue shortfalls.

The Company's operating expenses are relatively fixed, and, therefore, it has limited ability to reduce expenses quickly in response to any revenue shortfalls. Consequently, the Company's operating results will be harmed if its revenues do not meet its revenue projections. The Company may experience revenue shortfalls for the following reasons:

•: a significant reduction in customer demand;
•: significant pricing pressures that occur because of declines in average selling prices over the life of a product;
•: sudden shortages of raw materials or fabrication, test or assembly capacity constraints that lead the Company's suppliers to allocate available supplies or capacity to other customers and, in turn, harm the Company's ability to meet its sales obligations; and
•: the reduction, rescheduling or cancellation of customer orders.

In addition, the Company typically plans its production and inventory levels based on internal forecasts of customer demand, which is highly unpredictable and can fluctuate substantially. From time to time, in response to anticipated long lead times to obtain inventory and materials from the Company's outside suppliers and foundries, it may order materials in advance of anticipated customer demand. This advance ordering may result in excess inventory levels or unanticipated inventory write-downs if expected orders fail to materialize.

Periods of rapid growth and expansion could place a significant strain on the Company's limited personnel and other resources.

To manage the Company's possible future growth effectively, the Company will be required to continue to improve its operational, financial and management systems and to successfully hire, train, motivate and manage its employees. In addition, the integration of past and future potential acquisitions and the evolution of the Company's business plan will require significant additional management, technical and administrative resources. The Company cannot be certain that it will be able to manage the growth and evolution of its current business effectively.

Exar has in the past and may in the future make acquisitions, which will involve numerous risks. Exar cannot assure that it will be able to address these risks successfully without substantial expense, delay or other operational or financial problems.

The risks involved with acquisitions include:

•: diversion of management's attention;
•: failure to retain key personnel;
•: amortization of acquired intangible assets;
•: customer dissatisfaction or performance problems with an acquired company;
•: the cost associated with acquisitions and the integration of acquired operations; and
•: assumption of known or unknown liabilities or other unanticipated events or circumstances.

The Company cannot assure that it will be able to address these risks successfully without substantial expense, delay or other operational or financial problems.

The Company may not be able to protect its intellectual property rights adequately.

The Company's ability to compete is affected by its ability to protect its intellectual property rights. The Company relies on a combination of patents, trademarks, copyrights, mask work registrations, trade secrets, confidentiality procedures and non-disclosure and licensing arrangements to protect its intellectual property rights. Despite these efforts, the Company cannot be certain that the steps it takes to protect its proprietary information will be adequate to prevent misappropriation of the Company's technology, or that its competitors will not independently develop technology that is substantially similar or superior to the Company's technology.

More specifically, the Company cannot be sure that its pending patent applications or any future applications will be approved, or that any issued patents will provide it with competitive advantages or will not be challenged by third parties. Nor can the Company be sure that, if challenged, the Company's patents will be found to be valid or enforceable, or that the patents of others will not have an adverse effect on the Company's ability to do business. Furthermore, others may independently develop similar products or processes, duplicate the Company's products or processes or design around any patents that may be issued to it.

The Company could be harmed by litigation involving patents and other intellectual property rights.

As a general matter, the semiconductor industry is characterized by substantial litigation regarding patent and other intellectual property rights. The Company may be accused of infringing the intellectual property rights of third parties. Furthermore, the Company has certain indemnification obligations to customers with respect to the infringement of third-party intellectual property rights by its products. The Company cannot be certain that infringement claims by third parties or claims for indemnification by customers or end users of its products resulting from infringement claims will not be asserted in the future or that such assertions, if proven to be true, will not harm its business.

Any litigation relating to the intellectual property rights of third parties, whether or not determined in the Company's favor or settled by the Company, would at a minimum be costly and could divert the efforts and attention of its management and technical personnel. In the event of any adverse ruling in any such litigation, the Company could be required to pay substantial damages, cease the manufacturing, use and sale of infringing products, discontinue the use of certain processes or obtain a license under the intellectual property rights of the third party claiming infringement. A license might not be available on reasonable terms, or at all.

Earthquakes and other natural disasters may damage the Company's facilities or those of its suppliers.

The Company's corporate headquarters in Fremont, California are located near major earthquake faults that have experienced seismic activity. In addition, some of its suppliers are located near fault lines. In the event of a major earthquake or other natural disaster near its headquarters, the Company's operations could be harmed. Similarly, a major earthquake or other natural disaster near one or more of the Company's major suppliers, like the one that occurred in Taiwan in September 1999, could disrupt the operations of those suppliers, which could limit the supply of the Company's products and harm its business.

The Company relies on continuous power supply to conduct its operations.

The Company relies on a continuous power supply to conduct its business from its headquarters located in California. Currently, California is experiencing energy shortages which have resulted in rolling blackouts throughout the state. These rolling blackouts are expected to continue in the future and could disrupt the Company's operations, research and development and other critical functions. Such disruption in power supply may temporarily suspend operations in its headquarters. This

disruption may impede the Company's ability to continue operations, which could delay the introduction of new products, hinder the Company's sales efforts, impede the Company's ability to retain existing customers and to obtain new customers, which could have a negative impact on the Company and its results of operations.

The Company's stock price is volatile.

The market price of the Company's common stock has fluctuated significantly to date. In the future, the market price of its common stock could be subject to significant fluctuations due to:

•: the Company's anticipated or actual operating results;
•: announcements or introductions of new products;
•: technological innovations by the Company or its competitors;
•: product delays or setbacks by the Company, its customers or its competitors:
•: conditions in the communications and semiconductor markets;
•: the commencement of litigation;
•: changes in estimates of the Company's performance by securities analysts;
•: announcements of merger or acquisition transactions; and
•: general economic and market conditions.

In addition, the stock market in recent years has experienced extreme price and volume fluctuations that have affected the market prices of many high technology companies, including semiconductor companies, and that have often been unrelated or disproportionate to the operating performance of companies. These fluctuations may harm the market price of the Company's common stock.

The anti-takeover provisions of the Company's certificate of incorporation and of the Delaware General Corporation Law may delay, defer or prevent a change of control.

The Company's Board of Directors has the authority to issue up to 2,250,000 shares of preferred stock and to determine the price, rights, preferences and privileges and restrictions, including voting rights, of those shares without any further vote or action by its stockholders. The rights of the holders of common stock will be subject to, and may be harmed by, the rights of the holders of any shares of preferred stock that may be issued in the future. The issuance of preferred stock may delay, defer or prevent a change in control, as the terms of the preferred stock that might be issued could potentially prohibit the Company's consummation of any merger, reorganization, sale of substantially all of its assets, liquidation or other extraordinary corporate transaction without the approval of the holders of the outstanding shares of preferred stock. In addition, the issuance of preferred stock could have a dilutive effect on the Company's stockholders. The Company's stockholders must give 120 days advance notice prior to the relevant meeting to nominate a candidate for director or present a proposal to the Company's stockholders at a meeting. These notice requirements could inhibit a takeover by delaying stockholder action. The Company has in place a stockholder right or "poison pill" plan that may trigger its stockholder rights plan in the event its Board of Directors does not agree to an acquisition proposal. The rights plan may make it more difficult and costly to acquire the Company. The Delaware anti-takeover law restricts business combinations with some stockholders once the stockholder acquires 15% or more of the Company's common stock. The Delaware statute makes it more difficult for the Company to be acquired without the consent of its Board of Directors and management.

Recently Issued Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statements of Financial Accounting Standards ("SFAS") No.133, "Accounting for Derivative Instruments and Hedging Activities" and in June 2000 issued "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133" No. 138. SFAS No. 133, as amended by SFAS No. 138, requires companies to recognize all derivatives as assets or liabilities at their fair value. Gains or losses resulting from changes in the value of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The Company is required to adopt SFAS No. 133, as amended by SFAS No. 138, beginning April 1, 2001. The adoption of this accounting standard has not and will not have a material impact on the Company's financial position or results of operations.

In December 1999, the Securities and Exchange Commission ("SEC") released Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." In March 2000, the SEC issued SAB No. 101A and in June 2000, issued SAB No. 101B. An additional document was issued in October 2000 which responded to frequently asked questions regarding accounting standards related to revenue recognition and SAB No. 101. The Company has adopted SAB No. 101, as amended, in the third quarter of fiscal 2001. The adoption of this accounting guidance did not have a material impact on the Company's financial position or results of operations.

In March 2000, FASB issued Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation—An Interpretation of Accounting Principles Board Opinion No. 25", clarifying the guidance for certain stock compensation issues, including the definition of an employee, the treatment of the acceleration of stock options and the accounting treatment for options assumed in business combinations. FIN 44 became effective July 1, 2000, but applicable to certain transactions dating back to December 1998. The adoption of FIN 44 did not have a significant impact on the Company's financial position or results of operations.

Item 7A. Quantitative And Qualitative Disclosures About Market Risk

Foreign Currency Fluctuations. The Company is exposed to foreign currency fluctuations primarily through its foreign operations. This exposure is the result of the foreign operating expenses being denominated in foreign currency. Operational currency requirements are typically forecasted for a three month period. If there is a need to hedge this risk, the Company will enter into transactions to purchase currency in the open market or enter into forward currency exchange contracts which are currently available under its bank lines of credit. While it is expected that this method of hedging foreign currency risk will be utilized in the future, the hedging methodology and/or usage may be changed to manage exposure to foreign currency fluctuations.

If the Company's foreign operations forecasts are overstated or understated during periods of currency volatility, the Company could experience unanticipated currency gains or losses. For the fiscal year ended March 31, 2001, the Company did not have significant foreign currency denominated net assets or net liabilities positions, and had no foreign currency contracts outstanding.

Interest Rate Sensitivity. The Company maintains investment portfolio holdings of various issuers, types, and maturity dates with various banks and investment banking institutions. The market value of these investments on any given day during the investment term may vary as a result of market interest rate fluctuations. This exposure is not hedged because a hypothetical 10% movement in interest rates during the investment term would not likely have a material impact on investment income. The actual impact on investment income in the future may differ materially from this analysis, depending on actual balances and changes in the timing and the amount of interest rate movements.

Both short-term and long-term investments are classified as "available-for-sale" securities and the cost of securities sold is based on the specific identification method. At March 31, 2001, short-term investments consisted of auction rate securities, government and corporate securities of $11.5 million and long-term investments consisted of government and corporate securities of $31.3 million. At March 31, 2001, the difference between the fair market value and the underlying cost of such investments was attributable to the unrealized gain of $415,000.

ITEM 8. FINANCIAL STATEMENTS

Independent Auditors' Report

Board of Directors and Stockholders

Exar Corporation:

We have audited the accompanying consolidated balance sheets of Exar Corporation and subsidiaries as of March 31, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity and comprehensive income, and cash flows for each of the years in the three year period ended March 31, 2001. Our audits also included the consolidated financial statement schedule listed in Item 14.(a)2. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Exar Corporation and its subsidiaries as of March 31, 2001 and 2000 and the results of their operations and their cash flows, for each of the years in the three year period ended March 31, 2001, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

DELOITTE & TOUCHE LLP
San Jose, California
April 23, 2001

EXAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2001 AND 2000 (In thousands, except share amounts)

			2001			2000
ASSETS
CURRENT ASSETS:
	Cash and equivalents		$	389,522		$	377,158
	Short-term investments			11,522			3,000
	Accounts receivable, net of allowances of $1,664 and $1,869			11,433			11,550
	Inventories			9,717			8,299
	Prepaid expenses and other			3,039			3,012
	Deferred income taxes			2,414			3,369

		Total current assets		427,647			406,388
PROPERTY, PLANT, AND EQUIPMENT, Net				27,722			26,653
OTHER ASSETS				12,639			5,392
INVESTMENTS IN LONG TERM SECURITIES				31,340			—

TOTAL ASSETS			$	499,348		$	438,433

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
	Accounts payable		$	3,397		$	3,497
	Accrued compensation and related benefits			8,593			7,060
	Accrued sales commissions			1,443			1,096
	Other accrued expenses			1,442			1,165

		Total current liabilities		14,875			12,818
COMMITMENTS AND CONTINGENCIES (see Note 11)
LONG-TERM OBLIGATIONS				476			574
STOCKHOLDERS' EQUITY:
	Preferred stock; $.0001 par value; 2,250,000 shares authorized; no shares outstanding			—			—
	Common stock; $.0001 par value; 100,000,000 shares authorized; 38,967,639 and 37,165,950 shares issued			387,393			352,614
	Accumulated other comprehensive income			542			188
	Retained earnings			100,673			72,239
	Treasury stock; 245,000 and zero shares of common stock at cost			(4,611	)		—

		Total stockholders' equity		483,997			425,041

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY			$	499,348		$	438,433

See notes to consolidated financial statements.

EXAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED MARCH 31, 2001, 2000 AND 1999

(In thousands, except per share amounts)

			2001		2000		1999
NET SALES			$	112,924	$	78,554	$	71,868
COST AND EXPENSES:
	Cost of sales			45,968		34,152		33,386
	Research and development			23,840		18,568		14,842
	Selling, general and administrative			24,970		21,384		18,217
	Goodwill amortization			—		504		641
	Restructuring and other charges			—		—		731

		Total costs and expenses		94,778		74,608		67,817

INCOME FROM OPERATIONS				18,146		3,946		4,051
OTHER INCOME (EXPENSE):
	Interest income			26,145		6,152		4,156
	Interest expense			—		—		(65	)
	Gain on sale of investment			—		12,018		—
	Other, net			220		16		622

		Total other income, net		26,365		18,186		4,713

INCOME BEFORE INCOME TAXES				44,511		22,132		8,764
PROVISION FOR INCOME TAXES				16,077		7,017		3,340

NET INCOME			$	28,434	$	15,115	$	5,424

NET INCOME PER SHARE:
BASIC			$	0.75	$	0.52	$	0.19

DILUTED			$	0.66	$	0.47	$	0.19

SHARES USED IN COMPUTATION OF
NET INCOME PER SHARE:
BASIC				38,097		28,953		28,176

DILUTED				42,849		32,394		28,800

See notes to consolidated financial statements.

EXAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME

YEARS ENDED MARCH 31, 2001, 2000 AND 1999
(In thousands, except share amounts)

		Common Stock			Treasury Stock							Accumulated Other Comprehensive Income (Loss)
		Common Stock			Treasury Stock					Retained Earnings					Total Stockholders' Equity			Comprehensive Income
		Shares	Amount		Shares		Amount			Retained Earnings					Total Stockholders' Equity			Comprehensive Income
BALANCES, March 31, 1998		31,425,714	$	86,091	(2,933,298	)	$	(14,145	)	$	51,700	$	83		$	123,729
Comprehensive income:
	Net income										5,424					5,424		$	5,424
Other comprehensive income:
	Foreign currency translation adjustments												121			121			121

Comprehensive income																		$	5,545

Exercise of stock options		280,952		1,330												1,330
Income tax benefit from stock option transactions				312												312
Stock issued under Employee Stock Participation Plan		254,910		1,175												1,175
Acquisition of treasury stock					(1,081,500	)		(6,334	)							(6,334	)

BALANCES, March 31, 1999		31,961,576		88,908	(4,014,798	)		(20,479	)		57,124		204			125,757
Comprehensive income:
	Net income										15,115					15,115		$	15,115
Other comprehensive income:
	Foreign currency translation adjustments												(16	)		(16	)		(16	)

Comprehensive income																		$	15,099

Exercise of stock options		2,519,554		14,718												14,718
Income tax benefit from stock option transactions				10,838												10,838
Stock issued under Employee Stock Participation Plan		154,518		1,264												1,264
Acquisition of treasury stock					(354,900	)		(3,392	)							(3,392	)
Stock issued in connection with follow-on offering, net of related costs		2,530,302		236,886	4,369,698			23,871								260,757

BALANCES, March 31, 2000		37,165,950		352,614	—			—			72,239		188			425,041
Comprehensive income:
	Net income										28,434					28,434		$	28,434
Other comprehensive income:
	Foreign currency translation adjustments												(61	)		(61	)		(61	)
	Unrealized Gain/Loss on Investments												415			415			415

Comprehensive income																		$	28,788

Exercise of stock options		1,737,828		10,641												10,641
Income tax benefit from stock option transactions				22,569												22,569
Stock issued under Employee Stock Participation Plan		63,861		1,569												1,569
Acquisition of treasury stock					(245,000	)		(4,611	)							(4,611	)

BALANCES, March 31, 2001		38,967,639	$	387,393	(245,000	)	$	(4,611	)	$	100,673	$	542		$	483,997

See notes to consolidated financial statements.

EXAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED MARCH 31, 2001, 2000 AND 1999

(In thousands)

					2001			2000			1999
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income				$	28,434		$	15,115		$	5,424
	Reconciliation of net income to net cash provided by operating activities:
		Depreciation and amortization				3,917			4,038			4,762
		Tax benefit from disqualifying disposition				22,569			10,838			312
		Provision for doubtful accounts and sales returns				(205	)		(178	)		(1,364	)
		Deferred income taxes				(6,904	)		(4,071	)		1,510
		Gain on sale of investment				—			(12,018	)		—
		Gain on sale of equipment				—			(584	)		(289	)
		Changes in operating assets and liabilities:
			Accounts receivable			322			(638	)		6,678
			Inventories			(1,418	)		(2,426	)		908
			Prepaid expenses and other			(27	)		(937	)		319
			Accounts payable			(100	)		(768	)		(3,269	)
			Accrued compensation and related benefits			1,533			3,500			(5,004	)
			Accrued sales commissions			347			43			(54	)
			Other accrued expenses			179			(774	)		(319	)
			Income taxes payable			—			(1,601	)		1,188

				Net cash provided by operating activities		48,647			9,539			10,802

CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of equipment and leasehold improvements					(4,986	)		(2,503	)		(5,335	)
	Proceeds from disposition of equipment and leasehold improvements					—			658			977
	Purchases of short-term investments					(24,853	)		(24,340	)		(137	)
	Proceeds from maturities of short-term investments					16,331			23,340			1,277
	Purchases of long-term investments					(45,115	)		—			—
	Proceeds from maturities of long-term investments					14,190			—			—
	Proceeds from sale of investment					—			18,095			—
	Other assets					612			(372	)		(889	)

				Net cash provided by (used in) investing activities		(43,821	)		14,878			(4,107	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from issuance of common stock					12,210			276,739			2,505
	Acquisition of treasury stock					(4,611	)		(3,392	)		(6,334	)

				Net cash provided by (used in) financing activities		7,599			273,347			(3,829	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH						(61	)		(16	)		121

NET INCREASE IN CASH AND EQUIVALENTS						12,364			297,748			2,987
CASH AND EQUIVALENTS AT BEGINNING OF YEAR						377,158			79,410			76,423

CASH AND EQUIVALENTS AT END OF YEAR					$	389,522		$	377,158		$	79,410

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Cash paid for income taxes				$	244		$	1,051		$	633

	Cash paid for interest				$	—		$	725		$	—

See notes to consolidated financial statements.

EXAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2001, 2000 AND 1999

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business—Exar Corporation ("Exar" or the "Company") designs, develops and markets high-performance, high-bandwidth mixed-signal (analog and digital) silicon solutions for the worldwide communications infrastructure. The Company uses its mixed-signal design expertise, system-level knowledge and standard CMOS process technologies which provides physical interface and access control solutions for WAN communications equipment. The Company also offers ICs based on the T/E carrier, ATM and SONET/SDH transmission standards. Additionally, Exar provides solutions for the serial communications market as well as the video and imaging markets. Exar's largest customers include Alcatel, Cisco, Hewlett-Packard, Lucent, Nokia and Tellabs.

Use of Management Estimates—The preparation of the Company's consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, requires the use of management estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported results of operations during the reporting period. Actual results could differ from estimates.

Principles of Consolidation—The accompanying consolidated financial statements include the accounts of Exar and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Basis of Presentation—All share amounts and per share calculations in the accompanying consolidated financial statements give effect to the three-for-two stock split effected on February 15, 2000 and to the two-for-one stock split effected on October 19, 2000.

Cash and Equivalents—The Company considers all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents.

Investments—The Company considers all highly liquid investments with an original maturity of ninety days or less to be cash equivalents. All investments with maturities in excess of ninety days but less than twelve months from the date of the balance sheet are considered short-term investments. Long-term investments, which primarily consist of government, bank and corporate obligations, have maturities in excess of one year from the date of the balance sheet. The Company accounts for its investments under provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and Securities." Both short-term and long-term investments are classified as "available-for-sale" and the cost of the securities sold is based on the specific identification method. The Company recognizes

unrealized gains and losses and is reported in the accompanying consolidated financial statements. The following table summarizes the Company's investments as of March 31, 2001 and 2000:

		Original Cost		Unrealized* Gain (Loss)		Market Value
		(In thousands)
US government and agency obligations		$	13,392	$	206	$	13,598
Municipal securities			26,943		7		26,950
Corporate bonds and commercial paper			123,063		401		123,464
Asset-backed and collateralized obligations			267,822		65		267,887

	Total at March 31, 2001		431,220		679		431,899
As reported:
Cash equivalents						$	389,037
Short-term investments							11,522
Long-term investments							31,340

	Total at March 31, 2001						431,899

*: Unrealized gains (loss) are stated at gross amounts. The tax-effected unrealized gain (loss) is $415.

		Original Cost		Unrealized Gain (Loss)		Market Value
		(In thousands)
US government and agency obligations		$	263,026	$	—	$	263,026
Corporate bonds and commercial paper			21,871		—		21,871
Asset-backed and collateralized obligations			92,050		—		92,050

	Total at March 31, 2000		376,947		—		376,947
As reported:
Cash equivalents						$	373,947
Short-term investments							3,000
Long-term investments							—

	Total at March 31, 2000						376,947

Inventories—Inventories are stated at the lower of cost (first-in, first-out method) or market.

Property, Plant, and Equipment—Property, plant, and equipment are stated at cost. Depreciation of plant and equipment are computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives are as follows:

Computer software and computer equipment		3-6 years
Machinery and equipment		5-7 years
Buildings and fixtures		5-30 years

Long-Lived Assets—Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company's policy is to review the recoverability of all long-lived assets based upon undiscounted cash flows on an annual basis at a minimum, and in addition, whenever events or changes indicate that the carrying amount of the asset may not be recoverable. An impairment loss would be recognized when the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount.

Income Taxes—The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes," which requires the asset and liability approach for financial accounting and reporting of income taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Revenue Recognition—The Company generally recognizes product revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectibility is probable. The Company's distributor agreements generally permit the return of up to 10% of their purchases annually for purposes of stock rotation and also provide for credits to distributors in the event the Company reduces the price of any product. The Company records an allowance, at the time of shipment, based on authorized and historical patterns of returns, price protection and other concessions.

Comprehensive Income—In 1999, the Company adopted SFAS No. 130, "Reporting Comprehensive Income," which requires an enterprise to report, by major components and as a single total, the change in net assets during the period from nonowner sources. Comprehensive income for the years ended March 31, 2001, 2000, and 1999 has been disclosed within the consolidated statements of stockholders' equity and comprehensive income.

Foreign Currency—The functional currency of each of the Company's foreign subsidiaries is the local currency of that country. Accordingly, gains and losses from the translation of the financial statements of the foreign subsidiaries are included in stockholders' equity. Gains and losses resulting from foreign currency transactions are included in other income. Net foreign currency transaction gains (losses) were $(13,000), $(157,000) and $59,000 for the years ended March 31, 2001, 2000 and 1999, respectively.

The Company enters into foreign currency exchange contracts from time-to-time to hedge certain currency exposures. These contracts are executed with credit-worthy financial institutions and are denominated in currencies of major industrial nations. Gains and losses on these contracts serve as hedges in that they offset fluctuations that might otherwise impact the Company's financial results. The Company is exposed to credit-related losses in the event of nonperformance by the parties to its foreign currency exchange contracts. At March 31, 2001, and 2000, there were no such foreign currency exchange contracts outstanding.

Financial Instruments and Concentration of Credit Risk—Financial instruments potentially subjecting the Company to concentrations of credit risk consist primarily of accounts receivable, cash, short-term investments and long-term investments. The majority of the Company's sales are derived from manufacturers in the computer, communications and electronic imaging industries. The Company

performs ongoing credit evaluations of its customers and generally does not require collateral for sales on credit. The Company maintains reserves for potential credit losses and such losses have been within management's expectations. The Company's policy is to place its cash and short-term investments with high credit quality financial institutions and limit the amounts invested with any one financial institution or in any type of financial instrument. The Company does not hold or issue financial instruments for trading purposes.

Fair Value of Financial Instruments—The estimated fair value of financial instruments have been determined by the Company, using available market information and valuation methodology considered to be appropriate. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. The use of different market assumptions and/or estimation methodologies could have a material effect on estimated fair value amounts. The estimated fair value of the Company's financial instruments at March 31, 2001 and 2000 was not materially different from the values presented in the consolidated balance sheets.

Reclassifications—Certain amounts in the 2000 and 1999 financial statements have been reclassified to conform to the 2001 presentation.

2. INVENTORIES

Inventories at March 31 consisted of the following:

	2001		2000
	(In thousands)
Work-in-process	$	5,797	$	5,064
Finished goods		3,920		3,235

Total	$	9,717	$	8,299

3. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at March 31 consisted of the following:

	2001			2000
	(In thousands)
Land	$	6,584		$	6,584
Building		13,433			13,433
Machinery and equipment		39,476			35,254
Leasehold improvements		55			68
Construction in progress		31			—

		59,579			55,339
Accumulated depreciation and amortization		(31,857	)		(28,686	)

Total	$	27,722		$	26,653

4. BORROWING ARRANGEMENTS

The Company has a credit facility agreement with a domestic bank under which it may execute up to $15.0 million in foreign currency transactions. At March 31, 2001, the Company had no foreign currency contracts outstanding.

5. INCOME TAXES

The provision for income taxes for the years ended March 31 consisted of the following:

		2001			2000			1999
		(In thousands)
Current:
	Federal	$	148		$	91		$	882
	State		264			159			636
	Foreign		—			—			—

			412			250			1,518

Deferred:
	Federal		(8,011	)		(3,624	)		1,489
	State		1,107			(447	)		21
	Foreign		—			—			—

			(6,904	)		(4,071	)		1,510

Charge in lieu of taxes attributable to employee stock plans			22,569			10,838			312

Total		$	16,077		$	7,017		$	3,340

Consolidated pretax income includes foreign income of $8,500 in 2001 and foreign losses of approximately $(28,000), and $(622,000), in 2000 and 1999, respectively. Undistributed earnings of the Company's foreign subsidiaries are considered to be indefinitely reinvested and, accordingly no provision for federal and state income taxes have been provided thereon. Upon distribution of those earnings in the form of a dividend or otherwise, the Company would be subject to both US income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. It is not practical to estimate the income tax liability that might be incurred on the remittance of such earnings.

Current net deferred tax assets at March 31, 2001 and 2000 were $2,414,000 and $3,369,000, respectively. Non-current net deferred tax assets at March 31, 2001 and 2000 of $12,307,000 and $4,480,000, respectively, are included in deferred income taxes and other assets, respectively, within the

accompanying balance sheet. Significant components of the Company's net deferred tax asset at March 31, 2001 and 2000 are as follows:

			2001			2000
			(In thousands)
Deferred tax assets:
	Reserves and accruals not currently deductible		$	3,280		$	3,903
	Net operating loss and tax credit carryforwards			13,961			8,477
	General business credits			4,731			2,024
	State income taxes			—			8
	Other			—			169

		Total deferred tax assets		21,972			14,581

Deferred tax liabilities:
	Depreciation			(1,054	)		(922	)
	Other			(867	)		(480	)

		Total deferred tax liabilities		(1,921	)		(1,402	)

Valuation allowance				(5,330	)		(5,330	)

Net deferred tax assets			$	14,721		$	7,849

The valuation allowance for deferred tax assets relates to (i) the tax benefits of certain acquired net operating losses for which the utilization is limited to the taxable income of the acquired subsidiary and (ii) state tax credits. The valuation allowance relates to the amount of such benefits for which realization is not assured. During fiscal year 2001, the Company did not reverse any of its valuation allowances. During fiscal 2000, the Company reversed valuation allowances of $4,094,000, primarily due to a change in the assessment of the realization of the tax benefits of certain loss carryforwards.

The Company has net operating loss carryforwards of approximately $15,307,000 for federal income tax purposes, which are available to offset future taxable income through fiscal year 2013. The federal tax law includes provisions limiting the use of net operating loss carryforwards in the event of certain changes in ownership, as defined. Consequently, the Company's ability to utilize certain of its acquired net operating loss carryforwards is subject to an annual limitation.

The following summarizes differences between the amount computed by applying the statutory federal income tax rate to income before income taxes and the provision for income taxes for each of the years ended March 31:

		2001			2000			1999
		(In thousands)
Income tax provision at statutory rate		$	15,579		$	7,746			3,067
State income taxes, net of federal income
	tax benefit		1,934			1,071			762
Change in valuation allowance			(545	)		(1,818	)		(657	)
Amortization of goodwill			—			176			224
Tax-exempt interest income			(151	)		(7	)		(38	)
Benefit of foreign sales corporation			—			—			(175	)
Foreign (income) losses providing no benefit			(3	)		48			261
Tax credits			(705	)		(200	)		(200	)
Other, net			(32	)		1			96

Total		$	16,077		$	7,017		$	3,340

6. NET INCOME PER SHARE

SFAS 128 requires a dual presentation of basic and diluted EPS. Basic EPS excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

A summary of the Company's EPS for each of the years ended March 31 is as follows

(In thousands, except per share amounts):

	2001		2000		1999
NET INCOME	$	28,434	$	15,115	$	5,424

SHARES USED IN COMPUTATION:
Weighted average common shares outstanding used in
computation of basic net income per share		38,097		28,953		28,176
Dilutive effect of stock options		4,752		3,441		624

Shares used in computation of diluted net income per share		42,849		32,394		28,800

BASIC NET INCOME PER SHARE	$	0.75	$	0.52	$	0.19

DILUTED NET INCOME PER SHARE	$	0.66	$	0.47	$	0.19

Options to purchase 3,114,400 shares of common stock at prices ranging from $60.75 to $25.20 were outstanding as of March 31, 2001. Options to purchase 54,000 shares of common stock at a price of $47.66 were outstanding as of March 31, 2000. Options to purchase 4,834,828 shares of common

stock at prices ranging from $12.42 to $5.19 were outstanding as of March 31, 1999. These options to purchase shares of common stock that were outstanding as of March 31, 2001, 2000 and 1999 were not included in the computation of diluted net income per share because the options' exercise prices were greater than the average market price of the common shares as of such dates and, therefore, would be anti-dilutive under the treasury stock method.

7. EMPLOYEE BENEFIT PLANS

Exar Savings Programs—The Exar Savings Plan covers substantially all employees of the Company. The Savings Plan provides for voluntary salary reduction contributions in accordance with Section 401(k) of the Internal Revenue Code as well as contributions from the Company based on the achievement of specified operating results. Exar made contributions of $1,006,000, $452,000 and $86,000 for the fiscal years ended March 31, 2001, 2000 and 1999, respectively.

Incentive Compensation Programs—The Company's incentive compensation programs provide for incentive awards for substantially all employees of the Company based upon the achievement of specified operating and performance results. Incentive awards totaled $5,941,000, $4,964,000, and $681,000 in fiscal years 2001, 2000 and 1999, respectively. The Company's incentive compensation programs may be amended or discontinued at the discretion of the Board of Directors.

8. STOCKHOLDERS' EQUITY

Preferred Share Purchase Rights Plan—In December 1995, the Company's Board of Directors adopted a Preferred Share Purchase Rights Plan under which the Board declared a dividend of one purchase right for each outstanding share of common stock of Exar held as of January 10, 1996. Each right entitles the registered holder to purchase one one-hundredth of a share of Exar's Series A Junior Participating Preferred Stock. The rights become exercisable ten days after the announcement that an entity or person has commenced a tender offer to acquire or has acquired 15% or more of the outstanding Exar Common Stock ("the Distribution Date").

After the Distribution Date, the Board may exchange the rights at an exchange ratio of one common share or one one-hundredth of a preferred share per right. Otherwise, each holder of a right, other than rights beneficially owned by the acquiring entity or person (which will thereafter be void), will have the right to receive upon exercise that number of common shares having a market value of two times the exercise price of the right. The rights will expire on December 15, 2005.

Employee Stock Participation Plan—Exar is authorized to issue 4,500,000 shares of common stock under its Employee Stock Participation Plan (the "Plan"). The Plan permits employees to purchase common stock through payroll deductions. The purchase price is the lower of 85% of the fair market value of the common stock at the beginning or end of each three month offering period. Shares purchased by and distributed to participating employees were 63,861 in fiscal 2001, 154,518 in fiscal 2000, and 254,910 in fiscal 1999 at weighted average prices of $24.56, $8.17 and $4.60, respectively. The weighted average fair value of the fiscal 2001, 2000 and 1999 awards was $13.07, $7.27 and $1.39 per share, respectively.

The Company has reserved 2,372,065 shares of common stock for future issuance under its Employee Stock Participation Plan.

Stock Option Plans—Exar has a 2000 Equity Incentive Plan (the "2000 plan") which only permits the granting of nonstatutory stock options to Executive Officers and employees. A maximum of 40% of the total number of shares reserved under the 2000 Plan may be granted to Executive Officers of the Company. The 2000 Plan was adopted by the Board of Directors in September 2000 and subsequently amended in December 2000 and June 2001. The Company also has a 1997 Equity Incentive Plan (the "1997 Plan") which permits the granting of both incentive and nonstatutory stock options to Executive Officers of the Company and its employees. A 1996 Non-Employee Director's Stock Option Plan also exists, which provides each Director of Exar, who is not otherwise an employee of the Company, the opportunity to participate in a stock option plan. Generally, options under the three plans are granted with an exercise price of 100% of the fair value of the underlying stock on the date of grant and have a term of seven years, although options may be granted with a term of up to ten years. The three plans allow certain employees, including Executives Officers, Directors, senior management and technical personnel of the Company, the opportunity to select to defer a portion of his or her base salary and apply such deferred salary to options to purchase shares of the Company's common stock with exercise prices set at a discount to market with the aggregate of such discounts equal to the aggregate amount of the base salary so deferred. Options, other than deferred compensation options, generally vest over four years.

The Company may grant options to purchase up to 4,200,000, 7,188,104 and 750,000 shares of common stock under the 2001 Equity Incentive Plan, the 1997 Equity Incentive Plan, and the 1996 Non-Employee Directors' Stock Option Plan, respectively. Options are granted at fair market value on the date of grant. Options are generally exercisable in four equal annual installments commencing one year after the date of grant and generally expire seven years from the grant date.

Option activity for all three plans is summarized as follows:

		Outstanding Options
		Number of Shares		Weighted Average Exercise Price per Share
Outstanding, March 31, 1998 (2,292,920 exercisable at a weighted average price of $5.61)		6,579,966		$	6.14
	Options granted (weighted average fair value of $3.02)	2,384,740			5.30
	Options exercised	(280,952	)		4.76
	Options canceled	(904,578	)		6.35

Outstanding, March 31, 1999 (3,084,036 exercisable at a weighted average price of $5.86)		7,779,176			5.91
	Options granted (weighted average fair value of $7.86)	2,216,110			13.71
	Options exercised	(2,519,554	)		5.83
	Options canceled	(349,594	)		7.48

Outstanding, March 31, 2000 (1,542,018 exercisable at a weighted average price of $11.77)		7,126,138			8.27
	Options granted (weighted average fair value of $28.62)	3,252,550			42.76
	Options exercised	(1,737,828	)		6.12
	Options canceled	(138,332	)		18.15

Outstanding, March 31, 2001		8,502,528		$	21.74

At March 31, 2001, 3,156,996 options were available for future grant under three plans.

		Options Outstanding
			Weighted Average Remaining Contractual Average Life (years)
						Options Exercisable
Range of Exercise Prices		Number Outstanding		Average Price		Number Exercisable	Weighted Average Exercise Price
$	1.75 - $5.48	1,801,217	4.08	$	4.97	882,031	$	4.87
	5.50 - 11.35	1,743,742	3.65		7.51	1,024,098		7.15
	11.71 - 22.32	1,736,869	5.45		13.48	458,026		13.16
	23.90 - 53.86	1,582,600	6.21		31.35	66,875		33.63
	54.28 - 60.75	1,638,100	6.44		54.82	56,250		54.75

$	1.75 - $60.75	8,502,528	5.12	$	21.74	2,487,280	$	9.24

SFAS No. 123, "Accounting for Stock-Based Compensation," requires the disclosure of pro forma net income and earnings per share had the Company adopted the fair value method as of the beginning of fiscal 1996. Under SFAS 123, the fair value of stock-based awards to employees is calculated through the use of option pricing models, even though such models were developed to

estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company's stock option awards. These models also require subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The Company's calculations were made using the Black-Scholes option pricing model with the following weighted average assumptions: expected life, 5.3 to 7.8 years; stock volatility, 70%, 58% and 43% in fiscal 2001, 2000 and 1999, respectively; risk free interest rates, 4.9%, 6.1% and 5.4% in fiscal 2001, 2000 and 1999, respectively; and no dividends during the expected term. The Company's calculations are based on a single option valuation approach and forfeitures are recognized as they occur. If the computed fair values of the fiscal 2001, 2000 and 1999 awards had been amortized to expense over the vesting period of the awards, pro forma net income would have been as follows: (In thousands, except per share amounts):

		2001		2000		1999
Pro Forma Net Income		$	13,151	$	11,039	$	2,412

Pro Forma Net Income Per Share:
	BASIC	$	0.35	$	0.38	$	0.09

	DILUTED	$	0.31	$	0.34	$	0.08

The impact of outstanding non-vested stock options granted prior to fiscal 1996 has been excluded from the pro forma calculation; accordingly, the fiscal 2001, 2000 and 1999 pro forma amounts are not indicative of future period pro forma amounts, when the calculation will apply to all applicable stock options.

9. RESTRUCTURING AND OTHER CHARGES

Restructuring

In the third quarter of fiscal 1999, the Company sold its Silicon Microstructures business unit to OSI Systems, Inc. ("OSI") for $2,600,000, with additional contingent performance-based payments of up to $2,500,000 over the next year. The resulting restructuring charge of $731,000 represents the loss on the sale of the assets sold, severance costs related to the termination of 38 employees and other disposition related expenses. The restructuring action was completed during the fourth quarter of fiscal 1999 and was financed through the use of cash.

10. GAIN ON SALE OF INVESTMENT

As a result of a merger completed on April 1, 1999 of IC Works, Inc. and Cypress Semiconductor, Inc., the Company received approximately 1.1 million shares of common stock in Cypress Semiconductor, Inc. in exchange for its investment in IC Works, Inc. The Company sold this stock during the first and fourth quarters of fiscal 2000, resulting in a pre-tax gain of $12.0 million in other income and a related employee compensation and benefits expense of $3.0 million in costs and expenses.

11. COMMITMENTS AND CONTINGENCIES

In 1987, one of the Company's subsidiaries identified low-level groundwater contamination at its principal manufacturing site. Although the area of contamination appears to have been defined, the source of the contamination has not been identified. The Company reached an agreement with another entity to participate in the cost of ongoing site investigations and the operation of remedial systems to remove subsurface chemicals which is expected to continue for the foreseeable future an additional 10 years from the fiscal year ended March 31, 2001. The accompanying consolidated financial statements include the Company's share of estimated remaining remediation costs of approximately $549,000 as of March 31, 2001.

From time to time, the Company may be involved in various claims, legal actions and complaints arising in the normal course of business. Although the ultimate outcome of these matters is not presently determinable, management believes that the resolution of all such pending matters will not have a material adverse effect on the Company's consolidated financial position, results of operations, liquidity or cash flows.

12. INDUSTRY AND SEGMENT INFORMATION

In fiscal 1999, the Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 establishes standards for reporting information about operating segments in annual financial statements and requires that certain selected information about operating segments be reported in interim financial reports. It also establishes standards for related disclosures about products and services and geographic areas. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker, or decision making group in deciding how to allocate resources and in assessing performance. The Company operates in one reportable segment and is engaged in the design, development and marketing of a variety of analog and mixed-signal application-specific integrated circuits for use in communications and in video and imaging products. The nature of the Company's products and production processes as well as type of customers and distribution methods are consistent among all of the Company's devices. The Company's foreign operations consist primarily of its wholly-owned subsidiaries in Japan, the United Kingdom, France and Taiwan. The Company's principal markets include North America, Asia, and Europe. Total sales by geographic area represent sales to unaffiliated customers.

The following table sets forth product line revenue for fiscal years ended March 31:

	2001		2000		1999
	(In thousands)
Communications	$	83,347	$	58,262	$	41,029
Video and Imaging		24,033		14,204		15,375
Other		5,544		6,088		15,464

	$	112,924	$	78,554	$	71,868

Identifiable assets represent assets used in the Company's operations in each geographic area.

Geographic financial information for each fiscal year is as follows:

		2001			2000			1999
		(In thousands)
Net sales:
	United States	$	76,327		$	52,775		$	45,631
	Export sales to Japan and Asia		14,003			12,007			8,658
	Export sales to Western Europe		15,425			12,363			15,731
	Export sales to rest of world		1,345			823			975
	Japan		5,824			586			873

		$	112,924		$	78,554		$	71, 868

Income (loss) from operations:
	United States	$	18,062		$	4,000		$	4,572
	Japan		(23	)		(89	)		(512	)
	Western Europe		107			35			(9	)

		$	18,146		$	3,946		$	4,051

Long-lived assets information for each fiscal year is as follows:

		2001		2000		1999
		(In thousands)
Long-lived assets:
	United States	$	27,433	$	26,622	$	33,068
	Japan		260		526		1,121
	Western Europe		321		402		97

		$	28,014	$	27,550	$	34,286

13. RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the FASB issued SFAS No.133, "Accounting for Derivative Instruments and Hedging Activities" and in June 2000 issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133." SFAS No. 133, as amended by SFAS No. 138, requires companies to recognize all derivatives as assets or liabilities at their fair value. Gains or losses resulting from changes in the value of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The Company is required to adopt SFAS No. 133, as amended by SFAS No. 138, beginning April 2001. The Company has determined that the adoption of this accounting standard will not have a material impact on the Company's financial position or results of operations.

In December 1999, the SEC released SAB No. 101, "Revenue Recognition in Financial Statements." In March 2000, the SEC issued SAB No. 101A and in June 2000, issued SAB No. 101B. An additional document was issued in October 2000 which responded to frequently asked questions regarding accounting standards related to revenue recognition and SAB No. 101. The Company has

adopted SAB No. 101, as amended, in the third quarter of fiscal 2001. This adoption of this accounting guidance did not have a material impact on the Company's financial position or results of operations.

In March 2000, FASB issued Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation—An Interpretation of Accounting Principles Board Opinion No. 25," clarifying the guidance for certain stock compensation issues, including the definition of an employee, the treatment of the acceleration of stock options and the accounting treatment for options assumed in business combinations. FIN 44 became effective July 1, 2000, but applicable to certain transactions dating back to December 1998. The adoption of FIN 44 did not have a significant impact on the Company's financial position or results of operations.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

For a listing of executive officers and directors of the Company and certain information about them, see Part I "Management."

Certain information required by this item concerning the Company's directors is incorporated by reference from the section captioned "Proposal 1: Election of Directors" contained in the Company's Definitive Proxy Statement to be filed not later than 120 days following the close of the fiscal year ("Definitive Proxy Statement").

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the National Market. Officers, directors and greater than ten-percent shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

To the Company's knowledge and based solely on its review of the copies of such forms received by it, and written representations from certain reporting persons that no other forms were required during the fiscal year ended March 31, 2001, its officers, directors, and greater than ten percent beneficial owners complied with all applicable Section 16(a) filing requirements.

ITEM 11. EXECUTIVE COMPENSATION

The information required under this item is hereby incorporated by reference from the Company's Definitive Proxy Statement under the caption "Compensation of Executive Officers."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required under this item is hereby incorporated by reference from the Company's Definitive Proxy Statement under the caption "Security Ownership of Certain Beneficial Owners and Management."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required under this item is hereby incorporated by reference from the Company's Definitive Proxy Statement under the captions "Employment and Change of Control Arrangements," "CEO Compensation," and "Certain Relationships and Related Transactions."

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this Form 10-K:

(1) Index to Consolidated Financial Statements. The following Consolidated Financial Statements of Exar Corporation and its subsidiaries are filed as part of this Form 10-K:

		Form 10-K Page No.
Independent Auditors' Report		35
Consolidated Balance Sheets March 31, 2001 and 2000		36
Consolidated Statements of Operations for the years ended March 31, 2001, 2000 and 1999		37
Consolidated Statements of Stockholders' Equity and Comprehensive Income for the years ended March 31, 2001, 2000, and 1999		38
Consolidated Statements of Cash Flows for the years ended March 31, 2001, 2000 and 1999		39
Notes to Consolidated Financial Statements		40-53

(2) Index to Financial Statement Schedules. The following Consolidated Financial Statement Schedule of Exar Corporation and its subsidiaries for each of the years ended March 31, 2001, 2000 and 1999 are filed as part of this Form 10-K:

		Form 10-K Page No.
II Valuation and Qualifying Accounts and Reserves		58

Schedules not listed above have been omitted because they are not applicable or required, or the information required to be set forth therein is included in the Consolidated Financial Statements or Notes thereto.

(3) Exhibits

Exhibit Footnote	Exhibit Number	Description
(d)	3.1	Certificate of Amendment of Amended and Restated Certificate of Incorporation of Exar Corporation, as amended June 8, 2000.
(a)	3.2	Bylaws of the Company, as amended.
(c)	4.2	Rights Agreement dated as of December 15, 1995, between the Registrant and the First National Bank of Boston, as amended May 1, 2000.
(e)*	10.1	1989 Employee Stock Participation Plan of the Company and related Offering, as amended June 24, 1999.
(a)*	10.2	1991 Stock Option Plan of the Company and related forms of stock option grant and exercise.
(a)*	10.3	1991 Non-Employee Directors' Stock Option Plan of the Company and related forms of stock option grant and exercise.
*	10.4	Fiscal 2001 Key Employee Incentive Compensation Program.
*	10.5	Fiscal 2001 Executive Incentive Compensation Program.

(e)*	10.6	1996 Non-Employee Directors' Stock Option Plan, as amended April 13, 2000.
(b)*	10.7	1997 Equity Incentive Plan, as amended September 9, 1999.
(e)*	10.8	Executive Officers' Change of Control Severance Benefit Plans.
*	10.9	2000 Equity Incentive Plan, as amended and restated on June 21, 2001.
*	10.10	Executive Employment Agreement between Exar Corporation and Donald L. Ciffone, Jr., dated December 6, 2000, as amended on June 21, 2001.
*	10.11	Form of Letter Agreement Regarding Change of Control for each of the following: Frank P. Carrubba, Raimon L. Conlisk, James E. Dykes, Richard Previte, Donald L. Ciffone, Jr., Michael J. Class, Roubik Gregorian, Ronald W. Guire, Susan J. Hardman, Thomas R. Melendrez, Stephen W. Michael.
	21.1	Subsidiaries of the Company.
	23.1	Independent Auditors' Consent.
	24.1	Power of Attorney. Reference is made to the signature page.

(a): Filed as an exhibit to the Company's Annual report on Form 10-K for the fiscal year ended March 31, 1992 and incorporated herein by reference.
(b): Filed as an exhibit to the Company's registration statement on Form S-8 (Registration statement No. 333-31120) filed with the Commission on February 25, 2000 and incorporated herein by reference.
(c): The Rights Agreement was filed as an exhibit to the Registrant's Current Report on Form 8-K, dated December 15, 1995.
(d): Filed as an exhibit to the Company's Current Report on Form 8-K, filed on June 23, 2000, and incorporated herein by reference.
(e): Filed as an exhibit to the Company's Annual Report on Form 10-K, filed on November 13, 2000, and incorporated herein by reference.
*: Indicates management contracts or compensatory plans and arrangements filed pursuant to Item 601(b)(10) of Regulation S-K.

(b): There were no reports filed on Form 8-K during the fourth quarter of fiscal year 2001.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

		EXAR CORPORATION
		By:		/s/ Donald L. Ciffone Jr. Donald L. Ciffone Jr. Chief Executive Officer, President and Director
				Date: June 27, 2001

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Ronald W. Guire and Donald L. Ciffone, Jr., and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his substitute or substituted, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Donald L. Ciffone Jr. (Donald L. Ciffone Jr.)	Chief Executive Officer, President and Director	June 27, 2001
/s/ Ronald W. Guire (Ronald W. Guire)	Executive Vice President, Chief Financial Officer, Assistant Secretary and Director (Principal Financial and Accounting Officer)	June 27, 2001
/s/ Raimon L. Conlisk (Raimon L. Conlisk)	Director and Chairman of the Board	June 27, 2001
/s/ James E. Dykes (James E. Dykes)	Director	June 27, 2001
/s/ Frank P. Carrubba (Frank P. Carrubba)	Director	June 27, 2001
/s/ Richard Previte (Richard Previte)	Director	June 27, 2001

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In thousands)

Classification	Balance at Beginning of Year		Additions		Write-offs and Recoveries		Balance at end of Year
Year ended March 31, 2001: Allowance for doubtful accounts and sales returns	$	1,869	$	4,218	$	4,421	$	1,664
Year ended March 31, 2000: Allowance for doubtful accounts and sales returns	$	2,047	$	4,192	$	4,370	$	1,869
Year ended March 31, 1999: Allowance for doubtful accounts and sales returns	$	3,411	$	1,360	$	2,724	$	2,047

QuickLinks

PART I

ITEM 1. BUSINESS

Types of Communications ICs Used in WAN Equipment
MANAGEMENT

ITEM 2. PROPERTIES

ITEM 3. LEGAL PROCEEDINGS

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Quarterly Results
RISK FACTORS

Item 7A. Quantitative And Qualitative Disclosures About Market Risk

ITEM 8. FINANCIAL STATEMENTS

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Compliance with Section 16(a) of the Exchange Act

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

SIGNATURES
SCHEDULE II
EX-10.4 2 a2052358zex-10_4.htm EXHIBIT 10.4 Prepared by MERRILL CORPORATION
QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.4

PLAN DOCUMENT
Key Employee Incentive Compensation Program
Fiscal Year 2001

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 2001 Incentive Pool Funding Matrices
2.: 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 and personal objectives.

B. Effective Date

The period April 1, 2000 through March 31, 2001 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 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 1, FY2001 Incentive Pool Funding Matrices.
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 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.

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)			$	110,000			$	80,000
Target Incentive Award		20%		(22,040	)	15%		(12,000	)
	Pre-Tax Profit ($36.5M)			58.0	%			58.0	%
	Revenue ($103M)			48.1	%			48.1	%

	Combined Pool Funding Factor			106.1	%			106.1	%
	Personal Contribution Modifier			90	%			120	%

Corp		Personal		Total Indiv. Award Modifier		Target Incentive ward			Incentive Payment
Example 1:
106.1%	X	90%	=	95.49%	X	$	22,040	=	$	21,046

Example 2:
106.1%	X	120%	=	127.32%	X	$	12,000	=	$	15,278

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 2

I acknowledge receiving a copy of the Plan Document "Fiscal Year 2001 Key Employee Incentive Compensation Program" for the period April 1, 2000 through March 31, 2001. 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 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

QuickLinks

PLAN DOCUMENT Key Employee Incentive Compensation Program Fiscal Year 2001
Contents
EX-10.5 3 a2052358zex-10_5.htm EXHIBIT 10.5 Prepared by MERRILL CORPORATION
QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.5

PLAN DOCUMENT
Executive Incentive Compensation Program
Fiscal Year 2001

1.0 Intent

The intention of the Executive Incentive Compensation Program for Fiscal Year 2001 is to provide incentives to eligible Exar Corporation executives for achieving or surpassing established revenue and pre-tax profit goals derived from the FY 2001 Financial Plan. (see Attachment 1, FY 2001 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 2001 Key Employee Incentive Program.

3.2: Calculation for Pool Funding

The size of the executive pool is the sum of the fiscal year 2001 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 2001. Use the table in Attachment 2 to determine the pool size. For example, if the actual revenue level were $107M, the pool for revenue achievement would be $635.7K. If the pre-tax profit were $35.9M, the pool for the pre-tax profit achievement would be $751.8K. The total pool would be $1.388M ($635.7K + $751.8K). (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).

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 may be given by the Compensation Committee and the Committee's decision 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 FY2001, 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.

Attachments:	1	FY2001 Approved Financial Plan
	2	FY2001 Incentive Pool Funding Matrices
	3	FY2001 Participants
	4	Example of Individual Calculation/Formula for Payment

QuickLinks

PLAN DOCUMENT Executive Incentive Compensation Program Fiscal Year 2001
EX-10.9 4 a2052358zex-10_9.htm EX-10.9 Prepared by MERRILL CORPORATION

Exhibit 10.9

EXAR CORPORATION

2000 EQUITY INCENTIVE PLAN

ADOPTED SEPTEMBER 7, 2000
AMENDED AND RESTATED EFFECTIVE DECEMBER 6, 2000
AMENDED AND RESTATED EFFECTIVE JANUARY 26, 2001
AMENDED AND RESTATED EFFECTIVE JUNE 21, 2001
STOCKHOLDER APPROVAL NOT REQUIRED

1. PURPOSES.

The persons eligible to receive Stock Awards are the Employees and Consultants of the Company. The purpose of the Plan is to provide a means by which eligible recipients of Stock Awards may be given an opportunity to benefit from increases in value of the stock of the Company through the granting of (i) Nonstatutory Stock Options, (ii) stock bonuses and (iii) rights to purchase restricted stock, all as described below. The Plan is also intended to provide a means by which the Company may grant Stock Awards to persons not previously employed by the Company as an inducement essential to those persons entering employment contracts with the Company. Such inducement grants may be made to persons who ultimately are employed by the Company as Officers.

The Company, by means of the Plan, seeks to retain the services of persons who are or will become Employees of or Consultants to the Company or an Affiliate, and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.

The Company intends that the Stock Awards issued under the Plan shall, in the discretion of the Board or any Committee to which responsibility for administration of the Plan has been delegated pursuant to subsection 3(c), be either (i) Options granted pursuant to Section 6 hereof or (ii) stock bonuses or rights to purchase restricted stock granted pursuant to Section 8 hereof.

2. DEFINITIONS.

(a) "Affiliate" means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f) respectively, of the Code.

(b) "Board" means the Board of Directors of the Company.

(c) "Code" means the Internal Revenue Code of 1986, as amended.

(d) "Committee" means a committee or subcommittee appointed by the Board in accordance with subsection 3(c) of the Plan.

(e) "Company" means Exar Corporation, a Delaware corporation.

(f) "Consultant" means any person, including an advisor, engaged by the Company or an Affiliate to render consulting services and who is compensated for such services.

(g) "Continuous Service" means that the service of an individual to the Company, whether as an Employee, Officer, Director or Consultant, is not interrupted or terminated. The Board or the Committee may determine, in that party's sole discretion, whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by the Board or the Committee, including sick leave, military leave, or any other personal leave. Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which a person renders service to the Company or an Affiliate, whether such service is as an Employee, Officer, Director or Consultant or a change in the entity for which the person renders such service, provided that there is no interruption in the person's service relationship with the Company or an Affiliate.

(h) "Director" means a member of the Board.

(i) "Employee" means any person employed by the Company or any Affiliate of the Company. Mere service as a Director or payment of a Director's fee by the Company or an Affiliate shall not be sufficient to constitute "employment" by the Company or an Affiliate.

(j) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(k) "Fair Market Value" means, as of any date, the lower of (1) the last quoted per share selling price for the Company's Common Stock on the Nasdaq National Market on the relevant date; or (2) the arithmetic mean of the highest and lowest quoted selling prices on the Nasdaq National Market on the relevant date. If there were no sales on such date, then "Fair Market Value" means on the nearest trading day before the lower of (1) the last quoted per share selling price for the Company's Common Stock on the Nasdaq National Market; or (2) the arithmetic mean of the highest and lowest quoted selling prices on the Nasdaq National Market.

Notwithstanding the preceding, for federal, state, and local income tax purposes, fair market value shall be determined by the Board (or its delegate) in accordance with uniform and nondiscriminatory standards adopted from time to time.

(l) "Non-Employee Director" means a Director who either (i) is not a current Employee or Officer of the Company or its parent or subsidiary, does not receive compensation (directly or indirectly) from the Company or its parent or subsidiary for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act ("Regulation S-K")), does not possess an interest in any other transaction as to which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship as to which disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-employee director" for purposes of Rule 16b-3.

(m) "Nonstatutory Stock Option" means a stock option not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

(n) "Officer" means a person who possesses the authority of an "officer" as that term is used in Rule 4460(i)(1)(A) of the Rules of the National Association of Securities Dealers, Inc. For purposes of the Plan, a person in the position of "Vice President" or higher shall be classified as an "Officer" unless the Board or Committee expressly finds that such person does not possess the authority of an "officer" as that term is used in Rule 4460(i)(1)(A) of the Rules of the National Association of Securities Dealers, Inc.

(o) "Option" means a Nonstatutory Stock Option granted pursuant to the Plan.

(p) "Option Agreement" means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.

(q) "Optionholder" means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

(r) "Plan" means this 2000 Equity Incentive Plan.

(s) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect with respect to the Company at the time discretion is being exercised regarding the Plan.

(t) "Securities Act" means the Securities Act of 1933, as amended.

(u) "Stock Award" means any right granted under the Plan, including any Option, any stock bonus, and any right to purchase restricted stock.

(v) "Stock Award Agreement" means a written agreement between the Company and a holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan.

3. ADMINISTRATION.

(a) The Plan shall be administered by the Board unless and until the Board delegates administration to a Committee, as provided in subsection 3(c).

(b) The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

(1) To determine from time to time which of the persons eligible under the Plan shall be granted Stock Awards; when and how each Stock Award shall be granted; whether a Stock Award will be an Option, a stock bonus, a right to purchase restricted stock, or a combination of the foregoing; the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive stock pursuant to a Stock Award; and the number of shares with respect to which a Stock Award shall be granted to each such person.

(2) To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.

(3) To amend the Plan or a Stock Award as provided in Section 13.

(4) To terminate or suspend the Plan as provided in Section 14.

(5) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company which are not in conflict with the provisions of the Plan.

(c) The Board may delegate administration of the Plan to a committee of the Board composed of two (2) or more members (the "Committee"), all of the members of which Committee may be, in the discretion of the Board, Non-Employee Directors. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or such a subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. In addition, notwithstanding anything in this Section 3 to the contrary, the Board or the Committee may delegate to a subcommittee of one or more members of the Board the authority to grant Stock Awards to eligible persons who are not then subject to Section 16 of the Exchange Act.

4. SHARES SUBJECT TO THE PLAN.

(a) Subject to the provisions of Section 12 relating to adjustments upon changes in stock, the stock that may be issued pursuant to Stock Awards shall not exceed in the aggregate four million two hundred thousand (4,200,000) shares of the Company's Common Stock. If any Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, the

stock not acquired under such Stock Award shall revert to and again become available for issuance under the Plan.

(b) The stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise.

5. ELIGIBILITY.

(a) Stock Awards may be granted only to Employees or Consultants.

(b) The aggregate number of shares issued pursuant to Stock Awards granted to Officers shall not exceed forty percent (40%) of the number of shares reserved for issuance under the Plan, as determined at the time of each such issuance to an Officer, except that there shall be excluded from this calculation shares issued to Officers not previously employed by the Company pursuant to Stock Awards granted as an inducement essential to such individuals entering into employment relationships with the Company.

(c) A Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant, a Form S-8 Registration Statement under the Securities Act ("Form S-8") is not available to register either the offer or the sale of the Company's securities to such Consultant because of the nature of the services that the Consultant is providing to the Company, or because the Consultant is not a natural person, or as otherwise provided by the rules governing the use of Form S-8, unless the Company determines both (i) that such grant (A) shall be registered in another manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or (B) does not require registration under the Securities Act in order to comply with the requirements of the Securities Act, if applicable, and (ii) that such grant complies with the securities laws of all other relevant jurisdictions.

6. OPTION PROVISIONS.

Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:

(a) Term. No Option shall be exercisable after the expiration of ten (10) years from the date it was granted.

(b) Price. Except as otherwise provided in Section 7 of the Plan, the exercise price of each Option shall be not less than one hundred percent (100%) of the Fair Market Value of the stock subject to the Option on the date of grant.

(c) Consideration. The purchase price of stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised, or (ii) at the discretion of the Board or the Committee, at the time of the grant of the Option, (A) by delivery to the Company of other common stock of the Company, (B) according to a deferred payment arrangement (however, in the event the Company is then incorporated in the state of Delaware, then payment of the common stock's "par value" as defined in the Delaware General Corporation Law shall not be made by deferred payment), or other arrangement (which may include, without limiting the generality of the foregoing, the use of other common stock of the Company) with the person to whom the Option is granted or to whom the Option is transferred pursuant to subsection 6(d) or (C) in any other form of legal consideration that may be acceptable to the Board. Unless otherwise specifically provided in the Option, the purchase price of common stock of the Company acquired pursuant to an Option that is paid by delivery to the Company of other Company common stock acquired directly or indirectly from the Company, shall be paid only by shares of common stock of the Company that have been held for more than six (6) months (or such longer or shorter period of

time required to avoid a charge to earnings for financial accounting purposes). In the case of any deferred payment arrangement, interest shall be compounded at least annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement.

(d) Transferability. An Option shall not be transferable except by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the person to whom the Option is granted only by such person; provided, however, that an Option may be transferred to the extent provided in the Option Agreement. The person to whom the Option is granted may, but need not, designate, by delivering written notice of the same to the Company (in a form acceptable to the Company) during such person's lifetime, a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option and receive any and all proceeds thereof. If no such designation is made during the Optionholder's lifetime, the estate or the person to whom the Option is transferred by will or by the laws of descent and distribution shall, in the event of the death of the Optionholder, thereafter be entitled to exercise the Option and receive any and all proceeds thereof.

(e) Vesting. The total number of shares of stock subject to an Option may, but need not, be allotted in periodic installments (which may, but need not, be equal). From time to time during each of such installment periods, the Option may become exercisable ("vest") with respect to some or all of the shares allotted to that period, and may be exercised with respect to some or all of the shares allotted to such period and/or any prior period as to which the Option was not fully exercised. During the remainder of the term of the Option (if its term extends beyond the end of the installment periods), the Option may be exercised from time to time with respect to any shares then remaining subject to the Option. The provisions of this subsection 6(e) are subject to any Option provisions governing the minimum number of shares as to which an Option may be exercised.

(f) Termination of Employment or Relationship as a Director or Consultant. In the event an Optionholder's Continuous Service terminates (other than upon the Optionholder's death or disability), the Optionholder may exercise the Option (to the extent that the Optionholder was entitled to exercise it as of the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder's Continuous Service (or such longer or shorter period as specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement; provided, however, if the Optionholder is terminated for cause, then the Option shall terminate on the date Optionholder's Continuous Service ceases. If, at the date of termination, the Optionholder is not entitled to exercise the entire Option, the shares covered by the unexercisable portion of the Option shall revert to and again become available for issuance under the Plan. If, after termination, the Optionholder does not exercise the Option within the time specified in the Option Agreement, the Option shall terminate, and the shares covered by such Option shall revert to and again become available for issuance under the Plan.

An Optionholder's Option Agreement may also provide that if the exercise of the Option following the termination of the Optionholder's Continuous Service (other than upon the Optionholder's death or disability) would result in liability under Section 16(b) of the Exchange Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day after the last date on which such exercise would result in such liability under Section 16(b) of the Exchange Act. Finally, an Optionholder's Option Agreement may also provide that if the exercise of the Option following the termination of the Optionholder's Continuous Service (other than upon the Optionholder's death or disability) would be prohibited at any time solely because the issuance of shares would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in the first paragraph of this subsection 6(f), or (ii) the expiration of a period of three

(3) months after the termination of the Optionholder's Continuous Service during which the exercise of the Option would not be in violation of such registration requirements.

(g) Disability of Optionholder. In the event an Optionholder's Continuous Service terminates as a result of the Optionholder's disability, the Optionholder may exercise the Option (to the extent that the Optionholder was entitled to exercise it as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, at the date of termination, the Optionholder is not entitled to exercise the entire Option, the shares covered by the unexercisable portion of the Option shall revert to and again become available for issuance under the Plan. If, after termination, the Optionholder does not exercise the Option within the time specified herein, the Option shall terminate, and the shares covered by such Option shall revert to and again become available for issuance under the Plan.

(h) Death of Optionholder. In the event of the death of an Optionholder during, or within a period specified in the Option Agreement after the termination of, the Optionholder's Continuous Service, the Option may be exercised (to the extent the Optionholder was entitled to exercise the Option as of the date of death) by the Optionholder's estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder's death pursuant to subsection 6(d), but only within the period ending on the earlier of (i) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, at the time of death, the Optionholder was not entitled to exercise the entire Option, the shares covered by the unexercisable portion of the Option shall revert to and again become available for issuance under the Plan. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate, and the shares covered by such Option shall revert to and again become available for issuance under the Plan.

7. DEFERRED SALARY GRANTS.

(a) Any Employee who is selected by the Board or Committee ("Deferral Participant") may elect to apply a portion of his or her base salary, in an amount equal to at least five thousand dollars ($5,000) but in no event more than fifty thousand dollars ($50,000), to the acquisition of an Option to purchase shares of the Company's common stock pursuant to the terms of this Section 7 ("Deferred Salary Option"). Such election is irrevocable and must be filed with the Company prior to the commencement of the calendar year in which the base salary to be deferred is earned. Notwithstanding the foregoing, a newly hired, elected or appointed Deferral Participant may file an irrevocable election with the Company within thirty (30) days of the date the Deferral Participant commences employment with the Company.

Each Deferral Participant who files such a timely election shall automatically be granted an Option under this Section 7 on (i) the first trading day in January of the calendar year for which the deferral election is to be in effect; or (ii) for a newly hired Deferral Participant, the first trading day of the month following the month the Deferral Participant files such election.

(b) The number of shares of Company common stock subject to a Deferred Salary Option shall be determined pursuant to the following formula (rounded down to the nearest whole number):

X= A / (B × 66²/3%), where
X is the number of Option shares,
A is the maximum amount of base salary subject to the deferral election, and
B is the Fair Market Value per share of the common stock on the Option grant date.

(c) The purchase price per share of common stock of the Company for the shares to be purchased pursuant to the exercise of any Deferred Salary Option shall be thirty three and one third percent (33¹/3%) of the fair market value of the Company's common stock on the date such Deferred Salary Option is granted.

(d) Each Deferred Salary Option shall vest (become exercisable) equally over the twelve (12) month period that is the calendar year in which salary is deferred, and shall terminate on the earlier of (i) ten (10) years from the date the Option was granted, or (ii) three (3) years following termination of the Deferral Participant's employment with the Company or an Affiliate. If the Deferred Salary Option is not exercised during the applicable period, it shall be deemed to have been forfeited and of no further force or effect.

8. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.

Each stock bonus or restricted stock purchase agreement shall be in such form and shall contain such terms and conditions as the Board or the Committee shall deem appropriate. The terms and conditions of stock bonus or restricted stock purchase agreements may change from time to time, and the terms and conditions of separate agreements need not be identical, but each stock bonus or restricted stock purchase agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions as appropriate:

(a) Purchase Price. The purchase price under each restricted stock purchase agreement shall be such amount as the Board or Committee shall determine and designate in such Stock Award Agreement. Notwithstanding the foregoing, the Board or the Committee may determine that eligible participants in the Plan may be awarded stock pursuant to a stock bonus agreement in consideration for past services actually rendered to the Company or for its benefit.

(b) Transferability. No rights under a stock bonus or restricted stock purchase agreement shall be transferable by any participant under the Plan, either voluntarily or by operation of law, except

where such assignment is required by law or expressly authorized by the terms of the applicable Stock Award Agreement.

(c) Consideration. The purchase price of stock acquired pursuant to a stock purchase agreement shall be paid either: (i) in cash at the time of purchase; (ii) at the discretion of the Board or the Committee, according to a deferred payment arrangement or other arrangement with the person to whom the stock is sold; or (iii) in any other form of legal consideration that may be acceptable to the Board or the Committee in its discretion. Notwithstanding the foregoing, the Board or the Committee to which administration of the Plan has been delegated may award stock pursuant to a stock bonus agreement in consideration for past services actually rendered to the Company or for its benefit.

(d) Vesting. Shares of stock sold or awarded under the Plan may, but need not, be subject to a repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board or the Committee.

(e) Termination of Employment or Relationship as a Director or Consultant. In the event an Optionholder's Continuous Service terminates, the Company may repurchase or otherwise reacquire any or all of the shares of stock held by that person which have not vested as of the date of termination under the terms of the stock bonus or restricted stock purchase agreement between the Company and such person.

9. COVENANTS OF THE COMPANY.

(a) During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of stock required to satisfy such Stock Awards up to the number of shares of stock authorized under the Plan.

(b) The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares of stock upon exercise of the Stock Award; provided, however, that this undertaking shall not require the Company to register under the Securities Act either the Plan, any Stock Award granted under the Plan or any stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock upon exercise of such Stock Awards unless and until such authority is obtained.

10. USE OF PROCEEDS FROM STOCK.

Proceeds from the sale of stock pursuant to Stock Awards shall constitute general funds of the Company.

11. MISCELLANEOUS.

(a) The Board shall have the power to accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest.

(b) No Employee, Director or Consultant or any person to whom a Stock Award is transferred under subsection 6(d) or 8(b) shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such Stock Award unless and until such person has satisfied all requirements for exercise of the Stock Award pursuant to its terms.

(c) Nothing in the Plan or any instrument executed or Stock Award granted pursuant thereto shall confer upon any Employee or Consultant or other holder of Stock Awards any right to continue to serve the Company or any Affiliate in the capacity in effect at the time the Stock Award was granted or shall affect the right of the Company or any Affiliate to terminate (i) the employment of any Employee with or without cause, or (ii) the service of a Consultant subject to the terms of such Consultant's agreement with the Company or any Affiliate. In the event that a holder of Stock Awards is permitted or otherwise entitled to take a leave of absence, the Board or Committee shall have the unilateral right to (i) determine whether such leave of absence will be treated as a termination of employment or relationship as consultant for purposes of the Plan and corresponding provisions of any outstanding Stock Awards, and (ii) suspend or otherwise delay the time or times at which the shares subject to the Stock Awards would otherwise vest. The status of any person as an eligible Employee or Consultant shall not be construed as a commitment that any Stock Award will be granted under the Plan to such eligible Employee or Consultant, or to eligible Employees or Consultants generally.

(d) Payments and other benefits received by an Optionholder under the Plan or under an Option granted pursuant to the Plan shall not be deemed a part of an Optionholder's regular, recurring compensation for purposes of the termination, indemnity or severance pay law of any country and shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan, contract or similar arrangement provided by the Company or a Group Company, unless expressly so provided by such other plan, contract or arrangement, or unless the Board expressly determines that an Option or portion of an Option should be included to reflect competitive compensation practices or to recognize that an Option has been granted in lieu of a portion of competitive cash compensation.

(e) The Company may require any person to whom a Stock Award is granted, or any person to whom a Stock Award is transferred pursuant to subsection 6(d) or 8(b), as a condition of exercising or acquiring stock under any Stock Award, (1) to give written assurances satisfactory to the Company as to such person's knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters, and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (2) to give written assurances satisfactory to the Company stating that such person is acquiring the stock subject to the Stock Award for such person's own account and not with any present intention of selling or otherwise distributing the stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the shares upon the exercise of the Option has been registered under a then currently effective registration statement under the Securities Act, or (ii) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws.

(f) To the extent provided by the terms of a Stock Award Agreement, the person to whom a Stock Award is granted may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of stock under a Stock Award by any of the following means or by a combination of such means: (1) tendering a cash payment; (2) authorizing the Company to withhold shares from the shares of the common stock otherwise issuable to the participant as a result of the exercise or acquisition of stock under the Stock Award; or (3) delivering to the Company owned and unencumbered shares of Company common stock. Notwithstanding the foregoing, the Company shall not be authorized to withhold shares of Common Stock at rates in excess of the minimum statutory withholding rates for federal and state tax purposes, including payroll taxes.

12. ADJUSTMENTS UPON CHANGES IN STOCK.

(a) If any change is made in the stock subject to the Plan, or subject to any Stock Award (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in

property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan shall automatically be adjusted as appropriate in the type(s) and maximum number of securities subject to the Plan pursuant to subsection 4(a) and the outstanding Stock Awards will be appropriately adjusted in the type(s) and number of securities and price per share of stock subject to such outstanding Stock Awards. (The conversion of any convertible securities of the Company shall not be treated as a "transaction not involving the receipt of consideration by the Company.")

(b) In the event of (1) a dissolution or liquidation of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the Company is the surviving corporation but the shares of the Company's common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (4) any other capital reorganization in which more than fifty percent (50%) of the shares of the Company entitled to vote are exchanged, excluding in each case a capital reorganization in which the sole purpose is to change the state of incorporation of the Company, then all outstanding Stock Awards shall become vested and exercisable in full for a period of at least ten (10) days. Outstanding Stock Awards that have not been exercised prior to such event shall terminate on the date of such event unless assumed by a successor corporation.

13. AMENDMENT OF THE PLAN AND STOCK AWARDS.

(a) The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 12 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary for the Plan to satisfy the requirements of Rule 16b-3 of the Exchange Act or any Nasdaq or securities exchange listing requirements.

(b) Rights and obligations under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the person to whom the Stock Award was granted and (ii) such person consents in writing.

(c) The Board at any time, and from time to time, may amend the terms of any one or more Stock Award; provided, however, that the rights and obligations under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the person to whom the Stock Award was granted and (ii) such person consents in writing.

14. TERMINATION OR SUSPENSION OF THE PLAN.

(a) The Board may suspend or terminate the Plan at any time. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

(b) Rights and obligations under any Stock Award granted while the Plan is in effect shall not be impaired by suspension or termination of the Plan, except with the written consent of the person to whom the Stock Award was granted.

15. EFFECTIVE DATE OF PLAN.

The Plan shall become effective on the date on which it is adopted by the Board.

EX-10.10 5 a2052358zex-10_10.htm EX-10.10 Prepared by MERRILL CORPORATION
QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.10

EXECUTIVE EMPLOYMENT AGREEMENT

This EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the day of December, 2000 (the "Effective Date"), by and between EXAR CORPORATION, a Delaware corporation (the "Company"), and DONALD L. CIFFONE, JR. ("Executive").

WHEREAS, the Company desires to continue to employ Executive to provide executive management services to the Company and wishes to provide Executive with certain compensation and benefits in return for Executive's continued services; and

WHEREAS, Executive wishes to continue to be employed by the Company and provide executive management services to the Company in return for certain compensation and benefits;

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, it is hereby agreed by and between the parties hereto as follows:

ARTICLE 1

DEFINITIONS

For purposes of the Agreement, the following terms are defined as follows:

1.1 "Board" means the Board of Directors of the Company.

1.2 "Cause" means misconduct, including: (i) conviction of any felony or any crime involving moral turpitude or dishonesty; (ii) participation in a fraud or act of dishonesty against the Company; (iii) willful breach of the Company's policies; (iv) intentional damage to the Company's property; (v) a material breach of the Proprietary Rights and Nondisclosure Agreement dated October 21, 1996, between the Company and Executive; or (vi) conduct which in the good faith and reasonable determination of the Board demonstrates unacceptable job performance or unfitness to serve. Physical or mental disability shall not constitute "Cause."

1.3 "Change of Control" means (i) a merger or consolidation in which the Company is not the surviving corporation; (ii) a reverse merger in which the Company is the surviving corporation but the shares of the Company's common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; (iv) any other capital reorganization in which more than fifty percent (50%) of the shares of the Company entitled to vote are exchanged, excluding in each case a capital reorganization in which the sole purpose is to change the state of incorporation of the Company, and in each case Executive is not offered a similar executive level position with the surviving entity.

1.4 "Change of Control Plan" means the Exar Corporation Executive Officers' Change of Control Severance Benefit Plan, adopted effective as of June 24, 1999 by the Company for the benefit of certain of its eligible executive employees.

1.5 "Code" means the Internal Revenue Code of 1986, as amended.

1.6 "Common Stock" means the common stock of the Company.

1.7 "Company" means Exar Corporation, a Delaware corporation, or, following a Change of Control, the surviving entity resulting from such transaction.

1.8 "Consulting Agreement" means the Consulting Agreement entered into by and between the Company and Executive, substantially in the form attached hereto as Exhibit A. Service under the Consulting Agreement shall commence as of the termination of Executive's employment with the Company, provided that such termination is not for Cause, and further provided that such termination is not covered by Section 4.2 hereof.

1.9 "Executive Incentive Program" means the Executive Incentive Compensation Program maintained by the Company for the benefit of its eligible executive employees.

1.10 "Fiscal Year" means the twelve (12) month period ending on each March 31.

1.11 "Good Reason" means any one of the following events which occurs within thirteen (13) months after the effective date of a Change of Control: (i) any reduction of Executive's rate of total compensation (including base salary and stock options); (ii) any material reduction in the package of welfare benefit plans, taken as a whole, provided to Executive (except that the terms of benefits, including without limitation employee contributions, may be changed to the extent required by third party providers) or any action by the Company that would materially adversely affect Executive's participation or materially reduce Executive's benefits under any of such plans; (iii) any material change in Executive's responsibilities, duties, authority, title, reporting relationship or offices resulting in any diminution of position (including, but not limited to, a change of responsibility from company-wide responsibility to division-level responsibility); (iv) request that Executive relocate to a worksite that is both more than thirty-five (35) miles from Executive's prior worksite and more than thirty-five (35) miles from Executive's personal residence (as of the Effective Date), unless Executive accepts such relocation opportunity; (v) failure or refusal of a successor to the Company to assume the Company's obligations under this Agreement; or (vii) material breach by the Company or any successor to the Company of any of the material provisions of this Agreement.

ARTICLE 2

EMPLOYMENT BY THE COMPANY

2.1 Position and Duties. Subject to the terms set forth herein, the Company agrees to continue to employ Executive in the position of President and Chief Executive Officer, and Executive hereby accepts such employment. Executive shall serve in an executive capacity, shall continue to perform such duties as are customarily associated with the position of President and Chief Executive Officer and such other duties as are assigned to Executive by the Board, and shall report solely and directly to the Board. During the term of this Agreement, Executive shall devote his best efforts and substantially all of his business time and attention (except for vacation periods as set forth herein and reasonable periods of illness or other incapacities permitted by the Company's general employment policies or as otherwise set forth in this Agreement) solely to the business of the Company.

2.2 Term. The term of this Agreement shall commence on the Effective Date and shall continue until the earlier of (i) the termination of Executive's employment with the Company or (ii) March 31, 2004. Within a reasonable period of time prior to September 30, 2003, provided that Executive's employment has not then terminated, Executive and the Company shall commence negotiations in order to determine, no later than September 30, 2003, whether to renew this Agreement immediately following its scheduled termination date on March 31, 2004 or to continue Executive's employment without a written agreement; provided, however, that a failure to renew this Agreement shall in no way prevent either the continuation of this Agreement through March 31, 2004 or the continuation of the employment relationship beyond such date without a written agreement. Executive's service under the Consulting Agreement shall commence as of the termination of Executive's employment with the Company, provided that his employment is not terminated for Cause, and further provided that such termination is not covered by either Section 4.1 or 4.2 hereof.

2.3 Employment at Will. Executive's employment is at will, and both the Company and Executive shall have the right to terminate, with written notice, Executive's employment with the Company at any time, and for any reason, with or without Cause. If Executive's employment with the Company is terminated, Executive shall be eligible to receive severance benefits only to the extent provided in Article 4 of this Agreement.

2.4 Employment Policies. The employment relationship between the parties shall also be governed by the general employment policies and practices of the Company, including those relating to protection of confidential information and assignment of inventions, except that to the extent that the terms of this Agreement differ from or are in conflict with the Company's general employment policies or practices, this Agreement shall control.

ARTICLE 3

COMPENSATION

3.1 Base Salary. Executive shall receive for continued employment with the Company, during the term of this Agreement, a base salary at an annual (July 1-June 30) rate of six hundred fifteen thousand dollars ($615,000), payable in equal installments on the regular payroll dates of the Company, which payroll dates shall occur at least twice monthly, subject to applicable tax withholding. Such base salary (the "Annual Base Salary") shall be subject to increase as determined by the Board during the annual focal review period.

3.2 Incentive Compensation Payment. During the term of this Agreement, Executive shall be eligible to receive an annual target incentive compensation payment for each Fiscal Year, beginning with the Fiscal Year ending March 31, 2002, and continuing through and including the Fiscal Year ending March 31, 2004, the amount of which incentive compensation payment shall be determined pursuant to the terms and conditions of the Company's Executive Incentive Program based on a target award percentage equal to seventy-five percent (75%).

3.3 Stock Option Grant. The Board shall grant to Executive (i) on the Effective Date an option to purchase three hundred thousand (300,000) shares of Common Stock with an exercise price to be determined by the Board equal to the fair market value of Common Stock on the Effective Date, which option shall vest on each monthly anniversary date of the Effective Date as to ¹/36 of the shares of Common Stock, and (ii) on each April 1 following the Effective Date, beginning with April 1, 2001, and continuing through and including April 1, 2003, an option to purchase one hundred thousand (100,000) shares of Common Stock with an exercise price to be determined by the Board equal to the fair market value of Common Stock on the relevant April 1, which option shall vest on each monthly anniversary date of the relevant April 1 as to ¹/36 of the shares of Common Stock subject to the option. Grants pursuant to the preceding clause (ii) shall be subject to appropriate adjustment in the event of a change to the Company's Common Stock without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transactions not involving the receipt of consideration by the Company). Options granted pursuant to this Section 3.3 shall be granted under, and shall be subject to the terms of, the Company's 2000 Equity Incentive Plan and Executive's Stock Option Agreement thereunder.

3.4 Professional Services. The Company shall, during the term of this Agreement, reimburse Executive in an amount not to exceed ten thousand dollars ($10,000) per Fiscal Year for documented costs incurred by Executive for obtaining professional services, including, but not limited to, legal, tax planning, accounting and investment services.

3.5 Standard Company Benefits. During the term of this Agreement, Executive shall be entitled to all rights and benefits for which he is eligible under the terms and conditions of the standard Company benefits and compensation practices that may be in effect from time to time and are provided by the Company to its executive employees generally, including health, disability, life and

accidental death insurance coverage. In addition, Executive shall be entitled to receive the following benefits during the term of this Agreement:

(a) the Company shall provide Executive with four (4) weeks' paid vacation for each Fiscal Year (plus paid holidays), which Executive may take in accordance with the Company's standard policy regarding vacation time;

(b) the Company shall provide Executive with life insurance coverage pursuant to a term life insurance policy in an amount equal to one million dollars ($1,000,000).

(c) the Company shall provide Executive with a monthly automobile allowance equal to three thousand dollars ($3,000); and

(d) the Company, pursuant to the terms and conditions of the Company's Executive Health Plan, shall reimburse Executive up to ten thousand dollars ($10,000) for each Fiscal Year for the documented cost of covered medical expenses, without the need for any contribution by Executive.

3.6 Employment Beyond Termination Date of this Agreement. Sections 3.4 and 3.5 shall continue to apply to Executive for so long as he is employed by the Company, whether or not pursuant to this Agreement.

ARTICLE 4

SEVERANCE AND CHANGE OF CONTROL BENEFITS

4.1 Severance Benefits for Certain Terminations Without Regard to Change of Control. If Executive's employment is terminated by the Company without Cause during the term of this Agreement and prior to the effective date of a Change of Control, Executive shall, within thirty (30) days following the date on which the Release described in Section 4.3 becomes effective in accordance with its terms, receive the following severance benefits: (i) a lump sum payment equal to the sum of Executive's Annual Base Salary as in effect during the last regularly scheduled payroll period immediately preceding the termination of Executive's employment plus an additional amount equal to (A) if Executive's employment is terminated prior to October 1, the greater of the incentive compensation payment actually paid to Executive under the Executive Incentive Program for the last Fiscal Year ending with or prior to the termination date of Executive's employment or the target incentive compensation payment for such last Fiscal Year, or (B) if Executive's employment is terminated on or after October 1, the greater of the target incentive compensation payment that Executive could become entitled to receive under the Executive Incentive Program for the Fiscal Year in which Executive's employment is terminated or the incentive compensation payment actually paid to Executive under the Executive Incentive Program for the last Fiscal Year ending with or prior to the termination date of Executive's employment, such lump sum payment to be subject to applicable tax withholding; and (ii) Executive shall be credited with twelve (12) months of additional vesting under all unvested outstanding options to purchase Common Stock then held by Executive, and all options held by Executive shall be exercisable for up to fifteen (15) months following the termination of Executive's employment. For purposes of clause (ii) in the preceding sentence, Executive shall receive the option vesting credit and continued option exercisability therein provided only if Executive has executed the Consulting Agreement, and in the event of termination of the Consulting Agreement for any reason, such vesting credit shall cease and continued option exercisability shall be determined solely in accordance with the terms of grant of the then outstanding vested options.

4.2 Severance Benefits for Certain Terminations Within Thirteen (13) Months Following Change of Control.

(a) Severance Benefits. If Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason, in either case within thirteen (13) months following

the effective date of a Change of Control and during the term of this Agreement, Executive shall, within thirty (30) days following the date on which the Release described in Section 4.3 becomes effective in accordance with its terms, receive the following severance benefits: (i) a lump sum payment equal to two (2) times the sum of Executive's Annual Base Salary as in effect during the last regularly scheduled payroll period immediately preceding the termination date of Executive's employment plus an additional amount equal to (A) if Executive's employment is terminated prior to October 1, the greater of the incentive compensation payment actually paid to Executive under the Executive Incentive Program for the last Fiscal Year ending with or prior to the termination date of Executive's employment or the target incentive compensation payment for such last Fiscal Year, or (B) if Executive's employment is terminated on or after October 1, the greater of the target incentive compensation payment that Executive could become entitled to receive under the Executive Incentive Program for the Fiscal Year in which Executive's employment is terminated or the incentive compensation payment actually paid to Executive under the Executive Incentive Program for the last Fiscal Year ending with or prior to the termination date of Executive's employment, such lump sum payment to be subject to applicable tax withholding; and (ii) the vesting and exercisability of all unvested outstanding options to purchase Common Stock then held by Executive shall be fully accelerated.

(b) Tax Gross-Up Payment. In the event it shall be determined, either by the Company or by a final determination of the Internal Revenue Service, that any payment, distribution or benefit by or from the Company to or for the benefit of Executive pursuant to Section 4.2(a) or otherwise (the "Payment") would cause Executive to become subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then the Company shall pay to or for the benefit of Executive, within the later of ninety (90) days of the termination date of Executive's employment or ninety (90) days of the date of determination referred to above, an additional amount (the "Gross-Up Payment") in an amount that shall fund the payment by Executive of any Excise Tax on the Payment, as well as any income taxes imposed on the Gross-Up Payment, any Excise Tax imposed on the Gross-Up Payment and any interest or penalties imposed with respect to taxes on the Gross-Up Payment or any Excise Tax. For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal, state and local income taxes at the highest nominal marginal rate of such federal, state and local income taxation in the calendar year in which the Gross-Up Payment is due, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account to determine the amount of the Gross-Up Payment, then Executive shall repay to the Company at that time the portion of the Gross-Up Payment attributable to such reduction (plus an amount equal to any tax reduction, whether of the Excise Tax, any applicable income tax, or any applicable employment tax, which Executive has received as a result of such initial repayment). In the event that the Excise Tax is subsequently determined, whether by the Company or by a final determination of the Internal Revenue Service, to be more than the amount taken into account to determine the amount of the Gross-Up Payment, then the Company shall pay to Executive an additional amount, which shall be determined using the same methods as were used for calculating the Gross-Up Payment, with respect to such excess. For purposes of this Section 4(b), a determination of the Internal Revenue Service as to the amount of Excise Tax for which an Executive is liable shall not be treated as final until the time that either (i) the Company agrees to acquiesce to the determination of the Internal Revenue Service or (ii) the determination of the Internal Revenue Service has been upheld in a court of competent jurisdiction and the Company decides not to appeal such judicial decision or such decision is not appealable. If the Company chooses to contest the determination of the Internal Revenue Service, then all costs, attorneys' fees, charges assessed and other expenses shall be borne and paid when due by the Company.

4.3 Release. Upon the occurrence of a termination that would entitle Executive to receive severance benefits pursuant to Sections 4.1 or 4.2 that are conditioned upon the execution of an effective release, and prior to the receipt of such severance benefits, Executive shall execute a release (the "Release") in the form attached hereto as Exhibit B or Exhibit C, as appropriate. Such Release shall specifically relate to all of Executive's rights and claims in existence at the time of such execution and shall confirm Executive's obligations under the Company's standard form of proprietary information agreement. It is understood that Executive has a certain period to consider whether to execute such Release, and Executive may revoke such Release within seven (7) days after execution. In the event Executive does not execute such Release within the applicable period, or if Executive revokes such Release within the subsequent seven (7) day period, none of the aforesaid benefits shall be payable under this Agreement.

4.4 Mitigation. Executive shall not be required to mitigate damages or the amount of any payment provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by Executive as a result of employment by another employer or otherwise.

4.5 Other Terminations. Only terminations of employment described in the foregoing provisions of this Article 4 shall entitle Executive to severance benefits pursuant to the terms of this Agreement. Accordingly, terminations for any reason not so described (such as, without limitation, on account of Executive's disability or death) shall not entitle Executive to such severance benefits; provided, however, that the provisions of this Article 4 shall continue to apply to Executive with respect to terminations of employment with the Company described in Sections 4.1 and 4.2 even if, at the time of such termination, Executive is not employed pursuant to this Agreement.

ARTICLE 5

OUTSIDE ACTIVITIES

During the term of Executive's employment by the Company and continuing through the term of the Consulting Agreement, except on behalf of the Company, Executive shall not directly or indirectly, whether as an officer, director, employee, stockholder, partner, proprietor, associate, representative, consultant, or in any capacity whatsoever engage in, become financially interested in, be employed by or have any business connection with any other person, corporation, firm, partnership or other entity whatsoever that was known by Executive to compete directly with the Company, throughout the world, in any line of business engaged in (or planned to be engaged in) by the Company. Notwithstanding the foregoing, Executive may own, as a passive investor, securities of any competitor corporation, so long as Executive's direct holdings in any one such corporation shall not in the aggregate constitute more than 1% of the voting stock of such corporation. In addition, Executive may, with approval of the Board, serve as a director on the boards of directors of other corporations and business entities so long as such corporations or business entities do not compete directly with the Company, in any area of the world, in any line of business engaged in (or planned to be engaged in) by the Company, and so long as such service does not materially interfere with the performance of Executive's duties hereunder. Executive also may engage in civic and not-for-profit activities so long as such activities do not materially interfere with the performance of Executive's duties hereunder.

ARTICLE 6

NONINTERFERENCE

While employed by the Company, and for one (1) year immediately following the date on which Executive terminates employment or otherwise ceases providing services to the Company, Executive agrees not to interfere with the business of the Company by soliciting or attempting to solicit any employee of the Company to terminate such employee's employment in order to become an employee of or a consultant or independent contractor to or for any person, corporation, firm, partnership or other entity whatsoever. Executive's duties under this Article 6 shall survive termination of Executive's employment with the Company and the termination of this Agreement.

ARTICLE 7

GENERAL PROVISIONS

7.1 Notices. Subject to the remaining provisions of this Section 7.1, any notices provided hereunder must be in writing and shall be deemed effective upon the earlier of personal delivery (including personal delivery by telex) or the third day after mailing by first class mail, to the Company at its primary office location and to Executive at Executive's address as listed on the Company payroll. Any termination by the Company, whether or not for Cause, or by Executive for Good Reason, shall be communicated by a Notice of Termination to the other party hereto given by hand delivery or by registered or certified mail, return receipt requested, postage prepaid, if to the Executive, then to Executive at his address as set forth in the Company's records, and, if to the Company, to Exar Corporation, 48720 Kato Road, Fremont, California 94538 Attention: Law Department. For purposes of this Agreement, a Notice of Termination means a written notice which (i) indicates the specific termination provision in the Agreement relied upon and (ii) if the termination date of Executive's employment is other than the date of receipt of such notice, specifies such termination date (which date shall be not more than fifteen (15) days after the giving of such notice). The failure by the Company or Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or of Good Reason shall not waive any right of the Company or of Executive, respectively, or preclude the Company or Executive, respectively, from asserting such fact or circumstance in enforcing its or his rights under this Agreement.

7.2 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.

7.3 Waiver. If either party should waive any breach of any provisions of this Agreement, they shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement, unless such waiver is agreed to in writing by both parties.

7.4 Complete Agreement. As of the Effective Date, this Agreement wholly supersedes and renders without further force or effect the letters dated September 9, 1996 and September 10, 1996 from the Company to Executive (which letters set forth, respectively, the terms of Executive's employment by the Company and Executive's severance benefits following either a Change of Control or the termination of his employment without cause), the Change of Control Plan, to the extent that it may apply to Executive, and all other agreements relating to compensation and benefits between the Company and Executive, constitutes the entire agreement between Executive and the Company and is the complete, final, and exclusive embodiment of their agreement with regard to this subject matter. This Agreement is entered into without reliance on any promise or representation other than those expressly contained herein or therein, and it cannot be modified or amended except in a writing signed by Executive and by an officer of the Company.

7.5 Counterparts. This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.

7.6 Headings. The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof.

7.7 Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective successors, assigns, heirs, executors and administrators, except that (i) Executive may not assign any of Executive's duties hereunder and Executive may not assign any of Executive's rights hereunder, without the written consent of the Company, which shall not be withheld unreasonably and (ii) the Company may assign its rights and duties hereunder only to a parent or subsidiary of the Company or to a corporation or other entity that will become the Company's successor in interest due to a merger, consolidation, acquisition or similar transaction.

7.8 Arbitration. Unless otherwise prohibited by law or specified below, all disputes, claims and causes of action, in law or equity, arising from or relating to this Agreement or its enforcement, performance, breach, or interpretation shall be resolved solely and exclusively by final and binding arbitration held in Santa Clara County, California through Judicial Arbitration & Mediation Services/Endispute ("JAMS") under the then existing JAMS arbitration rules. However, nothing in this section is intended to prevent either party from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Each party in any such arbitration shall be responsible for its own attorneys' fees, costs and necessary disbursement; provided, however, that if one party refuses to arbitrate and the other party seeks to compel arbitration by court order, if such other party prevails, it shall be entitled to recover reasonable attorneys' fees, costs and necessary disbursements. Pursuant to California Civil Code Section 1717, each party warrants that it was represented by counsel in the negotiation and execution of this Agreement, including the attorneys' fees provision herein.

7.9 Attorneys' Fees. If either party hereto brings any action to enforce rights hereunder, each party in any such action shall be responsible for its own attorneys' fees and costs incurred in connection with such action.

7.10 Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the law of the State of California without regard to its principles of conflicts of law.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

		EXAR CORPORATION
		By:

		Date:

ACCEPTED AND AGREED THIS DAY OF DECEMBER, 2000
DONALD L. CIFFONE, JR.

Exhibit A: Consulting Agreement
Exhibit B: Release (Individual Termination)
Exhibit C: Release (Group Termination)

EXHIBIT A
CONSULTING AGREEMENT

CONSULTING AGREEMENT

This CONSULTING AGREEMENT (the "Agreement") is made as of the day of , 200 , by and between EXAR CORPORATION, including its affiliates and wholly owned subsidiaries, a Delaware corporation, with its principal place of business at 48720 Kato Road, Fremont, California 94538 (the "Company"), and DONALD L. CIFFONE, JR., an individual residing at (the "Consultant").

FOR AND IN CONSIDERATION of the mutual promises and conditions set forth below, the Company and Consultant agree as follows:

1.: SERVICES

The Company agrees to retain Consultant for the term specified in Section 2 to render services to the Company in the field of Consultant's expertise for the purpose of providing executive management services. Consultant shall exercise his best skill and judgment in performing such services under this Agreement.

2.: TERM

The Effective Date of this Agreement shall be the date on which Consultant's employment with the Company is terminated pursuant to the Executive Employment Agreement entered into as of December 6, 2000 between the Company and Executive (the "Employment Agreement"); provided, however, that the Effective Date shall not occur and this Agreement shall have no force or effect in the event that Consultant's employment with the Company is terminated by the Company for Cause, as such term is defined in the Employment Agreement, or on account of Consultant's death or disability. Consultant's service under this Agreement shall continue until the one (1) year anniversary of the Effective Date, unless terminated earlier as provided in Section 5, although the parties hereto may agree in writing to extend the term of Consultant's service under this Agreement. Consultant's commencement and continuation of service under this Agreement shall constitute continuous service with the Company for purposes of continued vesting and exercisability of any outstanding Company stock options or Company restricted stock held by Consultant as of the Effective Date.

3.: CONSULTING FEES

The Company will pay Consultant consulting fees in an amount equal to one thousand dollars ($1,000) per month during the term of this Agreement, payable within thirty (30) days of the Company's receipt from Consultant of an invoice for the relevant month, which invoice shall be in a form acceptable to the Company. Payment to Consultant shall be mailed to his address, as listed in Section 10.

4.: RELATIONSHIP

Consultant's relationship with the Company during the term of this Agreement is that of an independent contractor, and nothing stated or implied herein shall be construed to make Consultant an employee (common law or otherwise) of the Company (or any affiliated company) within the meaning or application of any national or state unemployment insurance law, old age benefit law, workmen's compensation or industrial accident law, or other industrial or labor law, any tax law, or any employee benefit plan maintained by the Company. Consultant hereby acknowledges his status as an independent contractor, and not as an employee (common law or otherwise), of the Company during the term of this Agreement. Consultant hereby waives, during the term of this Agreement, any claim for benefits or rights extended to employees of the Company to the extent that such benefits or rights are not provided to Consultant under this Agreement.

A–1

While Consultant shall control the detail, manner, and method of performing the services to be rendered, it is understood that all services performed under this Agreement shall be subject to inspection by and approval of the Company.

5.: TERMINATION

(a) Either party may, at its option, terminate this Agreement if the other party: (i) defaults in the performance of a material obligation hereunder, provided such default has not been corrected within thirty (30) days after receipt of notice describing such default; (ii) becomes a party to any proceeding involving his or its bankruptcy or other insolvency; or (iii) ceases to be actively engaged in business or financially incapable of fulfilling its obligations under this Agreement.

(b) Nothing contained herein shall limit any other remedies that either party may have for the default of the other party under this Agreement.

6.: CONFIDENTIALITY

The nature of the work performed and any information belonging to the Company or any third party with which Consultant may become familiar will be treated as confidential and may not be disclosed without the written consent of the Company, except as provided herein. Consultant agrees to keep in strictest confidence all information relating to the business affairs of the Company which may be acquired in connection with or as a result of this Agreement. During the term of this Agreement and at any time thereafter, without the prior written consent of the Company, Consultant will not publish, communicate, divulge, disclose or use any of such information which has been designated as secret, confidential or proprietary, or from the surrounding circumstances of which ought to be treated as secret or confidential.

7.: NON-SOLICITATION/HIRE

During the term of this Agreement, and for one (1) year following the date on which Consultant's services under this Agreement are terminated, Consultant agrees not to interfere with the business of the Company by soliciting or attempting to solicit any employee of the Company to terminate such employee's employment in order to become an employee of or a consultant or independent contractor to or for any person, corporation, firm, partnership or other entity whatsoever. Consultant's duties under this Section 7 shall survive termination of Consultant's services for the Company and the termination of this Agreement.

8.: NONCOMPETE

During the term of this Agreement, except on behalf of the Company, Consultant shall not directly or indirectly, whether as an officer, director, employee, stockholder, partner, proprietor, associate, representative, consultant, or in any capacity whatsoever engage in, become financially interested in, be employed by or have any business connection with any other person, corporation, firm, partnership or other entity whatsoever that was known by Consultant to compete directly with the Company, throughout the world, in any line of business engaged in (or planned to be engaged in) by the Company. Notwithstanding the previous sentence, Consultant may own, as a passive investor, securities of any competitor corporation, so long as Consultant's direct holdings in any one such corporation shall not in the aggregate constitute more than 1% of the voting stock of such corporation. In addition, Consultant may, with approval of the Board of Directors of the Company, serve as a director on the boards of directors of other corporations and business entities so long as such corporations or business entities do not compete directly with the Company, in any area of the world, in any line of business engaged in (or planned to be engaged in) by the Company, and so long as such service does not materially interfere with the performance of Consultant's duties hereunder.

A–2

9.: TAXES

Consultant shall be solely responsible for the payment, wherever payable, of any income taxes or other taxes, contributions or insurance premiums that pertain to the compensation received hereunder.

10.: NOTICES

Any notice or other communication required to be given under the terms of this Agreement shall be deemed to have been given upon personal delivery or upon the lapse of three (3) days following deposit for delivery by certified or registered United States mail, postage fully prepaid and addressed to the party at the Company's or Consultant's respective address as shown herein (or at such other address to which one party gives the other by the same means of notice).

Notice and payment to Consultant shall be sent to the following address:

Notice to the Company shall be sent to the following address:

EXAR CORPORATION
48720 Kato Road
Fremont, California 94538
Attn: Legal Department

11.: GENERAL

(a) This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings between them relating to the subject matter hereunder (with the exception of the Employment Agreement, certain provisions of which, by their terms, may continue in effect during the term of this Agreement), and no modification of this Agreement shall be binding on either party unless it is in writing and signed by both parties.

(b) The rights and obligations of the parties to this Agreement shall be governed by and construed in accordance with the laws of the State of California. The parties hereto subject themselves to the jurisdiction of the state and federal courts of the State of California residing within the County of Alameda with respect to any dispute, disagreement or claim arising hereunder, and agree that any such dispute, disagreement or claim shall be exclusively resolved by such California state or federal court.

(c) The prevailing party in any legal, arbitration or dispute resolution action brought by one party against the other regarding the performance, interpretation, enforcement or with respect to any matter arising out of or in connection with this Agreement shall be entitled, in addition to any other rights and remedies it may have, to reimbursement for its expenses incurred thereby, including court costs and reasonable attorneys' fees.

(d) Neither party shall assign this Agreement or any rights hereunder without the prior written consent of the other. Subject to this restriction, this Agreement shall benefit and bind the successors and assigns of the parties.

The parties hereto have caused this Agreement to be executed as of the date first above written.

A–3

EXHIBIT B

RELEASE
(INDIVIDUAL TERMINATION)

Certain capitalized terms used in this Release are defined in the Executive Employment Agreement (the "Agreement") which I have executed and of which this Release is a part.

I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims I may have against the Company.

Except as otherwise set forth in this Release, in consideration of benefits I will receive under the Agreement, I hereby release, acquit and forever discharge the Company, its parents and subsidiaries, and their officers, directors, agents, servants, employees, shareholders, successors, assigns and affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys' fees, damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed (other than any claim for indemnification I may have as a result of any third party action against me based on my employment with the Company or any claim to severance benefits pursuant to the terms of the Agreement), arising out of or in any way related to agreements, events, acts or conduct at any time prior to and including the date I execute this Release, including, but not limited to: all such claims and demands directly or indirectly arising out of or in any way connected with my employment with the Company or the termination of that employment, including, but not limited to, claims of intentional and negligent infliction of emotional distress, any and all tort claims for personal injury, claims or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership interests in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay, or any other form of compensation; claims pursuant to any federal, state or local law or cause of action including, but not limited to, the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement Income Security Act of 1974, as amended; the federal Americans with Disabilities Act of 1990; the California Fair Employment and Housing Act, as amended; tort law; contract law; statutory law; common law; wrongful discharge; discrimination; fraud; defamation; emotional distress; and breach of the implied covenant of good faith and fair dealing; provided, however, that nothing in this paragraph shall be construed in any way to release the Company from its obligation to indemnify me pursuant to the Company's indemnification obligation pursuant to agreement or applicable law.

I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA. I also acknowledge that the consideration given under the Agreement for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rights or claims that may arise on or after the date I execute this Release; (B) I have the right to consult with an attorney prior to executing this Release; (C) I have twenty-one (21) days to consider this Release (although I may choose to voluntarily execute this Release earlier); (D) I have seven (7) days following my execution of this Release to revoke the

B–1

Release; and (E) this Release shall not be effective until the date upon which the revocation period has expired, which shall be the eighth (8th) day after this Release is executed by me.

		DONALD L. CIFFONE, JR.

		Date:

B–2

EXHIBIT C

RELEASE
(GROUP TERMINATION)

Certain capitalized terms used in this Release are defined in the Executive Employment Agreement (the "Agreement") which I have executed and of which this Release is a part.

I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA. I also acknowledge that the consideration given under the Agreement for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rights or claims that may arise on or after the date I execute this Release; (B) I have the right to consult with an attorney prior to executing this Release; (C) I have forty-five (45) days to consider this Release (although I may choose to voluntarily execute this Release earlier); (D) I have seven (7) days following my execution of this Release to revoke the Release; (E) this Release shall not be effective until the date upon which the revocation period has expired, which shall be the eighth day (8th) after this Release is executed by me; and (F) I have received with this Release a detailed list of the job titles and ages of all employees who were

C–1

terminated in this group termination and the ages of all employees of the Company in the same job classification or organizational unit who were not terminated.

		DONALD L. CIFFONE, JR.

		Date:

C–2

QuickLinks

ARTICLE 1 DEFINITIONS
ARTICLE 2 EMPLOYMENT BY THE COMPANY
ARTICLE 3 COMPENSATION
ARTICLE 4 SEVERANCE AND CHANGE OF CONTROL BENEFITS
ARTICLE 5 OUTSIDE ACTIVITIES
ARTICLE 6 NONINTERFERENCE
ARTICLE 7 GENERAL PROVISIONS
EXHIBIT A CONSULTING AGREEMENT
EXHIBIT B RELEASE (INDIVIDUAL TERMINATION)
EXHIBIT C RELEASE (GROUP TERMINATION)
EX-10.11 6 a2052358zex-10_11.htm EXHIBIT 10.11 Prepared by MERRILL CORPORATION
QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.11

[Date] [Name]
[Title]
[Company]
[Address]

Dear [First]:

This letter agreement (the "Agreement") between you and Exar Corporation (the "Company") is made with respect to each of the outstanding stock options granted to you by the Company under any of its stock option plans (each an "Option," and collectively, the "Options"), including each Option that is held by you as of the date of this Agreement and any Option that may be granted to you by the Company after such date.

1. The term of this Agreement will commence on the date hereof and continue until the latest date on which any of your Options expire under the terms of the stock option agreements pursuant to which such Options were granted.

2. For purposes of this Agreement, the following definitions shall apply:

(i): "Cause" mean: (A) conviction of any felony or conviction of any crime involving moral turpitude or dishonesty; (B) participation in a fraud or act of dishonesty against the Company; (C) conduct by which, based upon a good faith and reasonable factual investigation and determination by the Company, demonstrates gross incompetence; or (D) intentional, material violation of any contract between you and the Company or any statutory duty to the Company that is not corrected within thirty (30) days after written notice to you thereof. Physical or mental disability shall not constitute "Cause."
(ii): "Change of Control" means (1) a merger or consolidation in which the Company is not the surviving corporation; (2) a reverse merger in which the Company is the surviving corporation but the shares of the Company's common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (3) any other capital reorganization, in each case in which the stockholders of the Company immediately prior to the closing of such transaction beneficially own less than fifty percent (50%) of the voting power of the acquiring entity.
(iii): "Restriction Period" means the continuous period of time during which you are, in connection with a Change in Control and as a result of state or federal securities laws or "pooling of interests" accounting rules applicable to a Change of Control, restricted from selling, transferring or otherwise disposing of stock of the Company.

3. If your employment or service with the Company is terminated during a Restriction Period for any reason other than Cause or your death, and such Restriction Period ends after the latest date on which, under the terms of the stock option agreements pursuant to which your Options were granted, you may exercise any of your Options, then the total exercise price of the Options that are not exercisable after the last day of the Restriction Period, or any portion of such purchase price, shall, at your election, be payable with a Promissory Note substantially in the form set forth in Exhibit A. The Promissory Note shall also include the amount of any state or Federal taxes payable by you on Options exercised pursuant to such Promissory Note, provided that such payment of taxes is due on or before the last day of the Restriction Period. Except to the extent prohibited by state or federal securities laws or "pooling of interests" accounting rules, shares purchased pursuant to such Promissory Note shall be subject to a pledge substantially in the form of the Pledge Agreement set forth in Exhibit B. If

required, the Pledge Agreement shall be modified or eliminated entirely, as agreed by the parties, in order to comply with such laws and rules. The outstanding principal amount of the Promissory Note shall be payable in full no later than three (3) months after the date on which the Restriction Period ends, or on such earlier date(s) as agreed upon between you and the Company, together with interest accrued from the date of the Promissory Note on the unpaid principal at a rate equal to the lower of (i) the short-term applicable Federal rate in effect on the date of the Promissory Note, or (ii) the return earned by the Company on its cash investments for the fiscal year ending with or prior to the date of the Promissory Note.

4. You represent that you have not entered into any agreements, understandings, or arrangements with any other person or entity that would be breached by you as a result of, or that would in any way preclude or prohibit you from entering into this Agreement, the Promissory Note and the Pledge Agreement.

5. Any successor to the Company as a result of the occurrence of a Change of Control shall assume the obligations under this Agreement to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations. For all purposes under this Agreement, the term "Company" shall include any successor to the Company's business and/or assets that assumes the obligation of this Agreement or that becomes bound by the obligations of this Agreement by operation of law, and this Agreement shall be binding upon any such successor.

6. The terms of this Agreement and all of your rights hereunder shall inure to the benefit of, and be enforceable by, your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees or legatees.

7. This Agreement, including any Exhibits thereto, constitutes the sole agreement of the parties and supersedes all negotiations and prior agreements with respect to the subject matter hereof.

8. Any term of this Agreement may be amended or waived only with the written consent of the parties.

9. Any notice required or permitted by this Agreement will be in writing and will be deemed sufficient upon receipt, when delivered personally, by facsimile or by a nationally-recognized delivery service (such as Federal Express or Express Mail), or 72 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party's address as set forth below or as subsequently modified by written notice.

10. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California, without giving effect to the principles of conflict of laws.

Please indicate your agreement with the above terms by signing below.

	Sincerely,
	Exar Corporation
	By:

		[Donald L. Ciffone, Jr.][Ronald W. Guire]
	Title:
	Address:

	Facsimile Number:
Agreed and Accepted:
[Name]



Address:

Facsimile Number:

Exhibit A

Promissory Note

PROMISSORY NOTE

$ [City and State]

[Date]

FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to pay in full on to the order of Exar Corporation, a Delaware corporation (the "Company"), at 48720 Kato Road, Fremont, California, or at such other place as the holder hereof may designate in writing, in lawful money of the United States of America and in immediately available funds, the principal sum of Dollars ($ ) together with interest accrued (and compounded annually) from the date hereof on the unpaid principal at the rate of % per annum.

If the undersigned fails to pay any of the principal and accrued interest when due, the Company, at its sole option, shall have the right to accelerate this Note, in which event the entire principal balance and all accrued interest shall become immediately due and payable, and immediately collectible by the Company pursuant to applicable law.

This Note may be prepaid at any time without penalty. All money paid toward the satisfaction of this Note shall be applied first to the payment of interest as required hereunder and then to the retirement of the principal.

The full amount of this Note is secured by a pledge of shares of Common Stock of the Company, and is subject to all of the terms and provisions of the Stock Pledge Agreement of even date herewith between the undersigned and the Company; provided, however, that the obligation of the undersigned to make payments of principal, interest and all other amounts pursuant to this Note shall be with full recourse against the undersigned.

The undersigned hereby represents and agrees that the amounts due under this Note are not consumer debt, and are not incurred primarily for personal, family or household purposes, but are for business and commercial purposes only.

The undersigned hereby waives presentment, protest and notice of protest, demand for payment, notice of dishonor and all other notices or demands in connection with the delivery, acceptance, performance, default or endorsement of this Note.

The holder hereof shall be entitled to recover, and the undersigned agrees to pay when incurred, all costs and expenses of collection of this Note, including without limitation, reasonable attorneys' fees.

The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California, without giving effect to the principles of conflict of laws.

Signed

Exhibit B
Pledge Agreement

STOCK PLEDGE AGREEMENT

THIS STOCK PLEDGE AGREEMENT ("Pledge Agreement") is made by ("Pledgor"), in favor of Exar Corporation, a Delaware corporation with its principal place of business at 48720 Kato Road, Fremont, California ("Pledgee").

WHEREAS, Pledgor has concurrently herewith executed that certain Promissory Note (the "Note") in favor of Pledgee in the amount of Dollars ($ ) in payment of the purchase price of ( ) shares of the Common Stock of Pledgee; and

WHEREAS, Pledgee is willing to accept the Note from Pledgor, but only upon the condition, among others, that Pledgor shall have executed and delivered to Pledgee this Pledge Agreement and the Collateral (as defined below):

NOW, THEREFORE, in consideration of the foregoing recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound, Pledgor hereby agrees as follows:

1. As security for the full, prompt and complete payment and performance when due (whether by stated maturity, by acceleration or otherwise) of all indebtedness of Pledgor to Pledgee created under the Note (all such indebtedness being the "Liabilities"), together with, without limitation, the prompt payment of all expenses, including, without limitation, reasonable attorneys' fees and legal expenses, incidental to the collection of the Liabilities and the enforcement or protection of Pledgee's lien in and to the collateral pledged hereunder, Pledgor hereby pledges to Pledgee, and grants to Pledgee, a first priority security interest in all of the following (collectively, the "Pledged Collateral"):

(a) ( ) shares of Common Stock of Pledgee represented by Certificates numbered (the "Pledged Shares"), and all dividends, cash, instruments, and other property or proceeds from time to time received, receivable, or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares;

(b) all voting trust certificates held by Pledgor evidencing the right to vote any Pledged Shares subject to any voting trust; and

(c) all additional shares and voting trust certificates from time to time acquired by Pledgor in any manner (which additional shares shall be deemed to be part of the Pledged Shares), and the certificates representing such additional shares, and all dividends, cash, instruments, and other property or proceeds from time to time received, receivable, or otherwise distributed in respect of or in exchange for any or all of such shares.

The term "indebtedness" is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and Liabilities heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, and whether recovery upon such indebtedness may be or hereafter becomes unenforceable.

2. At any time, without notice, and at the expense of Pledgor, Pledgee in its name or in the name of its nominee or of Pledgor may, but shall not be obligated to: (1) collect by legal proceedings or otherwise all dividends (except cash dividends other than liquidating dividends), interest, principal payments and other sums now or hereafter payable upon or on account of said Pledged Collateral; (2) enter into any extension, reorganization, deposit, merger or consolidation agreement, or any agreement in any wise relating to or affecting the Pledged Collateral, and in connection therewith may deposit or surrender control of such Pledged Collateral thereunder, accept other property in exchange for such Pledged Collateral and do and perform such acts and things as it may deem proper, and any money or property received in exchange for such Pledged Collateral shall be applied to the indebtedness or thereafter held by it pursuant to the provisions hereof; (3) insure, process and preserve

the Pledged Collateral; (4) cause the Pledged Collateral to be transferred to its name or to the name of its nominee; (5) exercise as to such Pledged Collateral all the rights, powers and remedies of an owner, except that so long as no default exists under the Note or hereunder Pledgor shall retain all voting rights as to the Pledged Shares.

3. Pledgor agrees to pay prior to delinquency all taxes, charges, liens and assessments against the Pledged Collateral, and upon the failure of Pledgor to do so, Pledgee at its option may pay any of them and shall be the sole judge of the legality or validity thereof and the amount necessary to discharge the same.

4. At the option of Pledgee and without necessity of demand or notice, all or any part of the indebtedness of Pledgor shall immediately become due and payable irrespective of any agreed maturity, upon the happening of any of the following events: (1) failure to keep or perform any of the terms or provisions of this Pledge Agreement; (2) failure to pay any installment of principal or interest on the Note when due; (3) the levy of any attachment, execution or other process against the Pledged Collateral; or (4) the insolvency, commission of an act of bankruptcy, general assignment for the benefit of creditors, filing of any petition in bankruptcy or for relief under the provisions of Title 11 of the United States Code of, by, or against Pledgor.

5. In the event of the nonpayment of any indebtedness when due, whether by acceleration or otherwise, or upon the happening of any of the events specified in the last preceding section, Pledgee may then, or at any time thereafter, at its election, apply, set off, collect or sell in one or more sales, or take such steps as may be necessary to liquidate and reduce to cash in the hands of Pledgee in whole or in part, with or without any previous demands or demand of performance or notice or advertisement, the whole or any part of the Pledged Collateral in such order as Pledgee may elect, and any such sale may be made either at public or private sale at its place of business or elsewhere, or at any broker's board or securities exchange, either for cash or upon credit or for future delivery; provided, however, that if such disposition is at private sale, then the purchase price of the Pledged Collateral shall be equal to the public market price then in effect, or, if at the time of sale no public market for the Pledged Collateral exists, then, in recognition of the fact that the sale of the Pledged Collateral would have to be registered under the Securities Act of 1933 and that the expenses of such registration are commercially unreasonable for the type and amount of collateral pledged hereunder, Pledgee and Pledgor hereby agree that such private sale shall be at a purchase price mutually agreed to by Pledgee and Pledgor or, if the parties cannot agree upon a purchase price, then at a purchase price established by a majority of three independent appraisers knowledgeable of the value of such collateral, one named by Pledgor within ten (10) days after written request by the Pledgee to do so, one named by Pledgee within such 10-day period, and the third named by the two appraisers so selected, with the appraisal to be rendered by such body within thirty (30) days of the appointment of the third appraiser. The cost of such appraisal, including all appraiser's fees, shall be charged against the proceeds of sale as an expense of such sale. Pledgee may be the purchaser of any or all Pledged Collateral so sold and hold the same thereafter in its own right free from any claim of Pledgor or right of redemption. Demands of performance, notices of sale, advertisements and presence of property at sale are hereby waived, and Pledgee is hereby authorized to sell hereunder any evidence of debt pledged to it. Any officer or agent of Pledgee may conduct any sale hereunder.

6. The proceeds of the sale of any of the Pledged Collateral and all sums received or collected by Pledgee from or on account of such Pledged Collateral shall be applied by Pledgee to the payment of expenses incurred or paid by Pledgee in connection with any sale, transfer or delivery of the Pledged Collateral, to the payment of any other costs, charges, attorneys' fees or expenses mentioned herein, and to the payment of the indebtedness or any part hereof, all in such order and manner as Pledgee in its discretion may determine. Pledgee shall then pay any balance to Pledgor.

7. Upon the transfer of all or any part of the indebtedness Pledgee may transfer all or any part of the Pledged Collateral and shall be fully discharged thereafter from all liability and responsibility with respect to such Pledged Collateral so transferred, and the transferee shall be vested with all the rights and powers of Pledgee hereunder with respect to such Pledged Collateral so transferred; but with respect to any Pledged Collateral not so transferred Pledgee shall retain all rights and powers hereby given.

8. Until all indebtedness shall have been paid in full the power of sale and all other rights, powers and remedies granted to Pledgee hereunder shall continue to exist and may be exercised by Pledgee at any time and from time to time irrespective of the fact that the indebtedness or any part thereof may have become barred by any statute of limitations, or that the personal liability of Pledgor may have ceased.

9. Pledgee agrees that so long as no default exists under the Note or hereunder, the Pledged Shares shall, upon request of Pledgor, be released from the pledge (i) as the indebtedness is paid at the rate of one share for each ($ ) of principal amount of indebtedness paid, or (ii) prior to the payment of the indebtedness for the purpose of effecting a sale of Pledged Shares by Pledgor, provided that such sale shall occur immediately following such release, and the proceeds of such sale shall be paid to Pledgee in an amount equal to the lesser of the full proceeds of such sale or the Liabilities.

10. Pledgee may at any time deliver the Pledged Collateral or any part thereof to Pledgor and the receipt of Pledgor shall be a complete and full acquittance for the Pledged Collateral so delivered, and Pledgee shall thereafter be discharged from any liability or responsibility therefor.

11. The rights, powers and remedies given to Pledgee by this Pledge Agreement shall be in addition to all rights, powers and remedies given to Pledgee by virtue of any statute or rule of law. Any forbearance or failure or delay by Pledgee in exercising any right, power or remedy hereunder shall not be deemed to be a waiver of such right, power or remedy, and any single or partial exercise of any right, power or remedy hereunder shall not preclude the further exercise thereof; and every right, power and remedy of Pledgee shall continue in full force and effect until such right, power or remedy is specifically waived by an instrument in writing executed by Pledgee.

12. If any provision of this Pledge Agreement is held to be unenforceable for any reason, it shall be adjusted, if possible, rather than voided in order to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Pledge Agreement shall be deemed valid and enforceable to the full extent possible.

13. The validity, interpretation, construction and performance of this Pledge Agreement shall be governed by the laws of the State of California, without giving effect to the principles of conflict of laws.

Dated:		PLEDGOR

		Printed Name:

QuickLinks

Exhibit A Promissory Note
Exhibit B Pledge Agreement
EX-21.1 7 a2052358zex-21_1.htm EX-21.1 Prepared by MERRILL CORPORATION
QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 21.1

SUBSIDIARIES OF THE COMPANY

1.: Exar International, Inc. (a Virgin Islands Foreign Sales corporation).
2.: Exar Japan Corporation (a Japan corporation).
3.: Micro Power Systems, Inc. (a California corporation).
4.: Exar Ltd. (a United Kingdom Limited Liability corporation).
5.: Exar SARL (a French Limited Liability corporation).
6.: Exar Taiwan Corporation (a Taiwan corporation).

QuickLinks

EXHIBIT 21.1

SUBSIDIARIES OF THE COMPANY
EX-23.1 8 a2052358zex-23_1.htm EX-23.1 Prepared by MERRILL CORPORATION
QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

The Board of Directors and Stockholders
Exar Corporation:

We consent to the incorporation by reference in Registration Statements Nos. 33-58991, 333-37371, 333-69381, 333-31120, 333-55082 and 333-48226 on Form S-8 of Exar Corporation of our report dated April 23, 2001, appearing in this Annual Report on Form 10-K of Exar Corporation for the year ended March 31, 2001.

Deloitte & Touche LLP

San Jose, California
June 27, 2001

QuickLinks

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT
GRAPHIC 9 g926061.jpg GRAPHIC begin 644 g926061.jpg M_]C_X``02D9)1@`!`0$!L`&P``#_VP!#``@&!@<&!0@'!P<)"0@*#!0-#`L+ M#!D2$P\4'1H?'AT:'!P@)"XG("(L(QP<*#`CH!`1$`_\0`'``!``$%`0$```````````````<"`P0%!@$(_\0` M51```0,#`0('"0T'`P($!`<``0(#!``%$082(1,4,516D]$'%187(D%1E-,R M-39587-T=96BL;+2(S1"<7*1LX&2PU*A)#,WM`@80U,E2&."@X;!_]H`"`$! M```_`)-ML>[7N7=W3J2XQ$,7!V.TS':C["4)"<>Z:)\YY36Q\';ITPO/51?8 MT\';ITPO/51?8T\';ITPO/51?8T\';ITPO/51?8T\';ITPO/51?8T\';ITPO M/51?8T\';ITPO/51?8T\';ITPO/51?8T\';ITPO/51?8U8EV*[1X3[R=7W@J M;;4H9:B\H!/_`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`SO]%=%7-Z1]U?OKB1^":Z2 ME*4I2E*Q;C[V2OF5_E-05IJ7)$*S)$E_9X..,<*K&,)^6I_I2E`X5I5,J2<..J91N(S[M"ACS8WUAP^Z%9WA&;D*=:?=::<7L,N+:; MX7/!@N;(`VB"!G&37L/NC:=G.1T-/RDA\M;"W(3J$8=SP:BHI`"5$$`GE(-5 MCNA:=5&#[0D+6V%#:2DYP2/,#@_V-7*4JT](8C)2I]YMI*EI;25J"05* M.`!GSDD`#SUZ)#)8+X=06@"2O:&R`.4YKUIUMYI#K2TK;6D*2M)R%`\A!\XJ MNE*QW)\-H.ER4P@,YX4J<`V,)VCM;]V$D'?YCFL/44&#==.3X-PD!B)(94VM M[;">#SR*!.X$'!'RXK12.YU:WE%;4F3'7WH%H"FRGY] M96;HQ,MS8MS:.!+D>*VA#;I:<#C94,]H MNM@C#.T@I.QNW#>3CS9]%8J-#2N*,1Y&I[D^F(II<-19CH+"V]R5#9;&UY.4 MD*R""?/OK5VG1,=UB/$5O&R1G9.>2MEX"6F.S%ANW![>W`CM MI6I(+O$RI:0-V\J!.UCS#=BO+3W-[=:%LEJ;)6B.ZRME)0TG82T5%*24I!4? M*WJ5DD`;_3MK+I9FQW!4J/,?4%LEE;2PG95^V<="LXR""ZL<5OZ4I2J M>$1PA;VT[8&T4YWX].*JI5*UH;3M+4E(R!DG&\[A556WI#,=*5/.H;2I:4)* MU``J4<`?S)W"KE*4I2E*4H>0U`MQ^$^H/K-W\$5)UG]Y('T9O\HK(TC[J_?7 M$C\$UTE*4I2E*5C7'WLE?,K_`"FH#TW^Z6;^B/\`@FOH6E*5S=K^'NH?HL+_ M`)JZ2E*4I2E*5%-U1?%7J\"$994B[[(&JI6M;BB$[=&HK[+B67@X4- M,88\A2<**5#A!C9V`L$D[13NK71(6O9LN.]VR?D90A M9_\`WU@VNR:DB69NVNV^_P"6HP8BML2`EE*PIWABZ"2%)4"C&0IL<)C.2&N%X1:G%Q7`Y@*5R!W M8R!@).\#&:UKEBU(JVM2WX%QF(J+O*0'Y[$@/.[3"PE](:0TDG0#`"LG>*SQ'UWM34;5WXZK;0 ME8.&`^9`+2P2M0X((!V@E`&SY)!5BKC,;6O'K:E:KP@A$=.2K;3PJ7E<84X> M$2G94,%.4D%&`D`BK#5LUE&[PO;=^D25XYPFT>3:S@ M@X&*IN-NU5$N\B);G+XZI#Z3&D<:"F>*<"0L**U8+O"%6"H9SLG(2#6F7#UL M-/-)0U?"XU)<+8X9P*>):1L[672ML;87@E2T9R2G9(%=AJUF]NW&WK;8NZXG M%%@-VJ2&UHEE2"DN*.`4`!0R04\N4[Q6A9A:RD(3'6N^,/'81<7E2!LJ<,IL M[4?!\E(:X3.R`-G`(R*ON6G50>FJ1*O.Q$VN))XRH\)_XQ1&UO\`+_9`#RL^ M2:PU1-<&3-#B[PH!UPR@TK92XR9*2!'47-RN!V@-E*,;P?*Q6/+L]_1+>EQ( MFHFD2(C+;;CSY>=0VW)<44N;"TJWH6@@!6WC.\G:SW>G+A/=T\FW38TMJ[QK M>VX]PR^$.TL+"1M^=7D9/HR-YKD3;=7PF(#3;E\D27(,13#IE%2&Y6WM2.,9 M5O3C``P1C(&^K7%=47"VMQKI!O2Q`3&4]AS!?<1-2I2FR%940T,@[O-C>*]@ MP-;2.'CS)%Y:6LMHE.)7LC)EH)4TOA#@!K;WH2D;.XC(K'N$:^08FJVIXNCL M)41Y$5R6\I6'RZ!&2GRU!:B2G"DA)&,*!5OJ8&>$X!'"XX39&WCDSC?_`-ZK MI2E*4I2AY#4"W'X3Z@^LW?P14G6?WD@?1F_RBLC2/NK]]<2/P3724I2E*4I6 M-R5\RO\IJ`]-_NEF_HC_@FOH6E*5S=K^'NH?HL+_FKI*4I2E*4I5/!H#A MJ)$9B6T6I#+;S9(.PX@*&1R;C5T`#D%*4Q2F*4Q3% M4I0E`(2D`$DG`QO-58IBF*5;?CLR65,OM-NM+&%(6D*21\H-5I0E"0E*0$@8 M``P`*]Q2E,"E*4Q3%*4Q2J5M-N`!:$J`4%#:&<$0U`MQ^ M$^H/K-W\$5)UG]Y('T9O\HK(TC[J_?7$C\$U;O6MH]EG3XZ[9<)+=OC(ES'V M`V4,MJVL$A2PHXV%$@`\E9$'6M@G/R8XN4=F1&>4TXR\ZE*QA80%8SR$E./Z MAZ:S'=2V1B:W"=NT)$EQTLH:+Z=HK!`V<9YAEKMTMQ"#,<4Y/>##"$H<<,CW("E*`!20DY)_A^2K$?N=7`)LD@ MW1#4R.A"YSH;47'72]PSI!"@E04HJ&%I4!N(P:JC]SJY1(#D"->8K<9]"5.K M5`2XZEU+):!05$@)Q@\F>4`[ZOZ;T!+LUW;GR;DT\I,E+ZDI2X>2,IC&TXM2 MCR@[S\@`&*[VE*5C7'WLE?,K_*:@/3?[I9OZ(_X)KZ%I2E<"$C.X;SNK6^%NF^D%J]=;_53PMTWT@M7KK?ZJ>% MNF^D%J]=;_53PMTWT@M7KK?ZJ>%NF^D%J]=;_53PMTWT@M7KK?ZJ>%NF^D%J M]=;_`%4\+=-](+5ZZW^JGA;IOI!:O76_U4\+=-](+5ZZW^JGA;IOI!:O76_U M4\+=-](+5ZZW^JGA;IOI!:O76_U4\+=-](+5ZZW^JGA;IOI!:O76_P!5/"W3 M?2"U>NM_JIX6Z;Z06KUUO]5/"W3?2"U>NM_JIX6Z;Z06KUUO]5/"W3?2"U>N MM_JIX6Z;Z06KUUO]5/"W3?2"U>NM_JIX6Z;Z06KUUO\`53PMTWT@M7KK?ZJ> M%NF^D%J]=;_53PMTWT@M7KK?ZJ>%NF^D%J]=;_53PMTWT@M7KK?ZJ>%NF^D% MJ]=;_53PMTWT@M7KK?ZJ>%NF^D%J]=;_`%4\+=-](+5ZZW^JGA;IOI!:O76_ MU4\+=-](+5ZZW^JGA;IOI!:O76_U4\+=-](+5ZZW^JGA;IOI!:O76_U4\+=- M](+5ZZW^JGA;IOI!:O76_P!5/"W3?2"U>NM_JIX6Z;Z06KUUO]5/"W3?2"U> MNM_JIX6Z;Z06KUUO]5/"W3?2"U>NM_JIX6Z;Z06KUUO]5/"W3?2"U>NM_JIX M6Z;Z06KUUO\`53PMTWT@M7KK?ZJ>%NF^D%J]=;_53PMTWT@M7KK?ZJJ1JO3K MBTH1?K6I2B`E(F-DDGD`WUMCR&H&N/PGU!]9N_@BI.L_O)`^C-_E%9&D?=7[ MZXD?@FM1JG3=NGZZTX\_;6WDR''TREE!(6$L'8VC\A`QGSUR=PU=JZ#96)'' M)2I4EN6\VV8"`A);=V$-C#:BH[(SLX!(.=H`8K9SM1:K9-QE,S7`R9$YEAM4 M';2TAK9+:_)25'.5;SM#SX.-^.=2ZNEVLR(DUYI3,9US:5#0L/KXR&TX.R-I M&P3@@()QG`\]$V]:C@W>ZKX_\`9QV4L`M/!6-Y*MG<20=HC`V:D+33MRX2[1+E*7+,28&F7ULI;*T% MIM?(D`'"E*&1Z*WU8UQ][)7S*_RFH#TW^Z6;^B/^":^A:4I7-VOX>ZA^BPO^ M:M;W5`%:.2%`$&?%R",@_MDU%KR(4=E3KR(S;:1E2UH2`/YG%8??2P\\MG^] MNG?2P\\MG^]NG?2P\\MG^]NG?2P\\MG^]NG?2P\\MG^]NG?2P\\MG^]NG?2P M\\MG^]NB;E8E*"4R[:5$X`"F]YK/XLQS=GJT]E.+1^;L]6GLK%D2K3$=X.2[ M!96!DI;V%$#T[JR>+ M1^;L]6GLKQ3$9*2HL,@`9)X-/)_:K+:HSK:'&[=)6VM(4E2;8Z0H'>"#P>\5 M5LL_%]G399^*Y?V6][.FRS\5R_LM[V=-EGXKE_9;WLZ;+/Q7+^RWO9T MV6?BN7]EO>SILL_%]G1H1'77&A%"'&P"I#L4MJ`.<'"D@X.#_:KO%H_ M-V>K3V5;>3$CH"G&&\*4$)"6-HJ43@```DDUYLL_%]G399^*Y?V6][. MFRS\5R_LM[V=-EGXKE_9;WLZ;+/Q7+^RWO9TV6?BN7]EO>SILL_%]G7 MB>*%]+*HBFG%)*DI>AJ:V@,9(VDC.,C^]7N+1^;L]6GLJEUJ(RTMUQEA*$)* ME*+8W`#)/)5L!A20H6R401D$6MW>.KKW99^*Y?V6][.FRS\5R_LM[V=-EGXK ME_9;WLZ;+/Q7+^RWO9TV6?BN7]EO>SJE:HK0!=@O-)*@G;=M[B$Y)P`2I``R M2!5,]AE,3:2RTE0=:P0@`C]JCY*^C?X34#7'X3Z@^LW?P14G6?WD@?1F_P`H MK(TC[J_?7$C\$UA7+7";3JV?:I<<)BQ[9QQM\'>MP;1+>/3LC(_UK$M7=-MC MD"W=]AQ2;(::7(0C>B.IQ:D("B3G>4GD!QRG`J\SK]$NZ-M,Q'6(:TQEMNRF ME)4ZEU3@"D)&=Q"`1GT[P-U;G3VJ[;J57!W M'>,8(%;W%,4Q2E8UQ][)7S*_RFH#TW^Z6;^B/^":^A:4I7-VOX>ZA^BPO^:M M;W4_@>CZ?$_S)J&M7_!.X?T)_,FH;\];G3VGG-0.S0F=$A-0XQDO/2BL(2@* M2C^%*CG*QYJV,[N?WV)#D+CM6F:MY"@A2$QU$A125`$8Y2D$_R&:R!I.]N*::8MLM^4KA-N*U&<+K6 MPH)5M#9])`W9]!P:0-)WN>]"`MTEAB9(1';DO,K2UMJ5L#*L>D$?Z&M*H%*B MD\H.*OP/?"-\ZC\14\*]T?YUY46]T/X2(^C(_$UR5;;3>GYFI[TU:X2V6W'` MI15HF.-VN8XW"6I$E:&5*2RI/*%$#`QBKW@I MJ(2FXIL5R$AULN(:XJO:4@8!4!C>`2-_RBK(T]>C&1)%IG<`MW@4N<77LES: MV=D''+D$8](Q6//MTZUR3&N$-^*^$A7!OME"L'D.#YJQ:[#N<_"!_P"BJ_,F MI/JU)_='_FE_E-39I+X&6/ZOC_XTUN#@#)KD%=T*`F$N>;9=3;>`>?8FAE); MD!I)4=GRLIR$DI*PD*QN/)6U1J_3B[>B?W\MR8RU;`<5*1LA>SM%.XK57Z^-V&&R^J))EK>?1':8C;. MVM:N3W2DCS>Y.Y0&2,\E8*==Z<D'T5M;5>;;?(G&;;-8E-#`4674KV"0#LG!. M#@C=6?BN.[J'P$D_28O_`+ANHFN/[F?G6O\`*BOHG^$U`UQ^$^H/K-W\$5)U MG]Y('T9O\HK(TC[J_?7$C\$U+B)TM+JG0_'?P%X3M,[6R,8Y#MJ!' MGK7^+>Q\;CR-J5^R"`M&VG#P0M2T[9V<[BL\A&1N.:]:[G=I;"DKE7%YO9:; M;0[)SP3;>WL(2<`@#A%>?/)OW5F:8T7;M*.ON07I+BGV6F5<,I)&RWD(`"4@ M#`4?Y\IW[ZZ.E*4K&N/O9*^97^4U`>F_W2S?T1_P37T+2E*YNU_#W4/T6%_S M5K>ZG\#T?3XG^9-0UJ_X)W#^A/YA4-^>M]IC4K^F>^CL5"N,2X9C-N#'[(EQ M"]H@@@[D$8^6MM;NZ#-9<8>N)DSGT7)$YUQ;V]P):+81R>8$X\P&[%;B1KN- M;T6)AMSC2VK>4SWHA&'75-AI`4'4%*]AI*$J!3@DJ_G5J3W1+;+,B,_993$) M]PN[,:6$.I(=#J<**3@$@Y&.4@C&R!5YCNGV]B(RA%D?2\ER,M9,E*\\"_PN M]:DEQ6UR;U8'*!O-1FM6TM2O2^$;YU/XBIV2XAUQU+:@HMKV5@;]D\N M#_H17CSB([?"/*#:,A.TK<,DX'_7&$@#=GE)K05V'6N#.A[VK3J]."_LHM#<1^,PE$4AU:5H4A`=45$$(VL^ M2`5%(Y-^<:\=S2;/FRGHMW:8;DI2A3?!+3@".EG.TA:5>;.SG9.<$'%4/]RY MY_3SEM-S9#BY'#<+P!Y.(\5QR^GRO^WRU>N?$6E.W$B(3D\JB7<`?+6IV5?\`2?[4@N(U:W6(EU@QUR8\V,\A,-7`,M2"@E+*-O*=DMYWD@E1.*W>F]'2;)J!^X]\&E MQG&W$AAI"@%J6I*MHA2BE)&#G8"0K.2,UV-*BWNJK0W?K&XXH)0F)+4I2C@` M`LY)KD4';0E:NX,[0X40W%['GV=E0S_+-?0MOWVN+\RC M\HK@D=S=]^5+3E)23YP=K!&UNZZQZ?%FGS9"7$%$EN.A*$(V=G@F]C_ON_E6\K MCNZA\!)/TF+_`.X;J)KC^YGYUK_*BOHG^$U`UQ^$^H/K-W\$5)UG]Y('T9O\ MHK(TC[J_?7$C\$UTE*4I2E*5C7'WLE?,K_*:@+3FZ'9]V?VJ>_53_Y@=7]' M(/5/?JK9=S7NNZIO.J7+5/M3MQ8D/*7_`.'1A<-)5YR=Q0.3RB#\IY*EFU_# MW4/T6%_S5K>ZG\#T?3XG^9-0UJ_X)W#^A/YA4-^>NY[GK=LE)E0;LZRF))F0 M4.I<=X/:;X8[>_((`'*1R5T%A:TK.A\&_!ML./.8B.3`):@6$IEN(64%:\@[ M"6U$;^7.,5Y<;=I"U2')"+9!#0M4A22H!MY9SP8&XK/F5@`XK M97N!IN_M7J[W)Z'QAQ#\?A<<*O+R`E6SC?M^]3F8*RY#;D.)86 M5!14@*(2-]=H%R9>S-0C9>5E:W5)X7 M._;&!Y\_C5N9HO4#<8E4I$@%24\$AU:BB7.+'D2#(>;AMI M6Z?XCOK5V1<)N_6Y=R3MP$R6S)3C.6PH;0_MFI->:EW*[*9U5>[5+M;LY:X, M?CC9#F&W"@(4@_L&2>#21E/*.0@D$671S+4$2X5M3-F26(\QE$]91"VFG"HH M(<.=Z6U945!)41_+WB^E)C5E7=(-K0B4W;XW#-S%)+:.!67%$!9V3MI2DE0W M`Y\^:VFG.\MG9?SWMMLY]AM%"1N2W@DIP:B60XAZ0XXVRAE"U%26D M$E*`3R#))P/E)-;O2L*3<'KA%B/EEYR&H)/_`%>4GR2?,#R9K:1=%ZAS_P!&XE6[&*PH>H];NVN2N1(?:>`CES,-?[!PN*#C85Q? M"!L@#.R[LX!SA6:N,:FUHJ2PMM-P><<@%2(CL$((<$=2@IP<&`05@;TK&\A. MP*V-GN.IKG?(41F[W15K+P4Y,D6U#+B\,[2VB"@`)V\;\`[RG)QD2=7S;W;+ M+<+KW10J$O`1&C(5O(V"HN85N\PQR^;-<5X$:B^,F>O<[*WFA+'<[5JB"Y-D M$MJN\9L(!)#J@X/+R=^/,/3OKZK\U1[J%N\)UXZJVN2HHDL6Z.N4RR%[*.'D M%S&TDISC&_&[(-K(LE,L2)ZI;D5N.XX8N$I;1+=2MW"6E`*V`V3Y)W+ M)"2`,>35ZMU)8)L6?+G(C][FCL,Q`GC)5)<02K;:"L\&E)(`3Z<`'%5IU%JZ M+.G1(:9O%&6I#:$J@C,<-O(2DH0EH)R&MM24A2]K`.!R5=D:BU>BZLMV^5/D M0`M/%7I5O+:IF7L+"@EH[@G`!_9;CM;\5+U0EW?[=+N:K,Q#60XF/*64#_Z@ M"F?)_P#]_P!*B-O16H5M(4+BTD*2"$E]P$;N3DJ@:5OD*3(>?F80U#<6MY"R MH%.RK]GO]/\`V&^OL*W^]D7YE'Y143:?LEV8..R9 M-62H&II,5AM+R61$BM1U*#:7'Y*U84I>"0E*4>8')4=V<5@K[I$M"WQWG8*8 M3:US3QWW)1(4PH-^1Y?N2H9V?1N-8=LUW>4S3'EL-2);ZVV&&@\$,[2Y4AO: M*N#VAA+/RYPG`!)K)/=(DJN#$!5L:;6ZX(SCC$KAPR\IM:_=)1L'&QR%04,FX66'+D7. M"F7',F4U%6V^.%4IL@I0I`3N3A6-H9.[DWBMQ:]<7&ZW6+;FK(E#JG7TR5NO M+;2VVUP65I"FPHDAT>2H)W@^;?7<4K&N/O9*^97^4U`>F_W2S?T1_P`$U.\J MT6^=.B39,1IR5#65QWBGRVR00<'EP03NY*SL4K!MUGM]I,@P(C3"I+RGWU(3 MO<<4ZG\#T?3XG^9-0UJ_X)W#^A/YA4-^>E*9 MIFF:5D0/?"-\ZC\14\*]T?YFO*BWNB?"1'T='XFN2I3-*4S2NP[G/P@?^BJ_ M,FI/JU)_='_FE_E-39I+X&6/ZOC_`.--;FE,4Q3%*5#.N/\`U"G_`$*+^+M: M6JXGO[8_K6+_`)!4^^:E*4Q3%*B[NI?"&P_1I?YF:Y"L.[^\EP^C._D-?0=N M][(OS*/RBLFF*4I7'=U#X"2?I,7_`-PW437']S/SK7^5%?1/\)J!KC\)]0?6 M;OX(J3K/[R0/HS?Y161I'W5^^N)'X)JJYVNP2M0%-P?BJD3HHCK@/+1B2E*R MI"M@[R4G;P1Z3Z!C5BS:$XTS>"[9E183:(K(*VN!CJ"U.#!Y`HE6?]`:R9T+ M1<:WW*0N%:WD/CA)#;?!E3ZL%Y(WD`J.]8WCES\M8DYG0-H9=N)M]K,BW-(< M4S'0V7VDC"1Y(.XC:`SZ#7036-/,B%;YHM[>6U1XK#RDI)0I(04(2>4$8&!6 MDE>`=N,R;Q>T.*><3$FN-!M13PJM@AW?N!(WY_Z?DJXRG1;$:3"81;XL-,/: M5)2I"&BU)*DG#F<$J+6_^0KJ(2([4".W$4E4=+24M%*MH%``Q@^?=C?5^L:X M^]DKYE?Y34!Z;_=+-_1'_!-?0M*4KF[7\/=0_187_-6M[J?P/1]/B?YDU#NJ M679&F)S3+:W'%(&RA"22?*'(!44=XKO\5S.H5V4[Q7?XKF=0KLIWBN_Q7,ZA M793O%=_BN9U"NRG>*[_%/DJ:5>Z/\`.O*C?7=LGS-0) M*[_%MIQ"T\2BC*5`CE=K455&4E%ZLBEJ"4BZ1223@#]H*G3OC"Q^^1^M3VU[ MWQA<\C]:GMIWQA<\C]:GMIWQA<\C]:GMIWQA<\C]:GMIWQA<\C]:GMIWQA<\ MC]:GMJ,^Z;(9D:AL7`O-N8C2L["@<>4SZ*Y2L.[^\EP^C._D-3U;[A"%MB@R MV`>!1_\`53_TCY:R>^,+GD?K4]M.^,+GD?K4]M.^,+GD?K4]M.^,+GD?K4]M M.^,+GD?K4]M=2(X;2XVLMDM2.&W MIY$@Y(V4@`6NNTG:I]@M[-G>#"H42*TEIUO:RIPE9<&"20D>3C._EKH:QKC[V2OF5_E-0 M'IO]TLW]$?\`!-?0M*4KF[7\/=0_187_`#5K>ZG\#T?3XG^9-1K2E*M293,1 MH.2'0V@J2@%1\Y.`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`$@G=FO)&L]0MI9N M34Q:G%07&@TXP."44RPVMX%)*#LH(.T/)(&<`9%4WG5]_G::6U*N#,1MR._P M+S4FF;C=I*77I2E+2A+`;#2W; M&E?LXWE.8\[A[!^)KK]*WCOS8VG5JS(:_9/?S'(?]1O_`+UNZ4I2E*50ZZAA ME;KJ@EM"2I2CY@-Y-1(G4[PU=WY.=@KV2C_]+DV?[?\`>I<;<0ZTAQM04A:0 MI*AYP>0U52E*4I2E*4I2E*4I2E*4I2E*4I2E8MQ_3*464I5(?;CJ6 MU'"@2GA%#W.0DGY!RXS6N1W1K.X66T1;H9+Y3P,7B:@ZZE2%+2M*?^DA"M_F MP0$N2N+J2T52C'4&6^%1MH"E>8D?)N.XXW598[IMAE,(7'1.> M=<>;:;8;CE3J^$2I:%!(/(4H5_+&\"MMIZ2Q=5R;@[&0UV'79`"G9K"D()5DG>0 M-]=99=(R+&MQR'8M1GA4@+2N$M0..0\G+VUN.*77H_?/L]SLIQ2Z]'[Y]GN= ME.*77H_?/L]SLIQ2Z]'[Y]GN=E.*77H_?/L]SLIQ2Z]'[Y]GN=E.*77H_?/L M]SLIQ2Z]'[Y]GN=E8EQLMPN<%R&]8M0):N M][/$^'X#BZN'SG&ULXSL_+BN\M]FN%M@M0V;#J!330PDN0%D@9Y,XK*XI=>C M]\^SW.RG%+KT?OGV>YV4XI=>C]\^SW.RG%+KT?OGV>YV4XI=>C]\^SW.RG%+ MKT?OGV>YV4XI=>C]\^SW.RG%+KT?OGV>YV4XI=>C]\^SW.RG%+KT?OGV>YV4 MXI=>C]\^SW.RG%+KT?OGV>YV4XI=>C]\^SW.RG%+KT?OGV>YV4XI=>C]\^SW M.RG%+KT?OGV>YV4XI=>C]\^SW.RG%+KT?OGV>YV4XI=>C]\^SW.RG%+KT?OG MV>YV4XI=>C]\^SW.RG%+KT?OGV>YV4XI=>C]\^SW.RG%+KT?OGV>YV4XI=>C M]\^SW.RG%+KT?OGV>YV4XI=>C]\^SW.RG%+KT?OGV>YV4XI=>C]\^SW.RG%+ MKT?OGV>YV4XI=>C]\^SW.RG%+KT?OGV>YV4XI=>C]\^SW.RK4BVWB4TEENP7 MH*4ZU@K@K2!AQ)))\PP#7T#YC4#7'X3Z@^LW?P14G6?WD@?1F_RBLC2/NK]] M<2/P35RX:/M]RN;TQUZ8A$E*$RHS3VRU)V00G;&,GZEK"]7O23<6?%MS;(EMK"HZG"K("L M>Z&,;Z[5/='U.$@<0LW(/XWNRO?&1J?F%EZQ[LIXR-3\PLO6/=E/&1J?F%EZ MQ[LIXR-3\PLO6/=E/&1J?F%EZQ[LIXR-3\PLO6/=E/&1J?F%EZQ[LIXR-3\P MLO6/=E/&1J?F%EZQ[LKC/#&]^-_OMQ6W<<[T\#L;3G![&UG.<9S_`-J[/QD: MGYA9>L>[*>,C4_,++UCW93QD:GYA9>L>[*>,C4_,++UCW93QD:GYA9>L>[*> M,C4_,++UCW93QD:GYA9>L>[*>,C4_,++UCW93QD:GYA9>L>[*>,C4_,++UCW M93QD:GYA9>L>[*>,C4_,++UCW93QD:GYA9>L>[*>,C4_,++UCW93QD:GYA9> ML>[*>,C4_,++UCW93QD:GYA9>L>[*>,C4_,++UCW93QD:GYA9>L>[*>,C4_, M++UCW93QD:GYA9>L>[*>,C4_,++UCW93QD:GYA9>L>[*>,C4_,++UCW93QD: MGYA9>L>[*>,C4_,++UCW93QD:GYA9>L>[*>,C4_,++UCW93QD:GYA9>L>[*> M,C4_,++UCW93QD:GYA9>L>[*>,C4_,++UCW93QD:GYA9>L>[*>,C4_,++UCW M93QD:GYA9?\`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`G&2`,5KM(^ZOWUQ(_!-=)2E*4I2E8UQ][ M)7S*_P`IJ`]-_NEF_HC_`()KZ%I2E*4I2E15_P#$#_Z=L?6+/X+J4V__`"T_ MR%54I2E*4I47?_F2_P#Z_P#\E2C2E*4I2E*4I2E*4I2E*4I2E*4I2E*4I2N; MTC[J_?7$C\$UTE*4I2E*5C7'WLE?,K_*:@/3?[I9OZ(_X)KZ%I2E*4I2E1_W M8=-W;5&C&H%FB\9DIFM.E&VE'D@*RD?=7[ZXD?@FNDI2E*4I2L:X^]DKYE?Y34!Z;_=+-_1'_``37T+2E M*4I2E*4I2E*4I2E*4I2E*4I2E*4I2E*4I2E*4I2E*4I2E*4KCK;(NUDF7=HZ M;N,M#]Q=D-/,.1]A2%!./=.`^8\HK`5W5H:5%)T_><@X.YCVM/&O"Z/WG^S' MM:>->%T?O/\`9CVM/&O"Z/WG^S'M:>->%T?O/]F/:T\:\+H_>?[,>UIXUX71 M^\_V8]K3QKPNC]Y_LQ[6GC7A='[S_9CVM697=2B/Q'F4V"\A2VU)!(8Y2"/_ M`+M<'86EQV[4RX,.-AA"AZ"-D&OH*E*4I6G@72XR=07.!)LSL:'%#9CS5.`I MD[0R<#S8_P!:W%REI"PO`]R0H'=_+?6DEZQN5@ M?EP'F$3Q$DLQ1+>>X-Q]QU'"8#;;9&$I]'HSZ36,UW3Y+UN1<$65GBJVD%.W M."5<*J*9`2RH<6F4J&P52MD+<2\VT2?(R$Y;"W(JUA1:4?X21RUG5P=PO5\;UA=$M+EJM=M:: M=6AD1PWC@U+4%E8X3?@#R>3-8+O=2DQ'&FY=HCI4IA+JTM3%*V"J.M]*Z// M+4A2+&R3&3^V!FX)47RRD(&SOSC.#A7F`)KK].WA-_L$.Z)0E`D(VBA*BH)( M)!&2`=Q!Y0*VE*4I2E*4I2E*4I2E*4I2E*4I2E*4I4<.=S>:MQ:A<(_E*)_\ MM7G-4^+6;\8Q^K53Q:S?C&/U:J>+6;\8Q^K53Q:S?C&/U:J>+6;\8Q^K53Q: MS?C&/U:J>+6;\8Q^K53Q:S?C&/U:J>+6;\8Q^K55R/W.9K,EITW".0A:5$!M M6_!!J1:4I2E*5J[]=[?9K:7[BE:V%JX/80R72HX)QL@'S`G?NW5H'-9Z-N2' MT2-AZ/L\.MU^$HM+*6DNCRBG!6$*2H#EK&D:PM;.FYMQ39D(CQKBBWEJ4C@! ME6PC;6"C*``X01@[@?,:MVS7.F(]M0I^'%A,I?6RQQ-OAF5MME*BZA24#]FE M2P-K`PK/HK.D:MTFA#@8'S&K,75>D., MS)B&(J2&D.(D-1LJ?:"65)P=D'(+K8"=Y&[_`$NP]:Z1;D/NP4D/R7DA98@K MVY!4%D.>2G*TX0ORN3R36^L.H;?J2"9EM6XM@*V0I;2D;6X$$9&\$$'(K:TK M&N$^-:[=)GS70U%C-J==603LI`R3@;ZHM5TAWJUQ[E;W@]$D(#C3@21M)/R' M>*S*YBY:I@P-71;"J*A3DUL<*^5)"4J4%!I"ARG;V%@>C`]-<]=-61;67+C= M-+P1P%P;M+CS;J7%IRD*)&6P=A*59QGT[A6T.J[:]"U8\FU(<9L*5[60G$G9 M:.UC=N&$E&=_)Z-U8E_U19=.-,6]W3[3L%UB.%M,M(*4M.J M`@D@$9'+7M#H0G=R8K$DZ'TY.D!]+CK9?=<=0&9&$G;V2X$#?@**0H[/GR M01DUCNZ0TVIQB'QJ9@N+GM,6_3+4A$`.DR%A;JW5[140D)'H&<#>>4\I)-;JE4N(0XV MI#B4J0H$*2H9!'GS7C3;;32&VD)0VD82E`P`/0`*KKAKI$T4[<-0NSW$BX0@ MS.FR%)/#1DI2%-EM>,@81G"<[R<\M>SCHN8F;NTI`4H["G&^#1M` M#^)/(CEWC=O%;#3M@T[W@?:M:5NP);`B.I6I0*DMA392H$`A7N@K._.:]BZ$ MM49]F0X].DR&7&5MNR9!6H!H+"$Y_P"D<(LX\Y.35@=S?3[;`9CMR([:>%V$ MM.X"0XXAQ2<$$%.6T^201C=BNBM5LC6:UQK=#"A'CH"$!2BHX'RUF4I2E*4I M2E*4I2E*4I2E*4I2E*4I2E*4I2E*4I2E*4I6H@::MUMO]SO<=#@FW+8$A2G" M4G8&!@<@K;UJ]1VM=ZT[/MK;B6ER62V%J&0DGSURFH.Y\[=KI<[@TY"+LR5& M=!>9RH-MM[)1M8.,JPK<#R>G>-K`WI!.>2K5I[ ME$F%&<;=G,`F.IM'!A9"7`AL(=&>0[384?Y`9/+5$ON339$E+_?5I3SC`X=Y M04%<,4N\(4@?PK6Z3O.X9&#YMU:.Y^;-K*/=H1@QX33(;4RTSY2L-!&!GW.\ M;64D9Y""?*KO*4K%N5OCW:V2K?*"C'DM*9<"5%)*5#!P1O%6[/:8MCL\6UP@ ML1HK8;;"UE1P/236=4=7[N>*O&I;I<>^3+;40,G>=YWUO`M*B0%`D'!P>0U5FE*4I2E*4I2E*4I2E M*4I2E*4I2E*4I2E*4I2E*4I2E*4K3V^-?&[_`'1Z=/CO6IS@^(QT-;*VL#R] MI6-^3REQ&E MRFS(=1$2"V-AXK0DJ1C8REH9`5RC"CG=*5*4I2E*4J,M6:;U!.U55 MG(<#GFQ\N^L9J!?;(L1ULWEI$JY%H<6=;X=]($QSR5D^YWM*WD>?Y:NMVSNA MQKFAQ'"-AY]MYXL[!0M[#`<4ORAY.RE8Y"-QP,[)KV=&[H?`/I97=`A3RU,$ M+;4XEC97P2584G]H%X*CDC&QRX571LXY0IG`SC&[T[K\3NJ3)T=*HVGT<.4*>*7910D-ACALYX/)./)QC&\$' M%9CW=081&86B&UPKZGD(:7(\H%"VT)R$I)RKA1N`/)@9S6)"[I5PG7&&&X$1 M#4YI+;+3TDHV7@\\VHJ5L;DX9.!C.2!RG*)=2R"J;Y17P/ M"J(2E!)2!NVAG=Y6`,U(T.2F9"8DHQLO-I<&R@"LT`)2`D``;@!7M*4I2E*4I2E*4I2E*4I2E*4I2E*4I2E* '4I2E*5__V3\_ ` end -----END PRIVACY-ENHANCED MESSAGE-----