**EXHIBIT10.7**

 

**MINDSPEED TECHNOLOGIES, INC.**2003 STOCK OPTION PLANAs Amended and Restated as of July 1, 2008

 

# 1.     Purpose.

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Inconnection with the Distribution, certain stock options granted pursuant to theConexant Stock Option Plans will be adjusted in accordance with the provisionsof the Employee Matters Agreement so that following the Distribution therespective grantees will hold stock options to purchase Shares in addition tostock options to purchase Conexant Shares, and the Corporation will assume Conexant’sobligations with respect to the adjusted stock options for Shares.  The purpose of this 2003 Stock Option Plan is(a) to provide a means for the Corporation to perform its obligations withrespect to the adjusted stock options for Shares and (b) to fostercreation of and enhance shareholder value by linking the compensation ofofficers and other employees of the Corporation, whose stock options grantedpursuant to the Conexant Stock Option Plans will be adjusted so that suchofficers and employees also hold stock options for Shares or who may receivegrants of stock options pursuant to the terms of the Plan, to increases in theprice of the Shares, thus providing means by which persons of outstandingabilities can be motivated and retained. Subject to the rights of the Board of Directors and the Committeeprovided in the Plan and any Sub-Plan, it is intended that the provisions ofthe Plan and any of Sub-Plans A through K will provide the Participants withOptions that have substantially the same terms and conditions as the ConexantOptions from which such Options are derived. The Board of Directors or the Committee may look to the original plan orplans from which the Plan or any of Sub-Plans A through K is derived in orderto interpret the Plan or any of Sub-Plans A through K or an Option governed bythe Plan or any of Sub-Plans A through K or to resolve any inconsistency orerror which may exist in the Plan or any of Sub-Plans A through K.

 

# 2.     Definitions.

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Forpurposes of the Plan, the following terms shall have the meanings set forthbelow:

 

## a.     Board of Directors.  The Board of Directors of the Corporation.

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## b.     Code.  The Internal Revenue Code of 1986, and anysuccessor statute, as it or they may be amended from time to time.

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## c.     Committee.  The Compensation and Management DevelopmentCommittee of the Board of Directors, as it may be comprised from time to time,or another committee of the Board of Directors designated by the Board ofDirectors to administer the Plan.

 

## d.     Conexant.  Conexant Systems, Inc., a Delawarecorporation, and any successor thereto.

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## e.     ConexantOption.  An option to purchaseConexant Shares granted pursuant to any of the Conexant Stock Option Plans,other than Specified Conexant Options.

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## f.      ConexantShares.  Shares of common stock, parvalue $.01 per share, of Conexant, or any security of Conexant issued insubstitution or exchange therefor or in lieu thereof.

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## g.     ConexantStock Option Plans.  As the contextrequires, any or all of the following (including any sub-plans authorizedthereunder), in each case, as amended through the Distribution Date:

 
| 1.     |   | Conexant  Systems, Inc. 1998 Stock Option Plan;              |
|--------|--------|-------------------------------------------------------------------|
|   |   |                                                              |
| 2.     |   | Conexant  Systems, Inc. 1999 Long-Term Incentives Plan;      |
|   |   |                                                              |
| 3.     |   | Conexant  Systems, Inc. 2000 Non-Qualified Stock Plan;       |
|   |   |                                                              |
| 4.     |   | Conexant  Systems, Inc. Directors Stock Plan;                |
|   |   |                                                              |
| 5.     |   | Applied  Telecom, Inc. 2000 Non-Qualified Stock Option Plan; |
|   |   |                                                              |
| 6.     |   | HotRail, Inc.  1997 Equity Incentive Plan;                   |
|   |   |                                                              |
| 7.     |   | HotRail, Inc.  2000 Equity Plan;                             |
|   |   |                                                              |
| 8.     |   | HyperXS  Communications, Inc. 2000 Stock Option Plan;        |
|   |   |                                                              |
| 9.     |   | Istari  Design, Inc. 1997 Stock Option Plan;                 |
|   |   |                                                              |
| 10.    |   | Maker  Communications, Inc. 1996 Stock Option Plan;          |
|   |   |                                                              |
| 11.    |   | Maker  Communications, Inc. 1999 Stock Incentive Plan;       |
|   |   |                                                              |
| 12.    |   | Microcosm  Communications Limited Stock Option Plan;              |
|   |   |                                                              |
| 13.    |   | NetPlane  Systems, Inc. Stock Option Plan;                   |
|   |   |                                                              |
| 14.    |   | Novanet  Semiconductor Ltd. Employee Shares Option Plan;          |
|   |   |                                                              |
| 15.    |   | Philsar  Semiconductor Inc. Stock Option Plan; and                |
|   |   |                                                              |
| 16.    |   | Sierra  Imaging, Inc. 1996 Stock Option Plan.                |

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## h.     Corporation.  Mindspeed Technologies, Inc., a Delawarecorporation, and any successor thereto.

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## i.      Director.  A member of the Board of Directors.

 

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## j.      Distribution.  The pro rata distribution of outstandingShares owned by Conexant to Conexant’s shareowners.

 

## k.     DistributionDate.  The date on which Conexantdistributes Shares to Conexant’s shareowners.

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## l.      EmployeeMatters Agreement.  The EmployeeMatters Agreement dated as of June 27, 2003 by and between Conexant andthe Corporation.

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## m.    ExchangeAct.  The Securities Exchange Act of1934, as amended.

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## n.     FairMarket Value.  The closing price ofthe Shares as reported on the American Stock Exchange or such other nationalsecurities exchange or automated inter-dealer quotation system on which theShares have been duly listed and approved for quotation and trading on the dateof a determination (or on the next preceding day such stock was traded if itwas not traded on the date of a determination).

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## o.     Option.  An option to purchase Shares derived fromadjustments to a Conexant Option, other than Specified Conexant Options, inconnection with the Distribution and in accordance with the Employee MattersAgreement or an option granted in connection with an offer to exchangeoutstanding Options for new Options pursuant to Section 4(c) andSub-Plan L.

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## p.     Participant.  Any person who as of the close of business onthe Distribution Date held one or more outstanding Conexant Options under oneor more of the Conexant Stock Option Plans and who, for purposes of aparticular Sub-Plan, also satisfies the additional requirements set forth inthe definition of “Participant” in that Sub-Plan.

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## q.     Plan.  This Mindspeed Technologies, Inc. 2003Stock Option Plan.

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## r.      SecuritiesAct.  The Securities Act of 1933, asamended.

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## s.     Shares.  Shares of common stock, par value $.01 pershare, of the Corporation, or any security of the Corporation issued insubstitution, exchange or in lieu thereof.

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## t.      SpecifiedConexant Options.  Conexant Options (i) grantedto certain executive officers of Conexant’s Broadband Communications businesswhich pursuant to their terms shall remain solely options to purchase ConexantShares or (ii) held by persons in certain foreign locations as shall bedesignated by Conexant.

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## u.     Sub-Plans.  Sub-Plans A through L****of the Plan.

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# 3.     Plan Administration.

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## a.     The Committee shall exercise allresponsibilities, powers and authority relating to the administration of thePlan not reserved by the Board of Directors.

 

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## b.     TheBoard of Directors reserves the right, in its sole discretion, to exercise orauthorize another committee or person to exercise some of or all theresponsibilities, powers and authority vested in the Committee under the Plan.

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## c.     Noneof the Corporation or any of its Subsidiaries, any member of the Board ofDirectors or of the Committee, or any other person participating in anydetermination of any question under the Plan, or in the interpretation,administration or application of the Plan, shall have any liability to anyparty for any action taken, or not taken, in good faith under the Plan.

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# 4.     Options.

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## a.     The outstanding Options entitle the holdersthereof to purchase such numbers of Shares at such exercise prices as shall bedetermined pursuant to resolutions to be adopted by Conexant’s Board ofDirectors before the Distribution Date in accordance with the Employee MattersAgreement and otherwise have the same terms and conditions as the ConexantOptions from which they are derived; provided, however, thatreferences to the “Corporation” shall mean the Corporation instead of Conexant;provided, further, that the purchase price of the Shares shall bepayable as provided in Section 5.

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## b.     Optionsgranted pursuant to Section 4(c) will entitle the holders thereof topurchase such numbers of Shares at such exercise prices as shall be determinedby the Committee pursuant to the terms and conditions of Sub-Plan L.

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## c.     Sharessubject to the unexercised portion of any terminated, forfeited or cancelledOption shall be available for future grants of Options solely in connectionwith offers to exchange outstanding Options for new Options made to Employeesand Non-Employees (as defined in Sub-Plan L), which new Options shall besubject to the terms and conditions set forth in Sub-Plan L.  Notwithstanding anything in the Plan to thecontrary, the specific provisions of Sub-Plan L shall govern any Optionsgranted pursuant to this Section 4(c).

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# 5.     Payment.  Tothe extent that the right to purchase Shares has accrued and is in effect, theOption may be exercised in full at one time or in part from time to time bygiving notice of exercise pursuant to such procedures and according to suchterms and conditions as may be adopted by the Committee from time to time.  Options granted under the Plan may providefor the payment of the exercise price, as provided in the terms and conditionsapplicable to the Conexant Options from which the Options are derived, bydelivery of (a) cash or a check payable to the order of the Corporation inan amount equal to the exercise price of such Options, (b) Shares owned bythe Participant having a Fair Market Value equal in amount to the exerciseprice of the Options being exercised, or (c) any combination of (a) and(b); provided, however, that payment of the exercise price bydelivery of Shares owned by the Participant may be made only if the paymentdoes not result in a charge to earnings for financial accounting purposes asdetermined by the Board of Directors or the Committee; provided, further,**that the purchase price of the Shareswith respect to which an Option or portion thereof is exercised cannot be paidby delivery of Conexant Shares but shall be payable in full in cash or inShares or in a combination of cash and Shares; provided, further,that to the extent that the exercise price of an Option is denominated inforeign currency and is not converted (with the consent of the Option 

 

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# holder) into U.S. dollars, only paymentby cash or check may be made.  Inaddition, Participants may, either on a selective or aggregate basis,simultaneously exercise options and sell the Shares thereby acquired, pursuantto a brokerage or similar arrangement approved in advance by the Committee, anduse the proceeds from such sale as payment of the purchase price of such Sharesand any applicable withholding taxes.

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# 6.     Book-Entry Statements.  Uponexercise and full payment for the Option, a book-entry statement representingthe number of Shares purchased will be issued as soon as practicable (i) afterthe stock option administrator (the “Administrator”) whom theCorporation has engaged to administer and process stock option exercises hasreceived full payment therefor or (ii) at the Corporation’s or theAdministrator’s election in their sole discretion, after the Corporation or theAdministrator has received (x) full payment of the exercise price of theShares subject to the Options and (y) any reimbursement in respect ofwithholding taxes due.

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# 7.     Shares Available.  Thetotal number of Shares which may be delivered upon exercise of Options shallnot exceed the number (estimated to be approximately 6 million Shares as of July 1,2008) necessary to provide for the exercise of Options outstanding on theDistribution Date as provided in the Employee Matters Agreement, subject to anyfurther adjustments provided for herein; provided, however, that,subject to the provisions of Section 8, without the approval of shareholdersof the Corporation, the Committee may not amend the Plan to increase the numberof Shares which may be delivered under the Plan.  Shares which may be delivered upon exerciseof Options may consist in whole or in part of unissued or reacquired Shares.  The Corporation will at all times reserve asufficient number of authorized and unissued Shares to satisfy outstandingOptions in full.

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# 8.     Adjustments.  If there shall be anychange in or affecting Shares on account of any merger, consolidation, reorganization,recapitalization, reclassification, stock dividend, stock split or combination,or other distribution to holders of Shares (other than a cash dividend), thereshall be made or taken such amendments to the Plan and such adjustments andactions thereunder as the Board of Directors may deem appropriate under thecircumstances; provided, however, that the foregoing is subjectto the specific provisions of each individual Sub-Plan regarding adjustments.

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# 9.     Miscellaneous.

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## a.     No award or portion thereof shall betransferable by the Participant otherwise than (i) by will or by laws ofdescent and distribution, (ii) by gift to members of a Participant’simmediate family, (iii) to a trust established for the benefit of aParticipant’s immediate family members only, (iv) to a partnership inwhich a Participant’s immediate family members are the only partners or (v) asotherwise determined by the Committee. For purposes of this plan, “immediatefamily” shall mean the Participant’s spouse and natural, adopted orstep-children and grandchildren. Notwithstanding any transfer of an award or portion thereof, thetransferred award shall continue to be subject to the same plan and grantagreement terms and conditions as were applicable to the Participant immediatelyprior to the transfer, as if the Option had not been transferred.  Except as otherwise provided under Sub-Plan Land any award agreement thereunder, each Option shall be exercisable during thelifetime of the Participant to whom the Conexant Option from which it isderived was granted only by the Participant unless the Option has beentransferred in accordance with the provisions of the Plan, in which case itshall be exercisable only by the transferee (or by the legal representative ofthe estate or the heirs or legatees of the transferee).

 

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## b.     Noperson shall have the rights or privileges of a shareholder of the Corporationwith respect to Shares subject to an Option until such person has received suchShares following exercise of such Option.

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## c.     Nofractional Shares shall be issued or transferred pursuant to the Plan.  If any Option shall be exercisable for afractional Share, the person entitled thereto shall be paid an amount equal tothe excess of the Fair Market Value as of the date of exercise over theexercise price for any fractional Share deliverable in respect of exercise ofthat Option.

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## d.     TheCorporation shall have the right in connection with the delivery of any Sharesupon exercise of an Option to require as a condition of such delivery that therecipient represent that such Shares are being acquired for investment and notwith a view to the distribution thereof and that he or she will make notransfer of the same except in compliance with any rules and regulationsin force at the time of such transfer under the Securities Act or any otherapplicable law.

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## e.     TheCorporation shall have the right in connection with any exercise of an Option,to deduct from any amount otherwise payable by the Corporation, an amount equalto any taxes required by law to be withheld with respect to exercise of thatOption or to require the Participant or other person effecting such exercise,as a condition of and prior to delivery of Shares upon such exercise, to pay tothe Corporation an amount sufficient to provide for any such taxes so requiredto be withheld, provided that such amount shall not exceed the statutorymaximum.

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## f.      TheCorporation shall bear all expenses and costs in connection with the operationof the Plan, including costs related to the purchase, issue or transfer ofShares, but excluding taxes imposed on any person receiving a payment ordelivery of Shares under the Plan.

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## g.     Noemployee of the Corporation shall have any right as a Participant to continuein the employ of the Corporation for any period of time or to a continuation ofany particular rate of compensation, and the Corporation expressly reserves theright to discharge or change the assignment of any of its employees who areParticipants at any time.  There is noobligation for uniformity of treatment of Participants under the Plan.

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# 10.   Interpretations and Determinations.  TheCommittee shall have the power from time to time to interpret the Plan and anySub-Plan, to adopt, amend and rescind rules, regulations and proceduresrelating to the Plan and any Sub-Plan, to make, amend and rescinddeterminations under the Plan and any Sub-Plan and to take all other actionsthat the Committee shall deem necessary or appropriate for the implementationand administration of the Plan and any Sub-Plan.  All interpretations, determinations and otheractions by the Committee not revoked or modified by the Board of Directorsshall be final, conclusive and binding upon all parties.  In the event of any conflict between the Planand any Sub-Plan, the terms of the Sub-Plan shall govern and, with respect toSub-Plans A-K, in a manner consistent with Section 1 of the Plan; provided,however, that Section 9(a) of the Plan shall control over anyinconsistent provision in any of Sub-Plans A-K or an award agreement related toany of Sub-Plans A-K.

 

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# 11.   Section Headings.  Thesection headings contained herein are for the purpose of convenience only, andin the event of any conflict, the text of the Plan, rather than the sectionheadings, shall control.

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# 12.   Gender, Etc.  In interpreting thePlan and any Sub-Plan, the masculine gender shall include the feminine, theneutral gender shall include the masculine or feminine, and the singular shallinclude the plural unless the context clearly indicates otherwise.

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# 13.   Invalidity.  If any term orprovision contained herein or in any award agreement evidencing an Option shallto any extent be invalid or unenforceable, such term or provision will bere-formed so that it is valid, and such invalidity or unenforceability shallnot affect any other provision or part thereof.

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# 14.   Effective Date.  Uponapproval by the sole shareholder of the Corporation, the Plan shall become effectiveas of the Distribution Date.

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# 15.   Applicable Law.  ThePlan, any Sub-Plan, any award agreement related to any Sub-Plan and all actionstaken hereunder or thereunder shall be governed by, and construed in accordancewith, the laws of the State of Delaware without regard to the conflict of lawprinciples thereof.

 

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