Prepared by R.R. Donnelley Financial -- Definitive Proxy Statement

DEF 14A 1 ddef14a.htm DEFINITIVE PROXY STATEMENT Prepared by R.R. Donnelley Financial -- Definitive Proxy Statement

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934

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Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12

EXAR CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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EXAR CORPORATION

48720 KATO ROAD

FREMONT, CALIFORNIA 94538

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON SEPTEMBER 5, 2002

TO THE STOCKHOLDERS OF EXAR CORPORATION:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of EXAR CORPORATION, a Delaware corporation (the “Company”), will be held on Thursday, September 5, 2002 at 3:00 p.m. pacific standard time at the Company’s Corporate Headquarters, 48720 Kato Road, Fremont, California 94538, for the following purposes:

To elect two (2) Directors to hold office until the 2005 Annual Meeting of Stockholders and until their successors are elected.

To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice.

The Board of Directors has fixed the close of business on July 29, 2002 as the record date for the determination of stockholders entitled to notice of and to vote at this Annual Meeting and at any adjournment or postponement thereof.

By Order of the Board of Directors

THOMAS R. MELENDREZ

Secretary

Fremont, California

August 2, 2002

ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.

EXAR CORPORATION

48720 KATO ROAD

FREMONT, CALIFORNIA 94538

PROXY STATEMENT

FOR ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD SEPTEMBER 5, 2002

INFORMATION CONCERNING SOLICITATION AND VOTING

General

The enclosed proxy is solicited on behalf of the Board of Directors of Exar Corporation, a Delaware corporation (the “Company”), for use at the Annual Meeting of Stockholders to be held on September 5, 2002, at 3:00 p.m. local time (the “Annual Meeting”), or at any adjournment or postponement thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting. The Annual Meeting will be held at the Company’s Corporate Headquarters, 48720 Kato Road, Fremont, California 94538. The Company intends to mail this proxy statement and accompanying proxy card on or about August 2, 2002 to all stockholders entitled to vote at the Annual Meeting.

Solicitation

The Company will bear the entire cost of solicitation of proxies, including preparation, assembly, printing and mailing of this proxy statement, the proxy and any additional information furnished to stockholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of Common Stock beneficially owned by others to forward to such beneficial owners. The Company may reimburse persons representing beneficial owners of Common Stock for their costs of forwarding solicitation materials to such beneficial owners. Original solicitation of proxies by mail may be supplemented by telephone, telegram or personal solicitation by Directors, officers or other regular employees of the Company or Georgeson Shareholder Communications, Inc. No additional compensation will be paid to Directors, officers or other regular employees for such services, but Georgeson Shareholder Communications, Inc. will be paid its customary fee, approximately $4,500, plus documented expenses, for solicitation services.

Voting Rights and Outstanding Shares

Only holders of record of Common Stock at the close of business on July 29, 2002 will be entitled to notice of and to vote at the Annual Meeting. At the close of business on July 29, 2002, the Company had outstanding and entitled to vote shares of Common Stock.

Each holder of record of Common Stock on such date will be entitled to one vote for each share held on all matters to be voted upon at the Annual Meeting.

All votes will be tabulated by the inspector of election appointed for the meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes. Abstentions will be counted towards the tabulation of votes cast on proposals presented to the stockholders and will have the same effect as negative votes. Broker non-votes are counted towards a quorum but are not counted for any purpose in determining whether a matter has been approved.

Unless otherwise indicated, all information in this proxy statement reflects a two-for-one stock split effected on October 19, 2000 and a three-for-two stock split effected on February 15, 2000.

Revocability of Proxies

Any person giving a proxy pursuant to this solicitation has the power to revoke it at any time before it is voted. It may be revoked by filing with the Secretary of the Company at the Company’s Corporate Headquarters, 48720 Kato Road, Fremont, California 94538, a written notice of revocation or a duly executed proxy bearing a later date, or it may be revoked by attending the meeting and voting in person. Attendance at the meeting will not, by itself, revoke a proxy.

Stockholder Proposals

Proposals of stockholders that are intended to be presented at the Company’s 2003 Annual Meeting of Stockholders must be received by the Company not later than April 4, 2003 in order to be included in the proxy statement and proxy relating to that Annual Meeting. In addition, any stockholder that desires to make a proposal to be presented at the Company’s Annual Meeting of Stockholders must comply with the provisions relating to advance notice contained in the Company’s By-Laws.

PROPOSAL 1

ELECTION OF DIRECTORS

The Company’s Amended and Restated Certificate of Incorporation and By-Laws provide that the Board of Directors shall be divided into three classes, each class consisting, as nearly as possible, of one-third of the total number of Directors, with each class having a three-year term. Vacancies on the Board of Directors may be filled by either (i) the affirmative vote of the holders of a majority of the voting power of the then-outstanding shares of voting stock of the Company voting together as a single class, or (ii) by a majority of the remaining Directors. A Director elected to fill a vacancy shall serve for the remainder of the full term of the class of Directors in which the vacancy occurred and until such Director’s successor is elected and qualified.

The Board of Directors is presently composed of six members. There are two Directors, Raimon L. Conlisk and Richard Previte, in the class whose terms of office expire in 2002. Mr. Conlisk, a nominee for election to this class, is currently Vice Chairman of the Board and a Director of the Company. Mr. Conlisk was previously elected by the stockholders. Mr. Conlisk is Chairman of the Employee Option Administration and Nominating Committees and a member of the Audit and Compensation Committees. Richard Previte is currently a Director of the Company and is Chairman of the Audit Committee and a member of the Compensation Committee. If elected at the Annual Meeting, Messrs. Conlisk and Previte would serve until the 2005 Annual Meeting and until their successors are elected and have qualified or until such Director’s earlier death, resignation or removal.

Directors are elected by a plurality of the votes present in person or represented by proxy and entitled to vote at the meeting. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the nominees named below. In the event that either of the nominees should be unavailable for election as a result of an unexpected occurrence, such shares will be voted for the election of such substitute nominee as management may propose. The persons nominated for election have agreed to serve if elected, and management has no reason to believe that the nominees will be unable to serve.

Set forth below is biographical information for the persons nominated and for each person whose term of office as a Director will continue after the Annual Meeting. There is no family relationship between any Directors or Executive Officers of the Company.

Nominees for Election for a Three-Year Term Expiring at the 2005 Annual Meeting

RAIMON L. CONLISK

Mr. Conlisk, age 80, joined the Company as a Director in August 1985, was appointed Vice Chairman of the Board in August 1990, served as Chairman of the Board from August 1994 to March 2002 and is currently serving as Vice Chairman. Mr. Conlisk has also served as a Director since 1991, and in December 1997 was appointed Chairman of the Board 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 abroad. 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.

RICHARD PREVITE

Mr. Previte, age 67, joined the Company as a Director in October 1999. He was a Director of Advanced Micro Devices, Inc., or AMD, from 1990 to April 2000, and Vice Chairman of the Board from 1999 to April 2000. Additionally, Mr. Previte served as Chairman of the Board of Vantis Corporation, a subsidiary of AMD, from 1997 to June 1999, and acted as Chief Executive Officer of Vantis Corporation 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. Most recently he was Chief Executive Officer and Chairman of the Board of MarketFusion, Inc., from January 2000 to April 2002.

Directors Continuing in Office Until the 2003 Annual Meeting

JAMES E. DYKES

Mr. Dykes, age 64, joined the Company 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 semiconductors and 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 to July 1998, Mr. Dykes served as Executive Vice President, Corporate Development, of the Thomas Group, Inc., a management services company. Mr. Dykes also is a Director of the Thomas Group, Inc. and Cree Research, Inc., a silicon carbide materials and electronics company.

FRANK P. CARRUBBA

Dr. Carrubba, age 64, joined the Company as a Director in August 1998. Dr. Carrubba served as Executive Vice President and Chief Technical Officer of Royal Philips Electronics N.V., headquartered in Eindhoven, The Netherlands, from 1991 to 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 Hewlett-Packard 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 designers of the RISC Architecture, for which he was named “Inventor of the Year” by the Intellectual Property Owners in Washington, D.C. in 1992. Dr. Carrubba is also a Director of Coherent, Inc., a global leader in the design, manufacture and sale of lasers, and Gyration, Inc., creators of in-air cordless mice and controllers for games, presentations and virtual reality. In June 2002, Dr. Carrubba was appointed Chairman of the Board of Accerra Corporation, a provider of secure online services for business communications located in Santa Rosa, California.

Directors Continuing in Office Until the 2004 Annual Meeting

DONALD L. CIFFONE, JR.

Mr. Ciffone, age 47, joined the Company as President and Chief Executive Officer in October 1996 and was appointed a Director at that time. Mr. Ciffone was appointed Chairman of the Board in April 2002. 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 a B.A. from San Jose State University and an M.B.A. from Santa Clara University.

RONALD W. GUIRE

Mr. Guire, age 53, joined the Company 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 served on the Board of Directors of Xetel Corporation an electronics contract manufacturer, since 1986, and served as Chairman of the Board until May 2002. 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.

THE BOARD OF DIRECTORS RECOMMENDS

A VOTE IN FAVOR OF EACH NAMED NOMINEE.

Board Committees and Meetings

During the fiscal year ended March 31, 2002, the Board of Directors held six meetings. The Board maintains an Audit Committee, a Compensation Committee, an Employee Option Administration Committee and a Nominating Committee. In addition, the Employee Option Administration Committee has delegated certain responsibilities to the Employee Option Administration Subcommittee.

The Audit Committee reviews the results of the Company’s annual audit, recommends to the Board the independent auditors to be retained by the Company, and receives and considers the accountants’ comments as to the Company’s system of internal controls, adequacy of staff and management performance and procedures in connection with the Company’s audit function and financial reporting process. The Audit Committee, which during the fiscal year ended March 31, 2002 was composed of Messrs. Carrubba, Conlisk, Dykes and Previte, held eight meetings during such fiscal year. Mr. Previte serves as Chairman of the Audit Committee.

The Compensation Committee evaluates the performance of the Company’s President and CEO, reviews the performance of other members of management, and reviews and approves or recommends to the Board compensation levels, policies and programs. The Compensation Committee, which during the fiscal year ended March 31, 2002 was composed of Messrs. Carrubba, Conlisk, Dykes and Previte, held five meetings during such fiscal year. Mr. Dykes serves as Chairman of the Compensation Committee.

The Employee Option Administration Committee administers the Company’s employee stock option plans, including the granting of any options under those plans. The Employee Option Administration Committee, which during the fiscal year ended March 31, 2002 was composed of Messrs. Conlisk and Dykes, held six meetings during such fiscal year. Mr. Conlisk serves as Chairman of the Employee Option Administration Committee. The Employee Option Administration Subcommittee, comprised of Messrs. Ciffone, as Chairman, and Guire, held twelve meetings during such fiscal year. The Employee Option Administration Subcommittee grants options within guidelines approved by the Employee Option Administration Committee to new hire employees, other than Company Section 16 insiders, as of the hire date in order to avoid option price fluctuations that might result if option grants are authorized subsequent to the hire date.

In the absence of Board of Directors action, the Nominating Committee interviews, evaluates, nominates and recommends individuals for membership on the Company’s Board of Directors and committees thereof. The Nominating Committee will consider nominees recommended by stockholders. Such recommendations should be submitted to the attention of the Chairman of the Nominating Committee. The Nominating Committee, which, during the fiscal year ended March 31, 2002, was composed of Messrs. Conlisk and Dykes, held no meetings during such fiscal year. Mr. Conlisk serves as Chairman of the Nominating Committee.

During the fiscal year ended March 31, 2002, each Board member attended at least 75% or more of the aggregate of the meetings of the Board and of the committees on which he served that were held during the period for which he was a Director or committee member, respectively.

SECURITY OWNERSHIP OF

CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of the Company’s Common Stock as of May 31, 2002:

•

each stockholder who is known by us to own beneficially more than 5% of our Common Stock;

•

each of our President and Chief Executive Officer and our other four most highly compensated Executive Officers as of March 31, 2002;

•

each of our Directors; and

•

all of our Non-Employee Directors and Executive Officers as a group.

Unless otherwise indicated, to our knowledge, all persons listed below have sole voting and investment power with respect to their shares of our Common Stock, except to the extent authority is shared by spouses under applicable law. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (the “SEC”). Applicable percentage ownership is based on 39,368,239 shares of Common Stock outstanding as of May 31, 2002. In computing the number and percentage of shares beneficially owned by a person, shares of Common Stock subject to options currently exercisable, or exercisable within sixty (60) days of May 31, 2002, are counted as outstanding, while these shares are not counted as outstanding for computing the percentage ownership of any other person.

	Beneficial Ownership⁽¹⁾
Beneficial Owner	Number of Shares	Percent of Total
Capital Group International, Inc.⁽²⁾	3,579,610	9.09	%
11100 Santa Monica Boulevard, Suite 1500
Los Angeles, CA 90025-3384
Capital Research & Management Company⁽³⁾	2,910,000	7.39	%
333 South Hope Street
Los Angeles, CA 90071
Putnam Investment Management, LLC⁽⁴⁾	2,362,232	6.00	%
One Post Office Square
Boston, MA 02109
The TCW Group, Inc.⁽⁵⁾	2,020,663	5.13	%
865 South Figueroa Street
Los Angeles, CA 90017
Donald L. Ciffone, Jr.⁽⁶⁾	791,484	2.01	%
Roubik Gregorian⁽⁶⁾	333,973	*
Ronald W. Guire⁽⁶⁾	329,377	*
Thomas R. Melendrez⁽⁶⁾	259,302
Raimon L. Conlisk⁽⁶⁾	212,728	*
Stephen W. Michael⁽⁶⁾	208,947	*
James E. Dykes⁽⁶⁾	124,160	*
Frank P. Carrubba⁽⁶⁾	115,130	*
Richard Previte⁽⁶⁾	78,148	*
All Executive Officers and Non-Employee Directors as a group (11 persons)⁽⁶⁾	2,746,815	6.98	%

Represents beneficial ownership of less than one percent of the Common Stock.

(1)

This table is based upon information supplied by Executive Officers, Directors, and principal stockholders and Schedules 13G and 13G(A) filed with the SEC.

(2)

Based on a Schedule 13G(A) filed with the SEC on February 11, 2002. Includes 3,495,100 shares owned by Capital Guardian Trust Company, a subsidiary of Capital Group International, Inc. The Capital Guardian Trust Company shares voting power with this subsidiary with respect to 2,642,300 shares.

(3)

Based on a Schedule 13G(A) filed with the SEC on February 11, 2002. Includes 2,525,000 shares owned by SmallCap World Fund, Inc., a mutual fund managed by the Capital Research & Management Company.

(4)

Based on a Schedule 13G filed with the SEC on February 13, 2002. Putnam Investments, LLC is the wholly owned subsidiary of Marsh & McLennan Companies, Inc. Putnam Investments, LLC owns Putnam Investment Management, LLC which beneficially owns 1,791,312 of the shares owned by Putnam Investments, LLC. Putnam Investments, LLC also owns Putnam Advisory Company, LLC which beneficially owns 570,920 of the shares reported as the aggregate amount beneficially owned by Putnam Investments, LLC. The Putnam Advisory Company, LLC shares voting power with respect to 348,020 shares.

(5)

Based on a Schedule 13G filed with the SEC on February 13, 2002. Includes 2,020,663 shares of shared voting power and shared dispositive power with its wholly owned subsidiaries (i) Trust Company of the West; (ii) TCW Asset Management Company; (iii) TCW Investment Management Company; and (iv) TCW Capital Investment Corporation.

(6)

Includes shares which certain Executive Officers and Directors have the right to acquire within 60 days after May 31, 2002, pursuant to outstanding options as follows: Donald L. Ciffone, Jr., 787,081 shares; Roubik Gregorian, 331,000 shares; Ronald W. Guire, 310,417 shares; Thomas R. Melendrez, 174,484 shares; Raimon L. Conlisk 209,328 shares; Stephen W. Michael, 184,500 shares; James E. Dykes, 111,660 shares; Frank P. Carrubba, 115,130 shares; Richard Previte, 78,148 shares; and all Non-Employee Directors and Executive Officers as a group, 2,586,275 shares.

Compliance with the Reporting Requirements of Section 16(a)

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires the Company’s Directors and Executive Officers, and persons who own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, Directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.

To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required during the fiscal year ended March 31, 2002, all its Executive Officers, Non-Employee Directors and greater than ten percent beneficial owners complied with applicable Section 16(a) filing requirements.

EXECUTIVE COMPENSATION

Compensation of Directors

Fees. In fiscal 2002, the Company paid fees to each of its Non-Employee Directors for their services as Directors. The Company paid to Frank P. Carrubba fees totaling $28,000, of which 50%, or $14,000, was deferred under the 1996 Directors’ Plan, for his services as a Director. The Company paid Raimon L. Conlisk fees totaling $56,000, of which 50%, or $28,000, was deferred under the 1996 Directors’ Plan (as defined below), for his services as a Director, including service as Chairman of the Board of Directors. The Company paid to

James E. Dykes fees totaling $28,000 for his services as a Director. The Company paid to Richard Previte fees totaling $28,000 for his services as a Director. In addition, the Company reimburses all Directors for certain expenses incurred in connection with their services as Directors in accordance with Company policy.

Nonqualified Stock Options. Non-Employee Directors received periodic non-discretionary grants of nonqualified stock options to purchase shares of Common Stock of the Company under the 1996 Non-Employee Directors’ Stock Option Plan, as amended (the “1996 Directors’ Plan”). The 1996 Directors’ Plan provides that upon initial election to the Board, each Non-Employee Director is granted an option to purchase 54,000 shares of Common Stock, and is automatically granted an option to purchase 22,500 additional shares on each anniversary date thereafter. On April 13, 2000, the Board amended the 1996 Directors’ Plan to provide that the Annual Grant to the Chairman of the Board be increased to twice the Annual Grant issued to each other Non-Employee Director. In addition, the 1996 Directors’ Plan provides that Non-Employee Directors may defer the payment of fees for their services as Directors and apply such deferrals to options to purchase shares of the Company’s Common Stock with exercise prices equal to 33-1/3% of the fair market value of the stock on the date the options are granted. For calendar year 2002, Mr. Conlisk elected to have 50% of his annual Director’s fee deferred, and Dr. Carrubba elected to have 50% of his annual Director’s fee deferred. Options granted under the 1996 Directors’ Plan are granted at fair market value. Initial option grants vest annually over a period of three (3) years. Annual options granted prior to September 11, 1998 vest in four (4) equal annual installments with the first installment becoming exercisable on the first anniversary of the date of the option grant. Annual options granted on or after September 11, 1998 vest monthly over a period of twelve (12) months from the date of grant. The maximum term of options granted under the 1996 Directors’ Plan is seven (7) years. Prior to the adoption of the 1996 Directors’ Plan, Non-Employee Directors received options under the 1991 Non-Employee Directors’ Stock Option Plan (the “1991 Directors’ Plan”) which was terminated as to future grants on May 31, 1996. At March 31, 2002, options to purchase 45,000 shares of Common Stock were outstanding under the 1991 Directors’ Plan and options to purchase 546,385 shares of Common Stock were outstanding under the 1996 Directors’ Plan.

During fiscal 2002, options to purchase 114,478 shares of Common Stock were granted under the 1996 Directors’ Plan to the Company’s Non-Employee Directors at an average exercise price of $20.06 per share. The exercise price of such options was equal to the fair market value of the Company’s Common Stock on the date of grant. During fiscal 2002, Non-Employee Directors exercised options to purchase 11,250 shares under the 1996 Directors’ Plan for a net value realized of $278,182. During the same period, Non-Employee Directors exercised options to purchase 28,126 shares under the 1991 Directors’ Plan for a net value realized of $378,887.

Compensation of Executive Officers

SUMMARY COMPENSATION TABLE

The following table shows for the fiscal years ended March 31, 2002, 2001 and 2000 compensation awarded or paid to, or earned by, the Company’s Chairman, President and CEO, and its other four most highly compensated Executive Officers at March 31, 2002 (the “Named Executive Officers”):

		Annual Compensation⁽¹⁾		Long-Term Compensation Awards
Name and Principal Position	Year	Salary ($)⁽²⁾	Bonus ($)⁽³⁾	Securities Underlying Options (#)⁽⁴⁾	All Other Compensation ($)⁽⁵⁾
Donald L. Ciffone, Jr. Chairman, President and CEO	2002 2001 2000	651,540 600,737 510,279	0 825,435 720,000	175,000 1,050,000 150,000	2,125 8,500 4,250

Ronald W. Guire Executive Vice President, Chief Financial Officer and Assistant Secretary	2002 2001 2000	290,828 285,982 278,602	0 304,000 285,000	100,000 280,000 90,600	2,125 8,500 13,975	⁽⁶⁾

Roubik Gregorian CTO and Executive Vice President/ GM, Communications Division	2002 2001 2000	290,828 283,282 267,620	0 308,000 300,000	144,000 220,000 120.000	7,500 15,500 6,750	⁽⁷⁾ ⁽⁸⁾ ⁽⁹⁾

Thomas R. Melendrez Corporate Vice President, General Counsel and Secretary	2002 2001 2000	222,540 219,471 216,181	0 145,216 103,000	56,000 44,000 39,000	6,710 8,500 4,250	⁽¹⁰⁾

Stephen W. Michael Vice President, Operations and Reliability and QA	2002 2001 2000	210,548 201,711 190,884	0 175,000 157,000	56,000 44,000 41,998	2,125 8,500 4,250

(1)

As permitted by rules promulgated by the SEC, no amounts are shown for “perquisites,” as such amounts for each Named Executive Officer do not exceed the lesser of 10% of the sum of such executive’s salary plus bonus or $50,000.

(2)

Includes: (i) amounts earned but deferred at the election of the Named Executive Officer pursuant to the Company’s tax-qualified retirement plan, the Exar Corporation Savings Plan (the “401(k) Plan”); (ii) auto allowances; and (iii) the employee-paid portion of life insurance in excess of $50,000 in coverage benefits.

(3)

The Company did not pay out cash incentives during fiscal year 2002. In lieu of a cash based incentive compensation program for the fiscal year ending March 31, 2003, the Company established the 2003 Executive Stock Based Incentive Compensation Program and issued options under the 2000 Equity Incentive Plan in connection therewith. See “Option Grants in Last Fiscal Year” chart for details.

(4)

Adjusted for the two-for-one stock split effected on October 19, 2000 and the three-for-two stock split effected on February 15, 2000. The Company has not granted any stock appreciation rights or made any restricted stock awards to any Executive Officer.

(5)

Consists of matching contributions made for fiscal 2002, fiscal 2001 and fiscal 2000 by the Company for the benefit of each Named Executive Officer under its 401(k) Plan in the stated amounts.

(6)

Includes $9,725 in the form of a bonus to purchase 200 shares of the Company’s Common Stock (based on the fair market value of the Company’s Common Stock on the date of the award and subsequently adjusted for stock splits) awarded in conformance with the Company’s practice, in recognition of Mr. Guire’s fifteen years of service with the Company.

(7)

Includes $5,375 in cash for patent awards.

(8)

Includes $7,000 in cash for patent awards.

(9)

Includes $2,500 in cash for patent awards.

(10)

Includes $4,585 in the form of a bonus to purchase 200 shares of the Company’s Common Stock (based on the fair market value of the Company’s Common Stock on the date of the award) awarded in conformance with the Company’s practice, in recognition of Mr. Melendrez’ fifteen years of service with the Company.

OPTION GRANTS IN LAST FISCAL YEAR

In fiscal 2002, the Company granted both incentive and nonqualified stock options to its Named Executive Officers under the 2000 Equity Incentive Plan, as amended and restated (the "2000 Plan"). The following tables show for the fiscal year ended March 31, 2002, certain information regarding options granted to, exercised by, and held at year-end by, the Named Executive Officers:

	Number of Securities Underlying Options Granted⁽¹⁾		% of Total Options Granted to Employees In Fiscal Year⁽²⁾	Exercise Price ($/Sh)⁽³⁾	Expiration Date	Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term⁽⁴⁾
	Number of Securities Underlying Options Granted⁽¹⁾			Exercise Price ($/Sh)⁽³⁾	Expiration Date	5%($)	10%($)
Donald L. Ciffone, Jr.	100,000 75,000	⁽⁵⁾	4.83 3.63	17.75 22.93	4/02/08 12/05/08	88,750 85,969	177,500 171,938

	175,000					174,719	349,438

Ronald W. Guire	80,000 20,000	⁽⁵⁾	3.87 0.97	27.15 22.93	4/23/08 12/05/08	108,600 22,925	217,200 45,850

	100,000					131,525	263,050

Roubik Gregorian	120,000 24,000	⁽⁵⁾	5.80 1.16	27.15 22.93	4/23/08 12/05/08	162,900 27,510	325,800 55,020

	144,000					190,410	380,820

Thomas R. Melendrez	44,000 12,000	⁽⁵⁾	2.13 0.58	27.15 22.93	4/23/08 12/05/08	59,730 13,755	119,460 27,510

	56,000					73,485	146,970

Stephen W. Michael	44,000 12,000	⁽⁵⁾	2.13 0.58	27.15 22.93	4/23/08 12/05/08	59,730 13,755	119,460 27,510

	56,000					73,485	146,970

(1)

Options generally vest 25% per year on the anniversary date of the grant. However, the options granted under the 2000 Plan on December 5, 2001 in connection with the 2003 Executive Stock Based Incentive Compensation Program for the fiscal period ending March 31, 2003 vest monthly in equal increments over a twelve-month period commencing April 1, 2002. The options will become fully vested immediately prior to, and the time during which the stock option may be exercised shall be accelerated upon, a change in control of the Company as defined in the 1997 Plan and 2000 Plan. Outstanding options that have not been exercised prior to a change in control event shall terminate on the date of such event unless assumed by the successor corporation.

(2)

Based on options to purchase an aggregate of 2,068,389 shares of the Company's Common Stock granted to employees of the Company in fiscal 2002, including the Named Executive Officers.

(3)

The exercise price of the options was equal to the fair market value of the Company's Common Stock on the date of grant.

(4)

The potential realizable value is based on the term of the option at the time of grant (which is generally seven (7) years). The potential realizable value is calculated by assuming that the stock price on the date of grant appreciates at the indicated rate for the entire term of the option and that the option is exercised and sold on the last day of its term at the appreciated price. These amounts represent certain assumed rates of appreciation, in accordance with rules of the SEC, and do not reflect the Company’s estimate or projection of future stock price performance. Actual gains, if any, are dependent on the actual future performance of the Company’s Common Stock, and no gain to the optionee is possible unless the stock price increases over the option term, which will benefit all stockholders.

(5)

In lieu of a cash based incentive compensation program for fiscal 2003, the Company granted a total of 413,917 stock options to eligible employees under the fiscal year 2003 Executive Stock Based Incentive Compensation Program and fiscal year 2003 Key Employee Stock Based Incentive Compensation Program on December 5, 2001 with an exercise price equal to the fair market value of the Company’s Common Stock on the date of the grant ($22.93), of which 143,000 stock options were granted to the Named Executive Officers. These options vest monthly in equal increments over a twelve-month period commencing on April 1, 2002.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR

AND FISCAL YEAR-END OPTION VALUES

Name	Number of Shares Acquired on Exercise (#)	Value Realized⁽¹⁾ ($)	Number of Securities Underlying Unexercised Options at FY-End (#)		Value of Unexercised In-the-Money Options at FY-End ($)⁽²⁾
Name	Number of Shares Acquired on Exercise (#)	Value Realized⁽¹⁾ ($)	Exercisable	Unexercisable	Exercisable	Unexercisable
Donald L. Ciffone, Jr.	0	0	609,304	981,944	3,264,389	1,384,974
Ronald W. Guire	0	0	253,750	377,496	2,399,263	714,673
Roubik Gregorian	0	0	373,000	473,996	4,401,599	2,101,168
Thomas R. Melendrez	0	0	170,484	118,248	2,081,321	309,687
Stephen W. Michael	0	0	180,500	120,496	2,153,430	333,496

(1)

Represents the fair market value of the Company’s Common Stock on the date of exercise (based on the closing sales price reported on the Nasdaq Stock Market or the actual sales price if the shares were sold by the optionee simultaneously with the exercise) less the exercise price, without taking into account any taxes that may be payable in connection with the transaction.

(2)

Represents the fair market value of the Company’s Common Stock at March 31, 2002 ($20.54) less the exercise price of the options.

EQUITY COMPENSATION PLAN SUMMARY

Plan	Number of securities to be issued upon exercise of outstanding options as of March 31, 2002	Weighted average exercise price of outstanding options		Remaining available for future issuance under equity compensation plans as of March 31, 2002
Equity compensation plans approved by stock holders⁽¹⁾	6,872,672	$	13.52	297,378
Equity compensation plans not approved by stock holders⁽²⁾	3,360,513	$	40.73	2,336,038

Totals	10,233,185			2,633,416

(1)

Includes the 1991 Stock Option Plan (options to purchase 699,326 shares with a weighted average exercise price per share of $5.90), 1991 Non-Employee Directors’ Stock Option Plan (options to purchase 45,000 shares with a weighted average exercise price per share of $7.20), 1996 Non-Employee Directors’ Stock Option Plan (options to purchase 546,385 shares with a weighted average exercise price per share of $23.16), and the 1997 Equity Incentive Plan (options to purchase 5,581,961 shares with a weighted average exercise price per share of $13.59).

(2)

Consists of the 2000 Equity Incentive Plan.

Employment and Change of Control Arrangements

On June 24, 1999, the Board of Directors of the Company adopted the Executive Officers’ Change of Control Severance Benefit Plan (the “Severance Plan”). The following individuals are eligible to receive benefits under the Severance Plan: Group I: Donald L. Ciffone, Jr., Michael J. Class, Roubik Gregorian and Ronald W. Guire. Group II: Thomas R. Melendrez, Stephen W. Michael and Susan Hardman. The Board of Directors or the Compensation Committee may, in their sole discretion, designate additional employees as eligible to receive benefits under the Severance Plan. The Severance Plan provides that an eligible employee will receive benefits if the employee’s employment is involuntarily terminated without “cause” or if the employee voluntarily terminates his or her employment for “good reason,” in either case within thirteen (13) months following the effective date of a change of control of the Company. Employees in Group I will receive a lump sum payment equal to two (2) times the employee’s annual base salary. Employees in Group II will receive a lump sum payment equal to the greater of (a) one year’s base salary, or (b) one month’s base salary for each complete year of service the employee has provided to the Company, up to a maximum of two (2) times the employee’s annual base salary. In order to receive benefits under the Severance Plan, an employee must execute a release of all claims that the employee may have against the Company and its successors and assigns.

In December 2000, the Company entered into an Executive Employment Agreement with Mr. Ciffone. The Employment Agreement provides for: (i) a three (3) year term ending on March 31, 2004; (ii) an annual base salary of $615,000 commencing July 1, 2000, subject to annual discretionary increases by the Board; (iii) a 75% target award percentage under the Company’s Executive Compensation Incentive Program for the fiscal year ending March 31, 2002 and continuing through and including fiscal year ending March 31, 2004; (iv) life insurance coverage in the amount of $1,000,000, executive health reimbursement of $10,000 each fiscal year, four (4) weeks’ paid vacation, professional services reimbursement of $10,000 each fiscal year, and a monthly auto allowance of $3,000; (v) certain severance benefits under the Severance Plan, including upon termination within 13 months of a change in control; (vi) an initial option grant of 300,000 shares of Common Stock (granted on December 6, 2000), which vests ratably on each monthly anniversary date from the grant date as to 1/36 of the option shares of Common Stock subject to the option, and subsequent grants of an option to purchase 100,000 shares of Common Stock granted or to be granted on each of April 1, 2001, April 1, 2002 and April 1, 2003, which options shall vest ratably on each monthly anniversary date of the grant date as to 1/36 of the shares of Common Stock subject to the option. The December 2000, April 2001, and April 2002 option grants were granted under the 2000 Plan, and the Company intends to grant the additional options in April 2003 under the 2000 Plan. In June 2001, the Executive Employment Agreement was amended and restated to modify Mr. Ciffone’s employment status upon termination of his employment with the Company.

In December 2000, the Board of Directors approved certain letter agreements that may be entered into with the following Executive Officers and Directors: Donald L. Ciffone, Jr., Michael J. Class, Roubik Gregorian, Ronald W. Guire, Frank P. Carrubba, Raimon L. Conlisk, James E. Dykes, Richard Previte, Thomas R. Melendrez, Stephen W. Michael and Susan Hardman. The letter agreements provide each individual with the right to exercise outstanding options granted to him or her under any of the Company’s stock plans with a promissory note in lieu of cash in the event that the individual’s employment or service to the Company is terminated without cause during a period of time during which such individual is restricted from disposing of his or her shares as a result of certain accounting or securities law restrictions in connection with a change of control. Any promissory note issued to the Company will be payable in full no later than three (3) months following the termination of any such restrictions on the individual’s shares.

REPORT OF THE COMPENSATION COMMITTEE AND OF THE

EMPLOYEE OPTION ADMINISTRATION COMMITTEE

OF THE BOARD OF DIRECTORS¹

During fiscal 2002, the Compensation Committee of the Board of Directors (the “Compensation Committee”) consisted of Messrs. Carrubba, Conlisk, Dykes and Previte, none of whom is an officer or an employee of the Company. Mr. Dykes serves as Chairman of the Committee. The Compensation Committee evaluates the performance of the Company’s President and CEO, reviews the performance of other Executive Officers and reviews and approves or recommends to the Board compensation levels, policies and programs. The Employee Option Administration Committee of the Board of Directors (the “Option Committee”) consists of Messrs. Conlisk and Dykes, the former of whom serves as Chairman of the Committee. The Option Committee administers the Company’s employee stock option plans.

General Compensation Policy

Compensation Philosophy. The Compensation Committee and the Option Committee (the “Committees”) believe that the Company’s overall compensation program should relate to creating stockholder value. Accordingly, the compensation program is designed to attract and retain talented executives and technical personnel, to reward achievement of the Company’s short-term and long-term performance goals, to link executive compensation to stockholder interests through equity-based plans, and to recognize and reward individual contributions to operating group and Company-wide performance objectives.

Components of Executive Compensation. During fiscal 2002, compensation for the Company’s Executive Officers consisted of base salary, participation in an annual incentive compensation program and longer-term equity incentives. The Committee calibrated each component to a competitive market position based on executive compensation surveys and reports, third party compensation specialists and other relevant information. The Company also offers to its Executive Officers participation (with all other eligible employees of the Company) in its 401(k) Plan, an auto allowance for Executive Officers, and certain other benefits available generally to employees of the Company.

Cash-Based Compensation

Base Salary. The Compensation Committee determines the base salary of the President and CEO and reviews and approves base salaries for each of the Company’s other Executive Officers annually in connection with annual performance reviews. In adjusting base salaries, the Compensation Committee examines both qualitative and quantitative factors relating to corporate and individual performance. In many instances, the qualitative factors necessarily involve a subjective assessment by the Committee. The Committee neither bases its considerations on any single performance factor nor does it specifically assign relative weights to factors but rather considers a mix of factors and evaluates individual performance against that mix both in absolute terms and in relation to other Company executives. Generally, in approving salary adjustments for Executive Officers (other than the President and CEO), the Committee considers the evaluation and recommendations of the Company’s President and CEO.

The Compensation Committee reviews an independent survey of compensation of Executive Officers of other high technology companies to enable it to set base salaries based on each Executive Officer’s level of responsibility and within the parameters of companies of comparable size in the Company’s industry. The survey includes a broader group of technology companies than those companies included in the JP Morgan H&Q Technology Index used in the performance measurement comparison graph included in this proxy statement. Generally, base salaries paid to Executive Officers for fiscal 2002 were set at levels within the top half of salaries paid to executives under the independent survey. This is consistent with the Committee’s objective of attracting and retaining executives whose skills and potential rank above the norm.

This section is not “soliciting material,” is not deemed filed with the SEC, and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1993, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

In addition to individual and corporate performance, the factors considered in determining merit adjustments include relative salaries and responsibilities in the Company, the size of the Company’s incentive payment allocation, which considers factors such as inflation and the competitive environment relative to other technology companies, independent survey data, number of years with the Company and anticipated future responsibilities of each individual within the next year. During fiscal 2002, consistent with the principles discussed herein, the Compensation Committee, at the recommendation of management, decided to forgo an annual salary merit adjustment for the Company’s Executive Officers.

Annual Incentive Compensation Opportunities. The Company maintains annual incentive compensation programs to reward Executive Officers and other selected senior management and technical personnel for attaining defined performance goals. The programs are designed to attract and motivate employees, and they are closely tied to corporate performance to enhance stockholder value and encourage profit and revenue growth. For Executive Officers, incentive compensation payments are based primarily on Company-wide performance targets, as well as personal performance measured against agreed-objectives. For selected senior management and technical personnel, Company-wide performance is a factor, and significant weight also is given to individual performance and the performance of particular operating groups within the Company. The programs are periodically reviewed with an executive compensation firm to ensure they are competitive and designed to achieve the performance intended.

Executive Incentive Compensation Program. In April 2001, the Compensation Committee approved an Executive Incentive Compensation Program based on performance results for fiscal 2002, in which all Executive Officers, including the President and CEO, participated. This program determined incentive compensation payments by application of a formula which takes into account (i) pretax profit and revenue goals against pre-established threshold levels; and (ii) a position factor reflecting each participant’s relative responsibility within the organization. The first two elements of the formula are adjusted by a range of numeric factors specified in the formula, which reflect the impact of particularly favorable or unfavorable individual performance. The Compensation Committee does not otherwise assign relative weights to any element. Individual performance factors may also be taken into account to modify the potential incentive compensation payment calculated under the formula. Under the program approved for fiscal 2002, no incentive payments could have been awarded unless a minimum level of profitability was achieved. In addition, no incentive payments could have been awarded unless payments were first made under the Key Employee Incentive Compensation Program discussed below. The maximum amount for which Mr. Ciffone was eligible under the fiscal 2002 Executive Incentive Compensation Program was 150% of base salary. Other Executive Officers participating in the 2002 Executive Incentive Compensation Program were eligible to receive maximum amounts ranging between 80% and 120% of base salary. Based on the Company’s pre-tax profit for fiscal 2002 of $5.7 million, and revenue of $55.0 million (both below program targets), no incentive compensation payments were made under the fiscal year 2002 Executive Incentive Compensation Program.

Key Employee Incentive Compensation Program. During fiscal 2002, certain other senior management and technical personnel participated in a Key Employee Incentive Compensation Program, which was adopted by the Compensation Committee in April 2001. Under the program, incentive compensation payments were based upon pre-tax profit and revenue targets (which were consistent with those applicable to the Executive Incentive Compensation Program), the performance of particular operating groups and individual performance. Based on the Company’s pre-tax profit for fiscal 2002 of $5.7 million, and revenue of $55.0 million (both below program targets), no incentive compensation payments were made under the fiscal year 2002 Key Employee Incentive Compensation Program.

Equity Incentives

The Company utilizes its 1997 Plan and its 2000 Plan to further align the interests of stockholders and management by providing Executive Officers and other employees with a significant economic interest in the long-term appreciation of the Company’s stock. The 1997 Plan permits the grant of both incentive and nonstatutory stock options. The 2000 Plan does not permit the grant of incentive stock options. A maximum of 40% of the total number of shares reserved under the 2000 Plan may be granted to Executive Officers of the Company. Generally, options under the 1997 Plan and the 2000 Plan are granted with exercise prices equal to 100% of the fair market value of the underlying stock on the date of grant and have terms of seven (7) years,

although options may be granted with terms of up to ten years. Under the 1997 Plan and the 2000 Plan, selected employees, including Executive Officers and senior management and technical personnel, may defer a portion of their 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, are subject to vesting over four years. This vesting schedule is designed to motivate option holders to achieve stated objectives, thereby aiding the Company’s efforts to maximize revenue and profit together with shareholder value, and to remain with the Company for the long-term. In determining the number of shares subject to an option to be granted to an Executive Officer, the Option Committee takes into account the Executive Officer’s position and level of responsibility with the Company, the Executive Officer’s existing stock and unvested option holdings, the potential reward to the Executive Officer if the stock price appreciates in the public market, and the competitiveness of the Executive Officer’s overall compensation arrangements, including stock options. Outstanding performance by an individual may also be taken into consideration. Option grants may also be made to new Executive Officers upon commencement of employment and, on occasion, to Executive Officers in connection with a significant change in job responsibility. The Option Committee may grant options taking into account multiple year periods. In fiscal 2002, based on the factors described above, the Option Committee granted options to purchase an aggregate of 544,200 shares of Common Stock to the Company’s Executive Officers, excluding grants to the Company’s CEO.

Additional long-term equity incentives are provided through the Company’s Employee Stock Participation Plan in which all eligible employees, including eligible Executive Officers of the Company, may purchase stock of the Company, subject to specified limits, at 85% of fair market value.

CEO Compensation

The Compensation Committee uses the same procedures described above for setting the annual salary, bonus and stock option award for Mr. Ciffone, our Chairman, President and Chief Executive Officer. Mr. Ciffone’s compensation package for fiscal 2002 consisted of an annual base salary of $651,540, 100,000 shares of the Company’s Common Stock granted in connection with his Executive Employment Agreement, in addition to other benefits detailed therein, and 75,000 shares of the Company’s Common Stock granted in connection with the 2003 Executive Stock Based Incentive Compensation Program.

Mr. Ciffone has an Executive Employment Agreement with the Company which is discussed under “Executive Compensation – Employment and Change of Control Arrangements.”

Section 162(m) Policy

The Compensation Committee has not adopted a general policy with respect to the application of Section 162(m) of the Internal Revenue Code, which generally imposes an annual corporate deduction limitation for tax computation purposes of $1 million on the compensation of certain Executive Officers. However, pursuant to Section 162(m), the Board has adopted, and the stockholders have approved, the 1997 Plan, intended to permit compensation from options granted thereunder to be excluded from Section 162(m) limitations. The 2000 Plan has not been approved by the stockholders, and, therefore, compensation from options granted thereunder shall not be so excluded.

Respectfully submitted,		The Employee Option Administration Committee
The Compensation Committee

James E. Dykes, Chairman		Raimon L. Conlisk, Chairman
Frank P. Carrubba		James E. Dykes
Raimon L. Conlisk
Richard Previte

Compensation Committee Interlocks and Insider Participation

As noted above, during the fiscal year ended March 31, 2002, the Compensation Committee consisted of Messrs. Conlisk, Carrubba, Dykes and Previte, none of whom is an officer or an employee of the Company.

REPORT OF THE AUDIT COMMITTEE

OF THE BOARD OF DIRECTORS¹

The rules and regulations of the SEC now require the Company to include in its proxy statement a report from the Audit Committee (“Audit Committee” or “Committee”) of the Board. The following report concerns the Audit Committee’s activities regarding oversight of the Company’s financial reporting and auditing process.

On behalf of the Board of Directors, the Audit Committee is responsible for providing an independent, objective review of the Company’s financial reporting process, audit function and internal controls. The Audit Committee is comprised solely of independent Directors as defined in the Marketplace Rules of the Nasdaq Stock Market, and is governed by a written charter adopted by the Board of Directors. The composition of the Audit Committee, the attributes of its members and the responsibilities of the Committee, as reflected in the Audit Committee Charter (“Charter”), are intended to be in accordance with applicable requirements for corporate audit committees.

Management has the primary responsibility for the financial statements and the financial reporting process, including the system of internal controls. The Audit Committee oversees the Company’s financial reporting process and internal controls on behalf of the Board of Directors. In this regard, it helps to ensure the independence of the Company’s auditors, the integrity of management and the adequacy of disclosure to stockholders. Representatives of the internal audit function, independent auditors and financial management have unrestricted access to the Committee and routinely meet privately with the Committee.

The Audit Committee members are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management and the independent auditor, nor can the Committee certify that the independent auditor is “independent” under applicable rules. The Committee serves a board-level oversight role, in which it provides advice, counsel and direction to management and the auditors on the basis of the information it receives, discussions with management and the auditors and the experience of the Committee’s members in business, financial and accounting matters. The Audit Committee, as appropriate, reviews and evaluates, and discusses and consults with Company management and the independent auditors regarding a variety of matters, including but not limited to, the following:

•

activity and performance of the Company’s internal and external auditors, including the audit scope, external audit fees, and auditor independence matters;

•

the extent to which the independent auditor may be retained to perform non-audit services;

•

the plan for, and the independent accountants’ report on, each audit of the Company’s financial statements;

•

the Company’s financial disclosure documents, including all financial statements and reports filed with the SEC or sent to stockholders, as well as the adequacy and appropriateness of the Company’s financial, accounting, and auditing personnel;

•

selection, evaluation, and when appropriate, replacement of the Company’s independent auditor; and

•

changes in the Company’s accounting practices, principles, controls or methodologies, or in the Company’s financial statements, and recent developments in accounting rules.

This year, the Audit Committee approved the Charter and, after appropriate review and discussion, the Audit Committee determined that the Committee had fulfilled its responsibilities under the Charter.

The Audit Committee is responsible for recommending to the Board that the Company’s financial statements be included in the Company’s Annual Report. The Committee took a number of steps in making this recommendation for fiscal 2002. First, the Audit Committee discussed with PriceWaterhouseCoopers LLP the Company’s independent auditors for fiscal 2002, those matters PriceWaterhouseCoopers LLP communicated to and discussed with the Audit Committee under applicable auditing standards, such as Statement on Auditing Standards No. 61, as amended, “Communications with Audit Committees,” including information concerning the scope and results of the audit. These communications and discussions are intended to assist the Audit Committee in overseeing the financial reporting and disclosure process. Second, the Audit Committee discussed with PriceWaterhouseCoopers LLP their independence, and received a letter from them regarding their independence as required by Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committee,” for auditors of public companies. This discussion and disclosure informed the Audit Committee of PriceWaterhouseCoopers LLP’s independence, and assisted the Audit Committee in evaluating such independence. Finally, the Audit Committee reviewed and discussed, with Company management and PriceWaterhouseCoopers LLP, the Company’s audited consolidated balance sheet at March 31, 2002, and consolidated statements of income, cash flows and stockholders’ equity for the fiscal year ended March 31, 2002. Based on the discussions with PriceWaterhouseCoopers LLP concerning the audit, the independence discussions, and the financial statement review, and additional matters deemed relevant and appropriate by the Audit Committee, the Audit Committee recommended to the Board that the Company’s Annual Report on Form 10-K for the year ended March 31, 2002 include these financial statements.

Fees Paid to Deloitte & Touche, LLP and PriceWaterhouseCoopers LLP

The following table shows the fees paid or accrued by the Company for the audit and other services provided by Deloitte & Touche, LLP* for fiscal year 2002.

Audit Fees	$	0
Financial Information Systems Design and Implementation Fees	$	0
All Other Fees (1)	$	105,686

Total	$	105,686

(1)

“All Other Fees” includes $6,750 for non-audit-related consulting services, as well as $98,936 for tax planning and assistance with the preparation of state and federal tax returns.

Effective September 7, 2001, the Company’s Board of Directors approved the engagement of PriceWaterhouseCoopers LLP as the Company’s independent primary auditor firm. See the Company’s 8-K filed on September 11, 2001 for additional information.

The following table shows the fees paid or accrued by the Company for the audit and other services provided by PriceWaterhouseCoopers LLP for fiscal year 2002.

Audit Fees (1)	$	114,450
Financial Information Systems Design and Implementation Fees	$	0
All Other Fees (2)	$	47,000

Total	$	161,450

(1)

Audit services of PriceWaterhouseCoopers LLP for fiscal year 2002 consisted of services rendered in connection with (i) the audit of the Company’s annual consolidated financial statements and the review of the Company’s quarterly consolidated financial statements; (ii) assistance with regulatory filings; and (iii) consultations on the effects of various accounting issues and changes in professional standards.

(2)

“All Other Fees” includes $5,000 for services related to filings made with the Securities and Exchange Commission, assistance in tax planning and compliance, as well as $42,000 for the preparation of state and federal tax filings.

Respectfully submitted,

The Audit Committee

Richard Previte, Chairman

Frank P. Carrubba

Raimon L. Conlisk

James E. Dykes

PERFORMANCE MEASUREMENT COMPARISON ⁽¹⁾

The following graph shows a five-year comparison of cumulative stockholder return of the CRSP Total Return Index for the Nasdaq Stock Market (U.S. Companies) (the “Nasdaq Composite Index”), the JP Morgan H&Q Technology Index, and the Company. The JP Morgan H&Q Technology Index is composed of approximately 200 technology companies in the semiconductor, electronics, medical, and related technology industries. Historic stock price performance is not necessarily indicative of future stock price performance

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN ON INVESTMENT ⁽²⁾

This section is not “soliciting material,” is not deemed filed with the SEC, and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

The total return on investment (change in stock price plus reinvested dividends) for the Company, the Nasdaq Stock Market (U.S.) Index and the JP Morgan H&Q Technology Index, based on March 31, 1997 = 100.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has entered into various arrangements with some of our Executive Officers, all of which are discussed under “Executive Compensation – Employment and Change of Control Arrangements.”

The Company has entered into indemnity agreements with Executive Officers and Directors which provide, among other things, that the Company will indemnify such Executive Officer or Director, under the circumstances and to the extent provided for therein, for expenses, damages, judgments, fines and settlements he/she may be required to pay in actions or proceedings to which he/she is or may be made a party by reason of his/her position as a Director, Executive Officer or other agent of the Company, and otherwise to the full extent permitted under Delaware law and the Company’s By-Laws.

ACCOUNTANTS

The Company’s financial statements have been audited by PriceWaterhouseCoopers LLP as independent auditors. Representatives of PriceWaterhouseCoopers LLP are expected to be present at the Annual Meeting of Stockholders. They do not expect to make any statement, but will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.

COMMUNICATING WITH THE COMPANY

We have from time-to-time received calls from stockholders inquiring about the available means of communication with the Company. We thought that it would be helpful to describe these arrangements which are available for your use.

•

If you would like to receive information about the Company, without charge, you may use one of these convenient methods:

To have information such as the Company’s latest Quarterly Earnings Release, Form 10-K, Form 10-Q or Annual Report mailed to you, stockholders residing in the U.S., please call the transfer agent, EquiServe Trust Company, N.A. at 877-282-1168.

To view the Company’s website on the Internet, use the Company’s Internet address: www.exar.com. The Company’s website includes product, corporate and financial data, as well as recent earnings releases, current stock price, an electronic file of this Proxy Statement and 10K/10Q, the Company’s Annual Report to Stockholders, and job listings. Internet access to this information has the advantage of providing you with up-to-date information about the Company throughout the year.

To reach our Investor Relations representative, please call 510-668-7201.

•

If you would like to write to us, please send your correspondence to the following address:

Exar Corporation

48720 Kato Road

Fremont, California 94538

Attn: Investor Relations, M/S 210

OTHER MATTERS

The Board of Directors knows of no other matter that will be presented for consideration at the Annual Meeting. If any other matter is properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on such matter in accordance with their best judgment.

The Board of Directors hopes that stockholders will attend the meeting. Whether or not you plan to attend, you are urged to complete, sign and return the enclosed proxy in the accompanying envelope. A prompt response will greatly facilitate arrangements for the meeting, and your cooperation will be appreciated. Stockholders who attend the meeting may vote their shares personally even though they have sent in their proxies.

By Order of the Board of Directors

Thomas R. Melendrez

Secretary

August 2, 2002

DELIVERY OF THIS PROXY STATEMENT

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for Annual Reports and Proxy Statements with respect to two or more stockholders sharing the same address by delivering a single Annual Report and Proxy Statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.

This year, a number of brokers with account holders who are Exar stockholders will be “householding” our proxy materials. A single Annual Report and Proxy Statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker or us that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate Annual Report and Proxy Statement, please notify your broker and direct your written request to Exar Corporation, Attention: Investor Relations M/S 210, 48720 Kato Road, Fremont, California 94538, or contact us directly at (510) 668-7201.

Stockholders who currently receive multiple copies of the Proxy Statement at their address and would like to request “householding” of their communications should contact their broker.

DETACH HERE

PROXY

EXAR CORPORATION

PROXY SOLICITED BY BOARD OF DIRECTORS

FOR THE ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON SEPTEMBER 5, 2002

The undersigned hereby appoints Donald L. Ciffone, Jr. and Ronald W. Guire, or each of them, as attorneys and proxies of the undersigned, with full power of substitution, to vote all of the shares of stock of Exar Corporation which the the following instructions, with discretionary authority as to any and all other matters that may properly come before the undersigned may be entitled to vote at the Annual Meeting of Stockholders of Exar Corporation to be held at the Company’s Corporate Headquarters, 48720 Kato Road, Fremont, California, on Thursday, September 5, 2002 at 3:00 p.m. pacific daylight time, and at any and all continuations, postponements and adjournments thereof, with all powers that the undersigned would possess if personally present, upon and in respect of the following matters and in accordance with meeting.

UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED IN PROPOSAL 1 AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.

Please vote, date and promptly return in the enclosed return envelope which is postage prepaid if mailed in the United States.

SEE REVERSE

SIDE

CONTINUED AND TO BE SIGNED ON REVERSE SIDE

SEE REVERSE

SIDE

EXAR CORPORATION

C/O EQUISERVE

P.O. BOX 43068

PROVIDENCE, RI 02940

DETACH HERE

Please mark

votes as in

this example.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED BELOW.

To elect two (2) Directors to hold office until the 2005 Annual Meeting of Stockholders and until their successors are elected and have qualified, or until such Director’s earlier death, resignation or removal.

Nominees: (01) Raimon L. Conlisk and (02) Richard Previte.

FOR

NOMINEES

WITHHELD

FROM

NOMINEES

¨________________________________________________________________________________

For all nominees except as noted above

To transact such other business as may properly come before the meeting or any adjournment, continuation or postponement thereof.

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT ¨

Please sign exactly as name appears at left. Executors, administrators, trustees, guardians, attorneys-in-fact, etc., should give their full titles. If the signer is a corporation, please give full corporate name and have a duly authorized officer sign, stating title. If signer is a partnership, please sign in partnership name by authorized person. If stock is registered in the names of two or more persons, each should sign.

Signature: _________________________ Date: ___________ Signature: ________________________ Date: ___________