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Exhibit 10.1

CREE, INC.

FISCAL 2009
MANAGEMENT INCENTIVE COMPENSATION PLAN

The following Management Incentive Compensation Plan (the “Plan”) is adopted by
Cree, Inc. and its consolidated subsidiaries (collectively, the “Company”) for
its fiscal year ending June 28, 2009 (the “Plan Year”):

1.    Purpose.  The purpose of the Plan is to motivate and reward excellent
performance, to attract and retain outstanding senior management, to create a
strong link between strategic and corporate operating plans and individual
performance, to achieve greater corporate performance by focusing on results,
and to encourage teamwork at the highest levels within the organization.  The
Plan rewards participants with incentives based on their contributions and the
attainment of specific corporate and individual performance goals.  Incentives
may be calculated in part based on a performance measurement multiplied by the
participant’s annual target award level.  Annual target award levels vary
according to the position.

2.    Eligibility.  The senior level managers of the Company who report directly
to the Company’s Chief Executive Officer (CEO) and other key managers of the
Company who have been identified by the CEO are eligible to participate in this
Plan upon approval by the Compensation Committee in the case of executive
officers, or by the CEO in all other cases, of such individual’s target award
level for the Plan Year.  Participation in a predecessor incentive compensation
plan does not entitle any Company employee to be selected for participation in
this Plan.  If an eligible participant’s duties and responsibilities materially
change during the Plan Year, the Compensation Committee in the case of executive
officers, or the CEO in all other cases, shall have the option to terminate the
participant’s eligibility to participate in the Plan or otherwise modify the
participant’s goals and/or incentives due to such change.

3.    Plan Awards:

3.1    Target Award Levels.  Annual target award levels are expressed as a
percentage of base salary and vary by position.  The target award level
specified for each participant represents the award level for 100% achievement
of all objectives by that participant.  The actual award amount is determined by
multiplying the participant’s base salary during the award period by various
percentages, as provided in Paragraph 3.2 below.

3.2    Determination of Awards.  Except as expressly provided otherwise in this
Plan, each eligible participant’s base salary for all award periods in the Plan
Year will be determined by reference to the participant’s base salary in effect
on the last day of the first fiscal quarter of the Plan Year (as provided in the
Company’s human resources management system).  If the participant’s base salary
changes after the first fiscal quarter of the Plan Year, the base salary for the
award period in which the change occurs will be the weighted average base salary
for the award period determined by multiplying each base salary in effect during
that award period by a fraction, the numerator of which is the number of
calendar days in the award period on which such base salary was in effect and
the denominator of which is the number of calendar days in the award period, and
the base salary for all full subsequent award periods will be the new base
salary (subject to any further changes).  Awards are determined based on
performance against goals in two categories:  corporate goals, and individual
MBO goals.  Unless otherwise approved by the Compensation Committee in the case
of executive officers or by the CEO in all other cases, 60% of a participant’s
target award level will be allocated to achievement of corporate
 
 

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annual goals and 40% of a participant’s target award level will be allocated to
achievement of individual MBO goals.  Performance against individual MBO goals
will be measured quarterly on a scale of 0% to 100% and performance against
corporate annual goals will be measured annually on a scale of 0% to
150%.  Actual awards will be determined for each participant in accordance with
the following formulas:
 
Quarterly Awards:     A x B x C x D

Annual Award:       A x B x E x F

Where:

  A equals the base salary for the award period   B equals the target award
level for the participant (expressed as a percentage)
 
C equals the percentage of the target award level allocated to individual
performance goals for the fiscal quarter (e.g., ¼ of 40%)

 
D equals the participant’s aggregate performance measurement against individual
goals for the fiscal quarter (expressed as a percentage)

 
E equals the percentage of the target award level allocated to corporate
performance goals for the fiscal year (e.g., 60%)

 
F equals the performance measurement against corporate goals for the fiscal year
(expressed as a percentage)

3.3    Individual MBO Goals.  At the beginning of each fiscal quarter, the CEO
will determine the quarterly corporate financial performance goals, if any, to
be included in each participant’s individual objectives and the weight to be
applied thereto.  At the beginning of each fiscal quarter, each participant will
develop performance goals specific to such individual or to his or her business
unit’s performance for that fiscal quarter and assign a weight to each goal
(expressed as a percentage) such that the aggregate weight of all goals
(including the weight of any quarterly corporate financial performance goals
specified by the CEO) is equal to 100%.  The participant's proposed goals and
assigned weights will be submitted to the CEO for approval.  Meeting an
individual goal will yield a performance measurement of 100% for that individual
goal.  Not meeting an individual goal will result in a 0% performance
measurement for that goal unless the CEO in his discretion approves a prorated
percentage based on partial achievement of the goal.  Performance measurements
for individual goals will be approved by the CEO and multiplied by the weight
assigned to that goal to arrive at the participant’s aggregate performance
measurement against individual goals for the fiscal quarter.  Any corresponding
awards will be paid to eligible participants following approval of the amount by
the CEO.

3.4    Corporate Goals.  Performance against corporate goals is measured based
on the Company meeting or exceeding the revenue and earnings per share (EPS)
targets for the Plan Year recommended by the CEO and approved by the
Compensation Committee.  The performance measurement against corporate goals
will be 0% for the Plan Year unless both the revenue and EPS targets established
for the minimum performance measurement level are achieved for such award
period.  After the end of the Plan Year, the Compensation Committee will assess
the Company’s revenue and EPS results for the Plan Year using competent and
reliable information, including but not limited to audited financial statements,
if available, and will determine in good faith and in its sole discretion the
performance measurement against corporate goals (expressed as a percentage) for
the Plan Year using a pre-established interpolation schedule.  The performance
payout for the award period will be determined based on the lower of the
performance measurement level associated with revenue results or the performance
measurement level associated with EPS results.  The performance measurement
percentage will then be used to determine each participant’s annual incentive
compensation based on achievement of corporate goals.  Any corresponding awards
will be paid to eligible participants following approval of the
 
 
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amount by the Compensation Committee in the case of executive officers and by
the CEO in all other cases.
 
4.    Other Provisions:

4.1    New Hires; Newly Eligible Employees; Leave Periods.  Unless otherwise
provided in the individual’s employment offer letter, if a new hire is eligible
to participate in the Plan, he or she will commence participation in the Plan as
of the date of hire and his or her base salary for the Plan Year will be as
provided in his or her offer letter (subject to change as otherwise provided in
this Plan); provided that the base salary used for purposes of calculating the
participant’s awards for the first quarter of participation and the annual award
will reduced proportionately to equate to the base salary applicable to the
number of calendar days the participant was employed during such award
periods.  If an existing employee of the Company first becomes eligible to
participate in the Plan after the start of the Plan Year, he or she will
commence participation in the Plan as of the start date approved by the
Compensation Committee in the case of an executive officer or by the CEO in all
other cases.  The base salary used for purposes of calculating such
participant’s awards will be determined as otherwise provided in this Plan,
except that the base salary used for purposes of calculating the participant’s
awards for the first quarter of participation and the annual award will reduced
proportionately to equate to the base salary applicable to the number of
calendar days the participant was eligible to participate in the Plan during
such award periods.  If a participant is on a leave of absence (other than a
leave of absence where the participant continues to be paid his or her full base
salary through the Company’s payroll system), including without limitation a
short-term or long-term disability leave, for all or part of an award period, to
the extent permitted by applicable law (e.g., the Family and Medical Leave Act
(FMLA) or the Uniformed Services Employment and Reemployment Rights Act
(USERRA)), the base salary for such award period will be reduced proportionately
to equate to a base salary applicable to the number of calendar days the
participant was not on a leave of absence during such award period.  If a
participant in the Plan remains employed by the Company, but after the start of
the Plan Year becomes ineligible to participate in the Plan, unless otherwise
approved by the Compensation Committee in the case of an executive officer or by
the CEO in all other cases, the participant will not be eligible for an award
for any award period that is partially completed as of the date he or she
becomes ineligible to participate in the Plan.

4.2    Termination of Employment.  Unless otherwise approved by the Compensation
Committee in the case of an executive officer or by the CEO in any other case,
and except in the case of termination of employment due to the participant’s
death or disability (meeting the requirements for benefits under the Company’s
long-term disability (LTD) plan or, in the case of a participant who is not
eligible to participate in the LTD plan, the determination by a qualified,
objective medical professional that the participant is disabled, as such term is
defined in the LTD plan) or termination of employment after a Change In Control
as provided in this paragraph, the participant must be continuously employed by
the Company for that part of the award period that the individual is eligible to
participate in the Plan up through and including the date of the payment in
order to have a right to payment for such award period, and any participant
whose employment with the Company terminates prior to the date of payment for
such award period, with or without cause, shall forfeit his or her rights to any
unpaid award.  If the Company terminates a participant’s employment prior to the
payment date for an award period on account of the participant’s death or
disability (which shall have the same meaning as provided above), the
participant will be entitled to receive an award for any award period in which
he or she was employed by the Company as otherwise determined in accordance with
this Plan as if the participant remained employed through the payment date for
the award period.  However, the base salary used for purposes of calculating
such participant’s award(s) will be reduced proportionately to equate to the
base salary applicable to the number of calendar days the participant was
employed, and not otherwise on a leave of absence as provided above, during the
award period.  If there is a Change In Control, as that term is defined in the
Cree, Inc. Equity Compensation Plan  (as amended and restated August 5, 2002 and
 
 
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without regard to any subsequent amendments) (“Change In Control”), and a
participant’s employment terminates for any reason (other than death or
disability) subsequent to the Change in Control but prior to the payment date
for an award period, the participant will be entitled to receive an award for
all award periods for the Plan Year as otherwise determined in accordance with
this Plan as if the participant remained employed through the payment date for
the award period.  The base salary used for purposes of calculating such
participant’s awards will be determined as otherwise provided in this Plan,
except that the base salary used for such purposes may not be decreased after
the Change in Control without the Participant’s prior written approval.
 
4.3    Exceptions.  In order to ensure that the Company’s best interests are
met, the amount of a payment on an award otherwise calculated in accordance with
this Plan can be increased, decreased, or eliminated at any time prior to
payment, in the sole discretion of the CEO, except that no change with respect
to any award to any executive officer of the Company shall be made without
Compensation Committee approval and, so long as the participant is not in breach
of his or her obligations under his or her Employee Agreement Regarding
Confidential Information, Intellectual Property, and Noncompetition with the
Company, payments due as a result of a Change In Control, as otherwise provided
in the Plan, cannot be decreased or eliminated without the prior written
approval of the participant.

4.4    Amendment; Termination.  The Company has no obligation to implement this
Plan for any fiscal year and has the right to amend, modify or terminate the
Plan at any time without prior notice to participants; provided that the Company
may not amend, modify or terminate the Plan in a manner that affects a payment
that has already become payable hereunder to an eligible employee.

4.5    Earned Upon Payment.  Except as provided in Paragraph 4.2 above and
Paragraph 4.6 below, no award amount shall be considered earned by any
participant under the Plan until it is received by the participant from the
Company.

4.6    Change In Control.  In the event a Change In Control occurs during the
Plan Year, notwithstanding any language in this Plan to the contrary, each
participant’s performance measurement against individual MBO goals for any award
period ending after the effective date of the Change In Control will be 100% and
the performance measurement against corporate goals for the Plan Year will be
the greater of 100% or such performance measurement as is determined in
accordance with this Plan, regardless of whether such participant is employed
during or at the end of the applicable award period.

4.7    Priority of Written Agreement.  Notwithstanding any language in this Plan
to the contrary, the terms and conditions of any written agreement between the
Company and a participant regarding payment of one or more awards under this
Plan (or payment of an amount in lieu of payment of such awards) upon
termination of employment for any reason or in the event of a Change In Control
shall supersede and control with respect to payment of such awards to the
participant under this Plan, provided that the written agreement was approved by
the Compensation Committee if the participant was an executive officer at the
time of execution of the agreement or by the CEO in any other case.

4.8    Non-Transferability.  No right or interest of any participant in this
Plan is assignable or transferable, or subject to any lien, directly, by
operation of law, or otherwise, including without limitation by execution, levy,
garnishment, attachment, pledge, and bankruptcy, except that the right to
receive any form of compensation payable hereunder may be assigned or
transferred by will or the laws of descent and distribution.
 
 
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4.9    No Rights to Company Assets.  No Plan participant nor any other person
will have a right in, nor title to, any assets, funds or property of the Company
or any of its subsidiaries through this Plan.  Any earned incentives will be
payable from the Company’s general assets.  Nothing contained in this Plan
constitutes a guarantee by the Company or any of its subsidiaries that the
assets of the Company and its subsidiaries will be sufficient to pay any earned
incentives.
 
5.    Administration:
 
5.1    The Compensation Committee is the Plan Administrator with respect to all
decisions under the Plan concerning, affecting or related to the compensation of
executive officers, and the CEO is the Plan Administrator with respect to all
other aspects of the Plan.  The Plan Administrators, in their respective
capacities, have the authority to interpret the Plan, and the Plan
Administrators’ interpretations, in their respective capacities, shall be final
and binding on all Plan participants.
 
5.2    At all times, this Plan shall be interpreted and operated so that awards
payable under this Plan shall either be exempt from or comply with the
provisions of section 409A of the Internal Revenue Code of 1986, as amended (the
"Code") and the treasury regulations relating thereto so as not to subject any
Plan participant to the payment of interest and/or any tax penalty that may be
imposed under section 409A of the Code with respect to the Plan.
 
5.3    When awarded, payments under the Plan will be made as soon as practicable
after the end of the applicable award period, and in any event, payments will be
made no later than the end of the second fiscal quarter following the award
period to which the payments relate.  Notwithstanding the foregoing, if a
participant is eligible for payment of:  (a) all or part of an annual award as a
result of his or her death or termination of his or her employment on account of
his or her disability as provided in Paragraph 4.2 above or as a result of his
or her involuntary termination under the Severance Plan for Section 16 Officers,
if applicable, the payment will be made no later than the 15th day of the third
month after the later of the end of the Company’s tax year in which such death
or disability occurs or the end of the participant’s tax year in which such
death or disability occurs; (b) 100% of a quarterly award as provided in
Paragraph 4.6 above due to a Change In Control, payment will be made without
exception on or before the 15th day of third month following the end of the
award period; and/or (c) 100% or more of an annual award as provided in
Paragraph 4.6 above due to a Change In Control, payment will be made without
exception no later than the 15th day of the third month after the later of the
end of the Company’s tax year in which the Change In Control occurs or the end
of the participant’s tax year in which the Change In Control occurs.
 
5.4    This Plan shall not be construed to give participants a right of
continued employment with the Company.
 
 
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