Exhibit 10.3

December 28, 2006

Robert S. Kirk

c/o Microtune, Inc.

2201 10th Street

Plano, Texas 75074

 

RE: Microtune, Inc. Stock Options

Dear Mr. Kirk:

In connection with an internal investigation of the stock option grant practices
of Microtune, Inc. (the “Company”), conducted by the Audit Committee (the
“Committee”) of the Company’s Board of Directors (the “Board”), the Board, the
Committee and the Company’s current management have concluded that certain stock
option grants were approved and granted for accounting purposes on a date (the
“Measurement Date”) other than the date reflected in the option grant award
documentation. Unless these stock option awards are amended by December 31,
2006, to make the exercise price of the portions of such stock option awards
that were not vested as of December 31, 2004 equal to at least the fair market
value of the Company’s common stock on the actual Measurement Date (as of each
such date, the “Fair Market Value”), you will be subject to an additional 20%
tax under Section 409A of the Internal Revenue Code of 1986, as amended to date
(the “Code”).

To avoid the imposition of the additional Section 409A tax, the Company is
proposing to amend each of the affected stock option awards referenced below
(the “Eligible Options”), to increase the exercise price of the portions of such
stock option awards that were not vested as of December 31, 2004 to the Fair
Market Value of the Company’s common stock on the Measurement Date for such
award. The Measurement Date was determined in connection with the investigation
being performed by the Committee and will be used for financial reporting
purposes in conjunction with the restatement of the Company’s financial
statements for the years 2001 through 2005, and the quarter ended March 31,
2006. Portions of Eligible Options that vested on or before December 31, 2004
are not affected by this amendment.

If you acknowledge and accept the amendment of the Eligible Options to increase
the exercise price of the portions of such awards that were not vested as of
December 31, 2004:

(1) the exercise price (the “Original Exercise Price”) of the portions of each
such Eligible Option that were not vested as of December 31, 2004 shall be
increased to an adjusted exercise price that is equivalent to the Fair Market
Value of the Company’s common stock as of the Measurement Date (the “Adjusted
Exercise Price”); and

(2) provided you are employed on the applicable payment date, the Company will
pay to you as additional compensation an amount in cash equal to the difference
between the Original Exercise Price and the Adjusted Exercise Price times the
number of “Amended Option Shares” (which reflects the portion of the “Original
Option Shares” that were not vested as of December 31, 2004), as set forth below
(the “Cash Payment”):

 

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Grant Date

 

Original Option Shares

 

Amended Option Shares

 

Original Exercise Price

 

Adjusted Exercise Price

 

Amount of
Cash Payment

March 10, 2003

  24,500   15,925   $1.27   $2.21   $14,969.50

July 9, 2003

  3,000   2,000   $2.20   $2.75   $1,100.00

August 1, 2003

  57,412   37,079   $2.40   $2.85   $16,685.55

August 19, 2004

  373   373   $4.47   $4.99   $193.96

August 19, 2004

  40,000   36,000   $4.47   $4.99   $18,720.00

August 19, 2004

  23,627   23,627   $4.47   $4.99   $12,286.04                       $63,955.05

The Cash Payment shall be paid in two installments as follows:

 

  •   $62,803.55 on or about January 31, 2008 for stock options vesting prior to
January 1, 2008; and

 

  •   $1,151.50 on or about January 31, 2009 for stock options vesting in the
2008 calendar year.

All applicable taxes will be withheld from the Cash Payment.

All Options. You represent and warrant that the above table accurately describes
the terms of the Eligible Options and our understanding as to the amendment of
the Eligible Options.

Entire Agreement; Amendment. The terms described in this Letter Agreement,
together with the underlying option agreement for each of the Eligible Options,
set forth the entire agreement and understanding between you and the Company and
merges and supersedes all prior agreements, arrangements and understandings,
written or oral, between you and the Company concerning the subject matter
hereof. You acknowledge and agree that you are not relying on any
representations or promises by any representative of the Company concerning the
meaning or any aspect of this Letter Agreement. This Letter Agreement may not be
altered or modified other than in writing signed by you and an authorized
representative of the Company.

Severability. It is the desire and intent of the parties hereto that the
provisions of this Letter Agreement shall be enforced to the fullest extent
permissible under applicable law. In the event that any one or more of the
provisions of this Letter Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. Moreover, if
any one or more of the provisions contained in this Letter Agreement shall be
held to be excessively broad as to duration, scope, activity or subject, such
provisions shall be construed by limiting or reducing them so as to be
enforceable to the maximum extent compatible with applicable law.

No Waiver. No waiver by either party of any breach by the other party of any
condition or provision of this Letter Agreement to be performed by such other
party shall be deemed a waiver of any other provision or condition at the time
or at any prior or subsequent time. This Letter Agreement and the provisions
contained in it shall not be construed or interpreted for or against either
party because that party drafted or caused that party’s legal representative to
draft any of its provisions.

Binding Arbitration. Any dispute, claim or controversy arising under or in
connection with this Letter Agreement and any dispute as to the enforceability
of this provision, shall be resolved exclusively by final and binding
arbitration administered by the JAMS arbitration service and in accordance with
its

 

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Employment Arbitration Rules and Procedures then in effect; provided, however,
that nothing herein shall require arbitration of any claim or charge which, by
law, cannot be the subject of a compulsory arbitration agreement. Any
arbitration proceeding brought under this Letter Agreement shall be conducted
before a single arbitrator and shall be conducted in Dallas, Texas. The written
decision of the arbitrator shall be final and binding upon the parties and in
such form that judgment may be entered in, enforced by, or appealed from, any
court having jurisdiction over the parties. Any arbitration proceedings,
decision or award rendered hereunder, and the validity, effect and
interpretation of this arbitration provision, shall be governed by the Federal
Arbitration Act, 9 U.S.C. § 1 et seq, or the Texas Arbitration Act.

Governing Law. This Letter Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Texas, without reference to
its choice of law rules.

Counterparts. This Letter Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.

To acknowledge and agree to the amendments as described above, please execute
and date this letter where indicated below and return it to me by December 28,
2006 at:

 

 

Microtune, Inc.

2201 10th Street

Plano, Texas 75074

 

If you choose not to agree to amend the above-referenced option(s), you will be
subject to the additional tax pursuant to Section 409A of the Code with respect
to those options, and you will not be reimbursed by the Company. No part of this
letter should be relied upon as tax advice. The Company recommends that you
consult with your tax advisor regarding the proposed options amendment.

Descriptions of the potential tax effects of Section 409A of the Code are
described herein for informational purposes only and are not legal advice. SUCH
INFORMATION DOES NOT CONSTITUTE AN OPINION AND IS NOT INTENDED OR WRITTEN TO BE
USED, AND CANNOT BE USED, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING PENALTIES
THAT MAY BE IMPOSED ON THE TAXPAYER. You should not act upon the information
without seeking professional legal counsel and consulting with your tax advisor.

[signature page follows]

 

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If the foregoing is acceptable to you, please so indicate by placing your
signature in the appropriate space set forth below, whereupon this letter shall
become a binding obligation of each of the undersigned.

 

Very truly yours,

 

MICROTUNE, INC.,

a Delaware corporation

By:   /s/ Jeffrey A. Kupp

Name:  Jeffrey A. Kupp

Title:    Chief Financial Officer

 

Agreed to and Accepted

this 28th day of December, 2006.

 

By:   /s/ Robert S. Kirk Name: Robert S. Kirk, individually

I hereby ACKNOWLEDGE and AGREE to the amendment of the applicable stock option
award agreement(s) relating to the Eligible Options referenced above to increase
the Original Exercise Price of the Amended Option Shares portion of the Eligible
Options to the Adjusted Exercise Price as set forth in the table above.

 

/s/ Robert S. Kirk

Robert S. Kirk

 

December 28, 2006

 

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