SEPARATION AND GENERAL RELEASE AGREEMENT

EXHIBIT 10.1

SEPARATION AND GENERAL RELEASE AGREEMENT

This Separation and General Release Agreement (this “Agreement”) is entered into by and between J. Scott Kamsler (“Kamsler”) and Exar Corporation, on behalf of itself and each of its subsidiaries (collectively, the “Company”).

WHEREAS , Kamsler is currently employed by the Company as its Chief Financial Officer and Senior Vice President pursuant to the terms of a letter agreement between Kamsler and the Company, dated December 29, 2008 (the “Employment Agreement”);

WHEREAS , Kamsler’s employment with the Company terminated, effective June 23, 2009;

WHEREAS , the Company and Kamsler agree that, subject to Kamsler entering into this Agreement, and subject to the terms and conditions contained herein, the Company will provide Kamsler as severance pay an amount equal to six months of his base salary, less standard withholdings and deductions;

WHEREAS , any capitalized terms that are not defined herein shall have the meaning set forth in the Employment Agreement.

NOW, THEREFORE , in consideration of the mutual promises and covenants contained herein, the Company and Kamsler agree as follows:

1. Effective Date : This Agreement shall become effective on the eighth day after Kamsler delivers to the Company a fully-executed version of this Agreement (the “Effective Date”), provided that Kamsler does not revoke this Agreement before such day pursuant to Section 9(e) below.

2. Separation from Employment : The parties agree that Kamsler’s employment with the Company in any capacity terminated, effective June 23, 2009 (the “Separation Date”). As of the Separation Date, by executing this Agreement, Kamsler agrees that he no longer holds the title of, or performs services as, the Company’s Chief Financial Officer, Senior Vice President or in any other position of employment with the Company.

3. Severance Benefits : Provided that Kamsler complies with the terms and conditions of this Agreement and his Employee Proprietary Rights and Nondisclosure Agreement dated February 19, 2007 (the “Proprietary Rights Agreement”) attached hereto as Exhibit A , Kamsler shall be entitled to receive the following severance benefits (collectively, the “Severance Benefits”):

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a. Severance Pay . The Company shall pay Kamsler severance pay in the amount of $145,000, less standard withholdings and authorized deductions (the “Severance Pay”). The Severance Pay will be paid in equal installments in accordance with the Company’s standard payroll schedule beginning with the first regularly scheduled payroll payment date after the Effective Date until the last regular payroll payment date on or prior to the six (6) month anniversary of the Effective Date.

b. Health and Welfare Benefits : Kamsler shall have the option to convert and continue health and dental insurance for himself and his eligible dependents after the Separation Date, as may be required or authorized by law under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). In the event Kamsler timely exercises his right to convert his health and dental insurance for himself and his eligible dependents, Kamsler will be responsible for paying the COBRA premiums and the Company shall reimburse Kamsler for the COBRA premiums for the period commencing on the Effective Date and ending on the earlier of: (i) the six (6) month anniversary of the Effective Date, or (ii) the maximum period of time the Company is required to provide Kamsler and his eligible dependants health continuation coverage under COBRA. COBRA premiums paid by Kamsler and submitted to the Company for reimbursement during the six months following the Effective Date will be reimbursed by the Company within 30 days following receipt of evidence of payment.

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

4. Termination Of Contractual Relationship : Except as arising out of this Agreement, the Proprietary Rights Agreement, the Indemnity Agreement dated February 19, 2007 (the “Indemnity Agreement”), the Stock Unit Award Agreements for the grants of restricted stock units made on March 1, 2007, October 1, 2007, August 31, 2007 and April 1, 2008 (collectively, the “RSU Agreements”), and the Stock Option Agreements (the “Stock Option Agreements”) for the stock option grants made on March 1, 2007, July 11, 2007, October 1, 2007 and April 1, 2008 (collectively, the “Stock Option Grants”), the parties have no further contractual relationship and Kamsler will have no right to reinstatement with the Company or any subsidiary.

5. No Other Compensation or Benefits : Except as expressly set forth herein in Sections 3 and 12 of this Agreement, Kamsler acknowledges that he will not receive, and is not entitled to receive, any additional compensation, severance or benefits after the Separation Date. Within one business day of the Separation Date, the Company shall pay Kamsler in full for all of his accrued wages, time off adjustment and paid-time off that he earned through the Separation Date. Kamsler agrees to submit any business expenses that he incurred in the scope of his employment within twenty-one (21) days following the Separation Date. The Company will reimburse Kamsler for all outstanding business expenses in accordance with the Company’s expense reimbursement policy.

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6. No Admission of Liability Or Wrongdoing : This Agreement does not constitute an admission by the Company or Kamsler of any violation of federal, state or local law, ordinance or regulation or of any violation of the Company’s policies or procedures or of any liability or wrongdoing whatsoever. Neither this Agreement nor anything in this Agreement shall be construed to be or shall be admissible in any proceeding as evidence of liability or wrongdoing by the Company or Kamsler. This Agreement may be introduced, however, in any proceeding to enforce the Agreement.

7. Release :

a. Release by Kamsler . Kamsler, on his own behalf and on behalf of his descendants, dependents, heirs, executors, administrators, assigns and successors, and each of them, hereby covenants not to sue and fully releases and discharges the Company and each of its and their subsidiaries, parent, or affiliated partnerships and corporations, past and present, as well as each of its and their directors, officers, trustees, shareholders, members, partners, representatives, attorneys, assignees, successors, agents and employees, past and present, and each of them (individually and collectively, “Company Releasees”), from and with respect to any and all claims, wages, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected (collectively, “Claims”), arising out of or in any way connected with any acts or omissions committed or omitted by Company Releasees prior to the date of this Agreement, including but not limited to Kamsler’s employment and termination of employment with the Company or any other relationship with, interest in or termination of relationship with any Company Releasees, including without limiting the generality of the foregoing, any claim for wages, vesting, overtime, salary, severance pay, director compensation, commissions, bonus or similar benefit, car allowance, sick leave, pension, retirement, vacation pay, paid time off, life insurance, health or medical insurance, including coverage under the Company’s Executive Health Plan, or any other fringe benefit, or disability, or any Claim pursuant to any federal, state or local law, statute or cause of action including, but not limited to: the federal Civil Rights Act of 1964, as amended; the federal Americans with Disabilities Act of 1990; the federal Age Discrimination in Employment Act of 1967, as amended (the “ADEA”); the California Fair Employment and Housing Act, as amended; the California Family Rights Act; the California Labor Code; the Sarbanes-Oxley Act; tort law; contract law; wrongful discharge; discrimination; retaliation; harassment; fraud; defamation; emotional distress; breach of the implied covenant of good faith and fair dealing; or breach of the Executive Officer’s Change of Control Severance and Benefit Plan. Notwithstanding any provision of this Section 7, Kamsler shall not hereby release any claim with respect to (i) Kamsler’s continuing rights created by or arising out of this Agreement, the Indemnity Agreement, the RSU Agreements, the Proprietary Rights Agreement, and the Stock Option Agreements; (ii) vested benefits, if any, under the Company’s 401(k) plan, in accordance with the terms of that Plan, COBRA health care and dental care continuation coverage, life insurance conversion rights, unemployment compensation, workers’ compensation or disability insurance, or (iii) indemnification by the Company pursuant to the Company’s certificate of incorporation, by-laws, and applicable law.

b. Release by the Company . Except for those obligations created or confirmed by or arising out of this Agreement, and except as provided below, the Company hereby covenants not to sue and releases and discharges Kamsler and his descendants, dependents, heirs, executors, administrators, assigns and successors, and each of them (“Kamsler Releasees”) from and with respect to any and all claims, agreements, obligations, losses,

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damages, injuries, demands and causes of action, known or unknown, suspected or unsuspected, arising out of or in any way connected with Kamsler’s employment or any other relationship with, interest in or termination of relationship with any Company Releasees with the Company, or any other occurrences, actions, omissions or claims whatsoever, known or unknown, suspected or unsuspected, which the Company now owns or holds or has at any time heretofore owned or held as against Kamsler, provided, however, that such release of Kamsler shall not extend to any claims, known or unknown, suspected or unsuspected, against Kamsler that arise out of facts which demonstrate that Kamsler engaged in reckless, fraudulent or intentional acts or omissions that (i) constitute a breach of fiduciary duty, (ii) constitute a crime under any federal, state, or local statute, law, ordinance or regulation, or (iii) give rise to a right of recovery by the Company under any applicable policies of insurance and as to which the insurer has a right to subrogation against Kamsler; and provided further, that the foregoing release shall not be construed to release Kamsler from any of his ongoing obligations under Sections 10, 11, 13, 16, 17, or 19 of this Agreement, or Kamsler’s continuing obligations under the Stock Option Agreements, the RSU Agreements and the Proprietary Rights Agreement, and nothing in this Section 7 shall be deemed in any way to waive, settle or release any of the Company’s rights under those Sections or agreements.

8. Section 1542 Waiver : In executing this Agreement, and except as expressly stated in this Agreement, Kamsler intends for it to be effective as a general release to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, Kamsler hereby expressly waives any rights and benefits conferred by SECTION 1542 OF THE CALIFORNIA CIVIL CODE, and expressly consents that this Agreement shall be given full force and effect according to each and all of its express terms and provisions, including those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides:

“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.”

Kamsler acknowledges that he may hereafter discover claims or facts in addition to or different from those which he now knows or believes to exist against Company Releasees, respectively, with respect to the subject matter of this Agreement and which, if known or suspected at the time of executing this Agreement, may have materially affected this settlement. Nevertheless, Kamsler hereby waives any right, claim or cause of action that might arise as a result of such different or additional claims or facts. Kamsler acknowledges that he understands the significance and consequence of such release and such specific waiver of SECTION 1542.

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9. Waiver Of Age Discrimination Claims : Kamsler expressly acknowledges and agrees that, by entering into this Agreement, he is waiving any and all rights or claims that he may have arising under the ADEA which have arisen on or before the date of execution of this Agreement. Kamsler also expressly acknowledges and agrees that: