exhibit10_1.htm


     

    
      

    

    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


       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      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., 1⁄4 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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