exhibit10_7.htm


     

    
      

    

    Exhibit
10.7
 

    
      Cree,
Inc.

      Severance
Plan for Section 16 Officers

      Plan
Document and Summary Plan Description

       

      Effective
August 18, 2008

       

    

    This Plan
Document and Summary Plan Description (“Summary Plan Description”) is for all
employees of Cree, Inc. (“Cree” or the “Company”) who are eligible under the
terms of the Cree, Inc. Severance Plan for Section 16 Officers (the “Section 16
Plan”).  All rights to participate in and receive benefits under the
Section 16 Plan are governed solely by the terms and conditions of this Summary
Plan Description. 

    


    
      	
              I.

            	 	
              EFFECTIVE
      DATE

            


    

     

    The
Section 16 Plan is effective as of August 18, 2008.

     

    
      	
              II.

            	 	
              ELIGIBILITY TO
      PARTICIPATE

            


    

     

    Participation
in the Section 16 Plan is restricted to active Cree employees who have been
designated by the Company, at its discretion and consistent with applicable law,
as being subject to the reporting requirements of Section 16 of the
Securities Exchange Act of 1934, as amended (“Officers”).

     

    
      	
              III.

            	 	
              ELIGIBILITY TO RECEIVE
      BENEFITS

            


    

     

    An
Officer of the Company is eligible to receive benefits under this Section 16
Plan upon his/her Termination of Employment initiated by the Company without
Cause or initiated by the Officer for Good Reason, except in the event of
termination of his/her employment due to death or LTD Disability and except as
provided in Article VI below.  Termination of employment initiated by
the Officer other than for Good Reason, or termination of employment due to
death or LTD Disability, will not entitle the Officer to any benefits under this
Section 16 Plan.  The receipt of benefits under the Section 16 Plan
will be conditioned upon the Officer’s execution of and compliance with an
agreement substantially in the form attached as Exhibit A, but with
any appropriate modifications, reflecting changes in applicable law, as are
necessary or appropriate to provide the Company with the protection it would
have if the release were executed as of the effective date specified in Article
I (the “Release Agreement”) that includes, without limitation, (i) a release of
claims against the Company, its affiliates and representatives; and (ii) a
non-disparagement provision. No severance benefits will paid or provided
under the Section 16 Plan unless and until the Release Agreement is timely
executed and returned by the Officer to the Company, becomes effective and has
not been timely revoked in accordance with the terms hereof.  The
Company will complete and provide to the Officer the release of claims in
sufficient time so that if the Officer timely executes 

     

     

    
      
        
        

      

      
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    and returns it, the
revocation period will expire before severance payments are required to commence
under Article IV.

     

    The
provisions of this paragraph will control in the event of conflict between this
paragraph and any other language in this Section 16 Plan.  If the
Officer becomes Generally Disabled, the Officer will not be entitled to
severance pursuant to this Section 16 Plan on account of the Company, in its
sole discretion, taking any action that would otherwise be considered Good
Reason hereunder provided that such action remains in effect only for so long as
the Officer remains Generally Disabled.  If the Officer is Generally
Disabled for more than ninety-one (91) days (whether or not consecutive) in a
rolling twelve (12) month period, the Company will not be in breach of this
Agreement and the Officer will not be entitled to severance on account of the
Company permanently taking any action that would otherwise be considered Good
Reason hereunder so long as the Committee does not terminate the Officer’s
employment prior to the date that the Officer is determined to have an LTD
Disability.  If the Officer is Generally Disabled and the Company
terminates his employment without Cause prior to the date that he is determined
to have an LTD Disability, such termination will be considered a Termination of
Employment by the Company without Cause for purposes of this Section 16
Plan.  If the Officer ceases to be Generally Disabled before his
employment is terminated by reason of LTD Disability, subject to the notice and
cure provisions in Article V, paragraph C of this Section 16 Plan, the Officer
will have the right to terminate his employment for Good Reason on account of
any event or circumstances that occurred while the Officer was Generally
Disabled that would otherwise have constituted Good Reason except for the
provisions of this paragraph and such termination will be considered Termination
of Employment by the Officer for Good Reason for purposes of this Section 16
Plan, unless such event or circumstances has already been cured by the Company
or consented to by the Officer.  

     

    
      	
              IV.

            	 	
              BENEFITS

            


    

     

    Officers
who are otherwise eligible to receive benefits under the Section 16 Plan will be
entitled to receive the following upon their execution and non-revocation (if
applicable) of the Release Agreement:

    


    A.    Severance
Amounts

    


    1.    In the case
of the Chief Executive Officer of the Company, eighteen (18) months of the
Officer’s annualized base salary as of the Termination Date, subject to all
applicable taxes and withholdings.  In the case of all other Officers
who are eligible under this Section 16 Plan, twelve (12) months of the Officer’s
annualized base salary as of the Termination Date, subject to all applicable
taxes and withholdings.  Except as provided in Article VII below, the
base salary provided above shall be paid in accordance with the Company’s
regular payroll schedule and practices for base salary, but commencing within
thirty (30) days following the Officer’s Termination of Employment with payments
retroactive to that date, and shall continue for the Salary Continuation Period
provided that the

     

     

    
      
        
        

      

      
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    Officer
continues to comply with all terms and conditions of the Release Agreement
during such period.

    


    2.    As to the
Chief Executive Officer, all incentive compensation amounts under the
performance units as to which the Chief Executive Officer was employed through
the end of the last day of the relevant performance period but that are not yet
paid as of the Termination Date, subject to all applicable taxes and
withholdings.  In the case of all other Officers who are eligible
under this Section 16 Plan, all incentive compensation amounts under the Cree,
Inc. Management Incentive Compensation Plan (“MICP”) as to which the Officer was
employed through the end of the last day of the relevant performance period but
that are not yet paid as of the Termination Date, subject to all applicable
taxes and withholdings.  The sole purpose of this Article IV,
paragraph A.2. is to negate the requirements under the MICP and performance
units that an Officer be employed on the date of payment in order to be eligible
for such payment.  Only amounts to which the Officer is entitled on
account of satisfaction of the relevant performance measures for the relevant
performance period, determined in accordance with the terms of the MICP or
Notice of Grant of Performance Units, as applicable, will be paid hereunder. Any
incentive compensation amounts will be paid in accordance with the schedule set
forth in the MICP or Notice of Grant of Performance Units, as
applicable.  

    


    B.    Medical, Dental & Vision
Benefits.  In the case of the Chief Executive Officer of the
Company, a lump sum payment equal to eighteen (18) multiplied by the COBRA
premium applicable to the type of medical, dental and vision coverage in effect
for the Officer (e.g., family coverage vs. employee-only coverage) as of the
Termination Date, subject to all applicable taxes and
withholdings.  In the case of all other Officers who are eligible
under this Section 16 Plan, a lump sum payment equal to twelve (12) multiplied
by the COBRA premium applicable to the type of medical, dental and vision
coverage in effect for the Officer (e.g., family coverage vs. employee-only
coverage) as of the Termination Date, subject to all applicable taxes and
withholdings.  Such lump sum amounts will be paid within ninety (90)
days following the Severance Start Date, except as provided in Article VII
below.  Receipt of this payment does not result in continuation of
coverage under the Company’s medical, dental, and vision plans (collectively
“Health Care Plans”) pursuant to the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, and the regulations thereunder (collectively
“COBRA”).  The Officer must timely and properly elect to continue
coverage under the Health Care Plans in accordance with COBRA and timely remit
the required premiums to the Company or its designee whether or not the payment
provided for in this paragraph has been received.  COBRA and the terms
and conditions of the applicable Health Care Plan documents shall govern any
continuation of coverage.

    


    All other
compensation (including, without limitation, bonuses and commissions) and
employee benefits (including, without limitation, short-term and long-term
disability insurance, Paid Time Off accrual, and vesting of equity compensation)
will cease on the Officer’s Termination Date unless provided otherwise by the
Company in writing.  All 

     

     

    
      
        
        

      

      
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    equity compensation grants
are subject to the terms and conditions of the applicable plan
document(s).  Payments under the Section 16 Plan will not be subject
to 401(k) Plan or Employee Stock Purchase Plan deductions.

     

    Although
an Officer will not be eligible for severance benefits hereunder in the event of
his/her Termination of Employment due to death or Disability, if an Officer is
otherwise eligible for benefits hereunder, such benefits will not cease if the
Officer dies or becomes disabled after a Termination of Employment initiated by
Cree without Cause or initiated by the Officer for Good Reason.

      

    
      	
              V.

            	 	
              DEFINITIONS

            


    

     

    A.    “Cause ” shall mean
(i) the Officer’s willful and continued failure to perform the duties and
responsibilities of his position that is not corrected after one written warning
detailing the concerns and offering the Officer a reasonable period of time to
cure; (ii) any material and willful violation of any federal or state law
by the Officer in connection with his responsibilities as an employee of the
Company; (iii) any act of personal dishonesty taken by the Officer in connection
with his responsibilities as an employee of the Company with the intention or
reasonable expectation that such may result in personal enrichment of the
Officer; (iv) the Officer’s conviction of, or plea of nolo contendere to, or grant
of prayer of judgment continued with respect to, a felony that the Board
reasonably believes has had or will have a material detrimental effect on the
Company’s reputation or business; or (v) the Officer materially breaching
his/her Employee Agreement Regarding Confidential Information, Intellectual
Property and Noncompetition with the Company, which breach is (if capable of
cure) not cured within thirty (30) days after the Company delivers written
notice to the Officer of the breach.

      

    B.    “Disability” means that the
Officer is generally disabled for more than ninety-one (91) days (whether or not
consecutive) in a rolling twelve (12) month period.  As used in this
paragraph, “generally disabled” means that the Officer is unable, with
reasonable accommodation, to perform the material and substantial duties of his
position due to illness or injury or physical or mental incapacity as determined
by the Committee consistent with its obligations to the Company’s
shareholders.

    


    C.    “Good Reason” means a
Termination of Employment initiated by the Officer within the time periods set
forth below following the initial existence of one or more of the following
conditions arising without consent of the Officer:

     

    (i)    a material
reduction of the Officer's authority, duties or responsibilities;  

     

    (ii)   a material
reduction in the Officer's base salary other than a one-time reduction that also
is applied to substantially all other Officers of the Company, provided that the
Officer's reduction is substantially proportionate to the reduction applied to
substantially all other Officers;  

     

     

    
      
        
        

      

      
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    (iii)   the Company
requiring an Officer (other than the Chief Executive Officer) to report to
anyone other than the Chief Executive Officer (or an acting Chief Executive
Officer in the event of the Chief Executive Officer's absence), the Company's
Board of Directors, or a Committee of the Board, or, in the case of the Chief
Executive Officer, the Company requiring the Chief Executive Officer to report
to anyone other than the Company's Board of Directors; or  

     

    (iv)   the Company
requiring the Officer to relocate his principal place of business or the Company
relocating its headquarters, in either case to a facility or location outside of
a thirty-five (35) mile radius from the Officer’s current principal place of
employment;

     

    provided,
however, that the Officer will only have Good Reason if he provides notice to
the Chief Executive Officer (in the case of any Officer other than the Chief
Executive Officer) or the Board (in the case of the Chief Executive Officer) of
the existence of the event or circumstances constituting Good Reason specified
in any of the preceding clauses within ninety (90) days of the initial
occurrence of such event or circumstances and if such event or circumstances is
not cured within thirty (30) days after Executive gives such written
notice.  If the Officer initiates Termination of Employment for Good
Reason, the actual Termination of Employment must occur within thirty (30) days
after expiration of the cure period.  The Officer’s failure to timely
give notice of the occurrence of a specific event that would otherwise
constitute Good Reason will not constitute a waiver of the Executive’s right to
give notice of any new subsequent event that would constitute Good Reason that
occurs after such prior event (regardless of whether the new subsequent event is
of the same or different nature as the preceding event).  The
Officer’s actions in writing (or by such other means as is reliable and
verifiable) approving any change, reduction, requirement or occurrence (that
otherwise may be considered Good Reason) in his role as an Officer will be
considered consent for the purposes of this Good Reason definition.

    


    D.    “LTD Disability” means that
the Officer is “Partially Disabled” or “Total Disabled” within the meaning of
the Company’s current long-term disability plan (or such similar term or terms
in any long-term disability plan of the Company that replaces its current
long-term disability plan) and has satisfied the elimination period for benefits
eligibility under such plan.

    


    E.    “Salary Continuation Period”
means the period of time beginning on the date following the Officer’s Severance
Start Date and continuing for the number of months specified in Article IV,
paragraph A (1) of this Section 16 Plan.

    


    F.    “Section 16 Plan
Administrator” means the Compensation Committee of the Cree Board of
Directors (“Compensation Committee”).

    


    G.    “Severance Start Date” means
the date on which the relevant Officer incurs a “separation from service” under
Section 409A(a)(2)(A)(i) of the Code.

     

     

    
      
        
        

      

      
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    H.    “Six-Month Delay Payment Date”
means the payment date associated with the first regular payroll cycle
after passage of six months following the Severance Start Date.

    


    I.     “Specified Employee” will have
the meaning prescribed by Subsection 409A(a)(2)(B)(i) of the Internal Revenue
Code, as amended, as such meaning may be amended from time to time.

    


    J.     “Specified Employee Identification
Date” will have the meaning prescribed by Treasury Regulation
§1.409A-1(i).

    


    K.    “Termination Date ” shall mean
the Officer’s last date of employment with Cree, Inc. or one of its
affiliates.  As used in this paragraph, “affiliate” means an entity
which controls, is controlled by, or is under common control with Cree, where
“control” means ownership of a majority of the outstanding capital stock or
other voting equity interests of the controlled entity.

    


    L.    “Termination of Employment”
will have the meaning as prescribed by Treasury Regulation §
1.409A-1(h)(1)(ii), as such meaning may be amended from time to
time.

     

    
      	
              VI.

            	 	
              IMPACT OF SEPARATE
      CHANGE IN CONTROL AGREEMENT

            


    

    


    This
Section 16 Plan shall not apply to an Officer if he or she becomes entitled to
the payment of severance benefits upon his or her employment termination in
connection with a change in control of the Company pursuant to a separate
agreement with the Company.  In other words, the Company will pay
severance benefits to an Officer only once:  either under this Section
16 Plan or, if applicable, under a separate agreement with the Company providing
for severance benefits in a change in control context.

     

    
      	
              VII.

            	 	
              INTERNAL REVENUE CODE
      SECTION 409A

            


    

     

    For
purposes of Section 409A with respect to all Officers other than the Chief
Executive Officer, each installment payment of severance specified in Article
IV, paragraphs A.1. and B. above is a separate payment; all payments specified
in Article IV, paragraphs A.1. and B. above made through the date that is 2-1⁄2
months following the later of the last day of the calendar year containing the
Severance Start Date and the last day of the Company’s fiscal year containing
the Severance Start Date (the “Short-Term Deferral Deadline”) are intended to be
exempt from Section 409A under the short-term deferral rule;  all such
payments made after the Short Term Deferral Deadline are intended to be exempt
from Section 409A under the severance pay exemption specified in Treasury
Regulation §1.409A- 1(b)(9)(iii) (the “Severance Pay Exemption”); all payments
made after the Short Term Deferral Deadline, that exceed the limits of the
Severance Pay Exemption, that would be paid earlier than the Six-Month Delay
Payment Date and that are paid to an Officer who is a Specified Employee on his
or her Severance Start Date will be delayed until the Six-Month Delay Payment
Date to the extent required to satisfy Subsection 409A(a)(2)(B)(i) of the Code;
on that date, the Company will pay the Officer

     

     

    
      
        
        

      

      
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    a lump sum consisting of
all payments that would have been paid to the Officer prior to the Six-Month
Delay Payment Date had the Officer not been a Specified Employee, increased for
interest at the short-term Federal rate in effect on the Termination Date for
the period beginning on the date each component of such lump sum would have been
paid had the Officer not been a Specified Employee and ending on the Six-Month
Delay Payment Date; however, if the Officer dies after his or her Severance
Start Date but before such lump sum payment is made, it will be paid to the
Officer’s estate without regard to any six-month delay that otherwise applies to
Specified Employees.

     

    For
purposes of Section 409A with respect to the Chief Executive Officer, if the
Chief Executive Office is a Specified Employee on his Severance Start Date, the
payments specified in Article IV, paragraphs A.1. and B. above will be delayed
until the Six-Month Delay Payment Date to the extent required to satisfy
Subsection 409A(a)(2)(B)(i) of the Code; on that date, the Company will pay the
Chief Executive Officer a lump sum consisting of all payments that would have
been paid to him prior to the Six-Month Delay Payment Date had he not been a
Specified Employee, increased for interest at the short-term Federal rate in
effect on the Termination Date for the period beginning on the date each
component of such lump sum would have been paid had he not been a Specified
Employee and ending on the Six-Month Delay Payment Date; however, if the Chief
Executive Officer dies after his Severance Start Date but before such lump sum
payment is made, it will be paid to the Chief Executive Officer’s estate without
regard to any six-month delay that otherwise applies to Specified
Employees.

    


    Each
Officer acknowledges and agrees that the Company has made no
representations as to the tax treatment of the compensation and benefits that
may be received by such Officer pursuant to this Section 16 Plan. This
Section 16 Plan is designed with the intent that all payments hereunder shall
either be exempt from or in compliance with Section 409A.  Nothing in
this Section 16 Plan shall require payment in 2008 of any payment that was
required to be paid after 2008 under the any agreement or arrangement with an
Officer that is deemed to be amended by this Section 16 Plan; in addition,
except as may be required to observe the six-month delay applicable to Specified
Employees under Subsection 409A(a)(2)(B)(i), nothing in this Section 16 Plan
shall postpone beyond 2008 any payment that was required to be paid in 2008
pursuant to any agreement or arrangement with an Officer that is deemed to be
amended by this Section 16 Plan.  The parties agree to work together
to effectuate the intent of this provision, including but not limited to
revising the timing and/or form of any payment hereunder as may be permitted by
and necessary to ensure the terms and conditions applicable to such payments
comply with Section 409A.

    


    
      	
              VIII.

            	 	
              FUNDING

            


    

     

    Benefits
provided pursuant to the Section 16 Plan shall be paid solely out of the
Company’s general assets.  Cree shall not be required to fund or
otherwise provide for the payment of benefits provided hereunder in any other
manner.  An Officer entitled to benefits under the Section 16 Plan has
no rights other than as an unsecured general creditor of the
Company.

     

     

    
      
        
        

      

      
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              IX.

            	 	
              CLAIMS AND REVIEW
      PROCEDURES

            


    

     

    If an
Officer believes that he/she is entitled to a benefit under the Section 16 Plan,
or to a benefit in an amount greater than he/she has received, the Officer may
file a claim by writing to the Section 16 Plan Administrator.  The
Section 16 Plan Administrator is the named fiduciary that has the discretionary
power and authority to act with respect to any appeal from a denial of a claim
for benefits under the Section 16 Plan by performing a full and fair review of
the denial, and such actions shall be final and binding on all persons. Benefits
under the Section 16 Plan shall be payable only if the Section 16 Plan
Administrator determines, in its sole discretion, that an eligible Officer is
entitled to them. Any claim must be filed no later than forty-five (45) days
after the Officer’s Termination Date.

     

    A.    Initial Claim. The
Section 16 Plan Administrator will notify the Officer in writing within ninety
(90) days (or 180 days if special circumstances require an extension of time for
processing the claim) of receipt of the claim as to whether the claim is granted
or denied. Note that if an extension is necessary, the Section 16 Plan
Administrator will provide the Officer with written notice of the extension
(including the circumstances requiring extension and date by which a decision is
expected to be rendered) before the initial ninety (90) day period expires. If
the claim is denied, the Officer will be given (1) specific reasons for the
denial, (2) specific reference to the Section 16 Plan provision(s) on which the
denial is based, (3) a description of any information or material necessary to
support the claim and an explanation of why such information or material is
necessary, (4) an explanation of the Section 16 Plan’s claim appeal
procedure (including a statement of the Officer’s right to bring a civil action
under the Employee Retirement Income Security Act of 1974 (“ERISA”) following a
denial of the claim upon appeal), and (5) a statement that the Officer is
entitled to receive, upon request and free of charge, reasonable access to, and
copies of all documents, records or other information relevant (as defined by
Department of Labor regulation section 2560.503-1(m)) to the claim.

     

    B.    Appeals.  If
the claim is denied, the Officer has sixty (60) days after receipt of notice of
the denial to file a written appeal with the Section 16 Plan Administrator.
During the review process, the Officer has the right to submit written comments,
documents, records, and other information relating to the claim for benefits,
which will be considered without regard to whether such items were considered in
the initial benefit determination. Also, the Officer may, upon request and free
of charge, have reasonable access to, and copies of, all documents, records and
other information relevant (as defined by Department of Labor regulation section
2560.503-1(m)) to the claim for benefits.

     

    The
Section 16 Plan Administrator will notify the Officer in writing within sixty
(60) days (or 120 days if special circumstances require an extension of time for
processing the appeal) of receipt of the appeal as to its decision on review. If
the Section 16 Plan Administrator determines that an extension is necessary, the
Section 16 Plan Administrator will provide the Officer with written notice
(including the circumstances

     

     

    
      
        
        

      

      
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    requiring
the extension and date by which a decision is expected to be rendered) before
the initial sixty (60) day period expires.

     

    If the
Section 16 Plan Administrator denies the appeal, it will provide a written
denial of the claim upon appeal. The written denial shall include the specific
reason or reasons for the denial, specific references to the Section 16 Plan
provisions on which the denial is based, a statement that the Officer is
entitled to receive, upon request and free of charge, reasonable access to, and
copies of all documents, records or other information relevant (as defined in
Department of Labor regulation section 2560.503-1(m)) to the claim, and a
statement of the Officer’s right to bring an action under Section 502(a) of
ERISA.

     

    All
determinations, interpretations, rules, and decisions of the Section 16 Plan
Administrator or its delegate shall be conclusive and binding upon all persons
having or claiming to have any interest or right under the Section 16 Plan and
shall be given deference in any judicial or other proceeding.

     

    C.    Exhaustion of Claims
Procedures. In no event shall an Officer or any other person be entitled
to challenge a decision of the Section 16 Plan Administrator in court or in any
other administrative proceeding unless and until the claim and appeal procedures
described above have been fully complied with and exhausted.

    


    D.    Limitation on
Actions.  Any claim or action that is filed in court or any
other tribunal against or with respect to the Section 16 Plan, the Section 16
Plan Administrator and/or the Committee with respect to this Section 16 Plan
must be brought within 180 days following the relevant Officer’s Termination
Date.  Any claim or action brought after this timeframe will be
void.

     

    
      	
              X.

            	 	
              ADMINISTRATION

            


    

     

    The
Section 16 Plan Administrator is the “administrator” of the Section 16 Plan
within the meaning of Section 3(16)(A) of ERISA and the “named fiduciary” of the
Section 16 Plan under Section 402 of ERISA.  The Section 16 Plan
Administrator is exclusively authorized to interpret the provisions of this Plan
Document and Summary Plan Description. The Section 16 Plan Administrator’s
interpretation and/or application of any term or provision of the Section 16
Plan shall be final and binding. The Section 16 Plan Administrator shall have
full and unfettered authority and responsibility for administration of the
Section 16 Plan, including the discretionary authority to determine eligibility
for benefits and amounts of benefit entitlements and to interpret the terms of
the Section 16 Plan.  The discretionary authority referred to above is
intended to be absolute, and in any case where the extent of this discretion is
in question, the Section 16 Plan Administrator is to be accorded the maximum
discretion possible.  Any exercise of this discretionary authority
shall be reviewed by a court or other tribunal under the arbitrary and
capricious standard (i.e., the abuse of discretion standard).

    
 

    
      
        
        

      

      
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              XI.

            	 	
              AMENDMENT AND
      TERMINATION

            


    

     

    Subject
to this paragraph and Article XV below, the Company reserves the right at its
discretion to amend or terminate this Section 16 Plan at any time, with or
without notice; provided that, the Company will notify the Officers within ten
(10) days if this Section 16 Plan is terminated or an amendment is approved that
adversely affects an Officer’s rights or benefits under this Section 16
Plan.  Any amendment must be in writing and made by a resolution
adopted by the Board of Directors of the Company or the Compensation Committee
of the Board of Directors of the Company or by any other applicable document
executed by a person or persons duly authorized by the Board of Directors of the
Company or the Compensation Committee of the Board of Directors of the Company
to take such actions.  Any amendment or termination of the Section 16
Plan will be limited so that a violation of Section 409A does not occur on
account of the amendment or termination.  Notwithstanding the
foregoing, if an Officer experiences a Termination of Employment initiated by
the Company without Cause or initiated by the Officer for Good Reason while this
Section 16 Plan is in effect, no subsequent amendment or termination of this
Section 16 Plan may alter his/her right to receive the severance benefits
provided under the Section 16 Plan in effect as of his/her Termination
Date.   In any event, if an Officer experiences a Termination of
Employment initiated by the Company without Cause or initiated by the Officer
for Good Reason within ninety (90) days after (i) termination of this Section 16
Plan, or  (ii) an amendment that adversely affects Officer’s rights or
benefits under this Section 16 Plan, the determination of the Officer’s
eligibility for and amount of benefits on account of such Termination of
Employment will be determined by reference to the form of this Section 16 Plan
in effect immediately prior to such termination or amendment.  If a
material change to the Section 16 Plan is adopted by a party other than the
Compensation Committee of the Board of Directors of the Company, the
Compensation Committee of the Board of Directors of the Company must approve
such change before it shall become effective.

     
 

    
      	
              XII.

            	 	
              ENTIRE PLAN;
      AMENDMENTS

            


    

     

    This Plan
Document and Summary Plan Description contains all the terms, conditions and
benefits relating to the Section 16 Plan.  No employee, officer, or
director of the Company has the authority to alter, vary or modify the terms of
the Section 16 Plan, other than by means of an authorized written amendment to
the Section 16 Plan approved by the Section 16 Plan Administrator.  No
oral or written representations contrary to the terms of the Section 16 Plan and
its written amendments shall be binding upon the Section 16 Plan, the Section 16
Plan Administrator or the Company.

     

    
      	
              XIII.

            	 	
              NO CONTRACT OF
      EMPLOYMENT

            


    

     

    Nothing
herein is intended to or shall be considered a contract of employment or for any
period of employment or a guarantee of future employment with the Company or to
limit 

     

     

    
      
        
        

      

      
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    in any
way the right of the Company to terminate an Officer at any time and for any
reason.

     

    
      	
              XIV.

            	 	
              ASSIGNMENT OF RIGHTS
      AND OBLIGATIONS

            


    

     

    No
eligible Officer shall have the right to assign, delegate or otherwise transfer,
either in full or in part, any of his/her rights or obligations under the
Section 16 Plan, and any such assignment, delegation or other such transfer
shall be void.  Notwithstanding the foregoing, if an Officer dies
after experiencing an Termination of Employment initiated by the Company without
Cause or initiated by the Officer for Good Reason but prior to receipt of the
final severance benefit provided for herein, any remaining payments will be made
to the Officer’s estate, subject to applicable withholdings.

    


    
      	
              XV.

            	 	
              APPLICABLE LAW;
      VENUE

            


    

     

    Except
where preempted by ERISA, the Section 16 Plan shall be construed in accordance
with, and all disputes hereunder shall be governed by, the laws of the State of
North Carolina without regard to its conflict of laws rules. All legal actions
arising under or relating to the Section 16 Plan shall be subject to the
jurisdiction and venue of the United States District Court for the Middle
District of North Carolina sitting in Greensboro, North Carolina.

     

    
      	
              XVI.

            	 	
              ERISA
      RIGHTS

            


    

     

    Information
Required By ERISA:

     

    Plan
Name

    Cree,
Inc. Severance Plan for Section 16 Officers

     

    Plan
Sponsor

    Cree,
Inc.

    4600
Silicon Drive

    Durham,
NC 27703

    (919)
313-5300

     

    Plan
Administrator

    The
Compensation Committee of the Company’s Board of Directors is the Section 16
Plan Administrator.  Communications with the Section 16 Plan
Administrator must be in writing and addressed to:

     

    Vice
President, Administration

    Cree,
Inc.

    4600
Silicon Drive

    Durham,
NC 27703

     

     

    
      
        
        

      

      
        - 11
-

        
          

        

      

      
        
        

      

    

     

    Type of
Plan

    The
Section 16 Plan is a welfare plan providing for severance benefits.

     

    Employer Identification
Number

    Cree’s
Employer Identification Number is 56-1572719.  When writing about the
Section 16 Plan, an Officer should include this number.

     

    Plan
Number

    For the
purpose of identification, Cree has assigned the Section 16 Plan the number 511.
All communications concerning the Section 16 Plan should include this reference
number.

    


    Plan
Year

    The
Section 16 Plan records are kept on a calendar year basis.

     

    Service of Legal
Process

    Service
of legal process may be made on the Section 16 Plan Administrator at the address
above.

    


    Statement of ERISA
Rights

    If you
are an eligible Officer who is a participant in the Section 16 Plan, you are
entitled to certain rights and protections under ERISA.

     

    A.    Receive Information About
Your Plan and Benefits. ERISA provides that you
are entitled to:

    


    1.    Examine,
without charge, at the office of the Section 16 Plan Administrator or its
delegate all Section 16 Plan documents and a copy of the latest annual report
(Form 5500 series) available at the Public Disclosure Room of the Employee
Benefits Security Administration, if such report is required to be filed by the
Section 16 Plan with the U.S. Department of Labor.

    


    2.    Obtain
copies of all documents governing the operation of the Section 16 Plan,
including copies of the latest annual report (Form 5500 series), if any, and
updated summary plan description, upon written request to the Section 16 Plan
Administrator. The Section 16 Plan Administrator may impose a reasonable charge
for the copies.

    


    3.    Receive a
summary of the Section 16 Plan’s financial report, if any. The Section 16 Plan
Administrator may be required by law to furnish each participant with a copy of
the summary annual report.

      

    B.    Prudent Actions By
Fiduciaries. In addition to creating rights for the Section 16 Plan
participants, ERISA imposes duties upon the people who are responsible for the
operation of the Section 16 Plan. The people who operate the Section 16 Plan,
called “fiduciaries” of the Section 16 Plan, have a duty to do so prudently and
in the interest of 

     

     

    
      
        
        

      

      
        - 12
-

        
          

        

      

      
        
        

      

    

     

    you and
other Section 16 Plan participants and beneficiaries.   No one,
including your employer or any other person, may fire you or otherwise
discriminate against you in any way to prevent you from obtaining a welfare
benefit or exercising your rights under ERISA.

     

    C.    Enforce Your
Rights.  If your claim for a welfare benefit is denied or
ignored, in whole or in part, you have a right to know why this was done, to
obtain copies of documents relating to the decision without charge, and to
appeal any denial, all within certain time schedules.

     

    Under
ERISA, there are steps you can take to enforce the above rights. For instance,
if you request a copy of plan documents or the latest annual report (if any)
from the Section 16 Plan and do not receive them within thirty (30) days, you
may file suit in a federal court. In such case, the court may require the
Section 16 Plan Administrator to provide the materials and pay you up to $110 a
day until you receive the materials, unless the materials were not sent because
of reasons beyond the control of the Section 16 Plan Administrator.

     

    If you
have a claim for a benefit that is denied or ignored, in whole or in part, you
may file suit in a state or federal court.  If it should happen that
Section 16 Plan fiduciaries misuse the Section 16 Plan’s money, or if you are
discriminated against for asserting your rights, you may seek assistance from
the U.S. Department of Labor or you may file suit in a federal
court.  The court will decide who should pay court costs and legal
fees.  If you are successful, the court may order the person you have
sued to pay these costs and fees.  If you lose, the court may order
you to pay these costs and fees, for example, if it finds your claim is
frivolous.

     

    D.    Assistance With Your
Questions.  If you have questions about the Section 16 Plan,
you should contact the Section 16 Plan Administrator in care of the Vice
President, Administration, of the Company.  If you have questions
about the statements made in this summary or your rights under ERISA, or if you
need assistance in obtaining documents from the Section 16 Plan Administrator,
you should contact the nearest office of the Employee Benefits Security
Administration, U.S. Department of Labor, listed in your telephone directory, or
the Division of Technical Assistance and Inquiries, Employee Benefits Security
Administration, U.S. Department of Labor, 200 Constitution Avenue, Washington,
D.C. 20210.  You may also obtain certain publications about your
rights and responsibilities under ERISA by calling the publications hotline of
the Employee Benefits Security Administration.

    


    


    
      
        
           


        

        
          - 13
-

          
            

          

        

        
           


        

      

    

     

    
      EXHIBIT A


      
        GENERAL
RELEASE

        
          RECITALS

        

      

    

     

    This
General Release (this “Release”) is made by and between ______________
(“Employee”) and Cree, Inc. (the “Company”) (jointly referred to as the
“Parties”):

     

    WHEREAS,
the Company and Employee entered into an Executive Change in Control Agreement
dated [_______] (the “Change in Control Agreement”);

     

    WHEREAS,
the Employee is a participant in the Company’s Severance Plan for Section 16
Officers adopted on August 18, 2008 (the “Severance Plan”);

     

    WHEREAS,
the Company and Employee entered into an Employee Agreement Regarding
Confidential Information, Intellectual Property, and Noncompetition (the
“Confidentiality Agreement”);

     

    WHEREAS,
the Company and Employee entered into [DESCRIBE EQUITY AWARD AGREEMENTS: a Stock
Option Agreement dated [____] granting Employee the option to purchase shares of
the Company’s common stock subject to the terms and conditions of the Company’s
[Stock Option Plan] and the Stock Option Agreement (collectively, the “Stock
Agreements”)];

     

    WHEREAS,
Employee’s employment with the Company terminated on [DATE] (the “Termination
Date”); and

     

    WHEREAS,
the Parties wish to resolve any and all disputes, claims, complaints,
grievances, charges, actions, petitions and demands that the Employee may have
against the Company as defined herein, including, but not limited to, any and
all claims arising out of, or related to, Employee’s employment with, or
separation from, the Company;

     

    NOW
THEREFORE, in consideration of the promises made herein, the Parties hereby
agree as follows:

     

    COVENANTS

     

    1.    Consideration.

     

    (a)    Pursuant
to Article III of the Severance Plan , Employee’s receipt of severance pursuant
to Article IV of the Severance Plan is subject to Employee executing and not
revoking this Release.  In consideration of Employee executing and not
revoking this Release, and subject to the terms and conditions of the Severance
Plan, the Company agrees to pay (or provide, as applicable) Employee the amounts
and benefits specified in Article IV of the Severance Plan.  Such
severance benefits will be paid or provided at the times and in the manner set
forth in the Severance Plan.  Employee acknowledges that he will not
be entitled to any other compensation or benefits, except as provided in Section
7 of the Change in Control Agreement.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)    Stock.  Employee
acknowledges that as of the Termination Date, he will have vested in [______]
options and no more.  The exercise of any stock options shall continue
to be subject to the terms and conditions of the Stock Agreements and Section 19
of the Change in Control Agreement. [Delete Section 19 cross-reference if not
applicable]

     

    (c)    Benefits.  Employee’s group
health benefits will cease on [DATE], subject to Employee’s
right to continue his group health benefits under COBRA.  Employee’s
participation in all other benefits and incidents of employment (including, but
not limited to, the accrual of vacation and paid time off, and the vesting of
stock options) ceased on the Termination Date.

     

    2.    Payment of
Salary.  Subject to Section 7 of the Change in Control
Agreement and Section 1 above, Employee acknowledges and represents that
Employee is not entitled to any additional salary, wages, bonuses, accrued
vacation, housing allowances, relocation costs, interest, severance, stock,
stock options, outplacement costs, fees, commissions or any other benefits and
compensation.

     

    3.    Confidential
Information.  Employee shall continue to comply with the terms
and conditions of the Confidentiality Agreement and maintain the confidentiality
of all of the Company’s confidential and proprietary
information.  Employee also shall return to the Company all of the
Company’s property, including all confidential and proprietary information, and
all documents and information that Employee obtained in connection with his
employment with the Company, on or before the Effective Date of this
Release.

     

    4.    Release of
Claims.  Employee agrees that the foregoing consideration
represents settlement in full of all outstanding obligations owed to Employee by
the Company.  To the fullest extent permitted by applicable law,
Employee, on his own behalf and on behalf of his respective heirs, family
members, executors, agents, and assigns, hereby fully and forever releases the
Company and its current and former: officers, directors, employees, agents,
investors, attorneys, shareholders, administrators, affiliates, divisions,
subsidiaries, predecessor and successor corpora­tions and assigns (the
“Releasees”) from, and agrees not to sue concerning, any claim, duty, obligation
or cause of action relating to any matters of any kind arising out of or
relating to his employment by the Company (except as provided in Section 7 of
the Change in Control Agreement), or his service as an officer of the Company
and/or a director of the Company, whether presently known or unknown, suspected
or unsuspected, that Employee may possess arising from any omissions, acts or
facts that have occurred up until and including the Effective Date of this
Release including, without limitation:

     

    (a)    any and
all claims relating to or arising from Employee’s employment with the Company,
or the termination of that employment;

     

    (b)    any and
all claims relating to, or arising from, Employee’s right to purchase, or actual
purchase of, shares of Company stock, including, but not limited to, any claims
for fraud, misrepresentation, breach of fiduciary duty, breach of duty under
applicable state corporate law, and securities fraud under any state or federal
law;

     

    (c)    any and
all claims under the law of any jurisdiction, including, but not limited to,
wrongful discharge of employment; constructive discharge from employment;
termination in 

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    violation of public
policy; discrimination; breach of contract, both express and implied; breach of
a covenant of good faith and fair dealing, both express and implied; promissory
estoppel; negligent or intentional infliction of emotional distress; negligent
or intentional misrepresentation; negligent or intentional interference with
contract or prospective economic advantage; unfair business practices;
defamation; libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; and conversion;

     

    (d)    any and
all claims for violation of any federal, state or municipal statute, including,
but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights
Act of 1991; the Age Discrimination in Employment Act of 1967; the Americans
with Disabilities Act of 1990; the Fair Labor Standards Act; the Employee
Retirement Income Security Act of 1974; the Worker Adjustment and Retraining
Notification Act; the Older Workers Benefit Protection Act; the Family and
Medical Leave Act; the Fair Credit Reporting Act; the North Carolina Equal
Employment Practices Act; and North Carolina law;

     

    (e)    any and
all claims for violation of the federal, or any state,
constitution;

     

    (f)    any and
all claims arising out of any other laws and regulations relating to employment
or employment discrimination;

     

    (g)    any claim
for any loss, cost, damage, or expense arising out of any dispute over the
non-withholding or other tax treatment of any of the proceeds received by
Employee as a result of this Release; and

     

    (h)    any and
all claims for attorney fees and costs.

     

    5.    [Include if Officer is 40 or
more years old] Acknowledgement of Waiver of Claims Under
ADEA.  Employee acknowledges that he is waiving and releasing
any rights he may have under the Age Discrimination in Employment Act of 1967
(“ADEA”) and that this waiver and release is knowing and
voluntary.  Employee and the Company agree that this waiver and
release does not apply to any rights or claims that may arise under the ADEA
after the Effective Date of this Release.  Employee acknowledges that
the consideration given for this waiver and release is in addition to anything
of value to which Employee was already entitled.  Employee further
acknowledges that he has been advised by this writing that:

     

    (a)    he should
consult with an attorney prior to executing this Release;

     

    (b)    he has up
to twenty-one (21) days within which to consider this Release;

     

    (c)    he has
seven (7) days following his execution of this Release to revoke this
Release;

     

    (d)    this ADEA
waiver shall not be effective until the revocation period has expired;
and,

     

    (e)    nothing
in this Release prevents or precludes Employee from challenging or seeking a
determination in good faith of the validity of this waiver under the ADEA, nor
does it 

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    impose
any condition precedent, penalties or costs for doing so, unless specifically
authorized by federal law.

     

    6.    Unknown
Claims.  The Parties represent that they are not aware of any
claim by either of them other than the claims that are released by this
Release.  Employee acknowledges that he has been advised by legal
counsel and is familiar with the principle that a general release does not
extend to claims which the releasor does not know or suspect to exist in his
favor at the time of executing the release, which if known by him would have
materially affected his settlement with the releasee.  Employee, being
aware of said principle, agrees to expressly waive any rights Employee may have
to that effect, as well as under any other statute or common law principles of
similar effect, to the fullest extent permitted by applicable law.

     

    7.    Application for
Employment.  Employee understands and agrees that, as a
condition of this Release, he shall not be entitled to any employment with the
Company, its subsidiaries, or any successor, and he hereby waives any alleged
right of employment or re-employment with the Company, its subsidiaries or
related companies, or any successor.

     

    8.    No
Cooperation.

     

    (a)    Employee
agrees that he will not knowingly counsel or assist any attorneys or their
clients in the presentation or prosecution of any disputes, differences,
grievances, claims, charges, or complaints by any third party against any of the
Releasees that relate to any of the matters for which he has provided a release
hereunder, unless under a subpoena or other court order to do
so.  Employee agrees both to immediately notify the Company upon
receipt of any such subpoena or court order, and to furnish, within three (3)
business days of its receipt, a copy of such subpoena or court order to the
Company.  If approached by anyone for counsel or assistance in the
presentation or prosecution of any such disputes, differences, grievances,
claims, charges, or complaints against any of the Releasees, Employee shall
state no more than that he cannot provide counsel or assistance.

     

    (b)    Notwithstanding any
language herein to the contrary, Employee understand that nothing in this
Release prohibits him from filing or pursuing a charge of discrimination with
the Equal Employment Opportunity Commission (EEOC) or a claim with the National
Labor Relations Board (NLRB); provided that, by signing this Release Employee
agree to waive and relinquish any personal monetary gain that otherwise would
result from such EEOC or NLRB Claim.

     

    9.    Costs.  The
Parties shall each bear their own costs, expert fees, attorney fees and other
fees incurred in connection with the preparation of this Release.

     

    10.   Arbitration.  The
Parties agree that any and all disputes arising out of, or relating to, the
terms of this Release, their interpretation, and any of the matters herein
released, shall be subject to binding arbitration as described in Section 17
[change to Section 16 as applicable] of the Change in Control Agreement (but as
adjusted to cover disputes under this Release).

     

    11.   No
Representations.  Each Party represents that it has had the
opportunity to consult with an attorney, and has carefully read and understands
the scope and effect of the provisions of this 

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Release.  Neither
Party has relied upon any representations or statements made by the other Party
hereto which are not specifically set forth in this Release.

     

    12.   No Oral
Modification.  Any modification or amendment of this Release,
or additional obligation assumed by either Party in connection with this
Release, shall be effective only if placed in writing and signed by both Parties
or their authorized representatives.

     

    13.   Entire
Agreement.  This Release, the Change in Control Agreement, the
Confidentiality Agreement and the Stock Agreements represent the entire
agreement and understanding between the Company and Employee concerning the
subject matter of this Release and Employee’s relationship with the Company, and
supersede and replace any and all prior agreements and understandings between
the Parties concerning the subject matter of this Release and Employee’s
relationship with the Company.

     

    14.   Governing
Law.  This Release shall be governed by the laws of the State
of North Carolina, without regard for choice of law provisions.

     

    15.   Severability.  If
any provision of this Release is found to be unenforceable, it shall not affect
the enforceability of the remaining provisions, and the court shall enforce all
remaining provisions to the fullest extent permitted by law.

     

    16.   Effective
Date.  This Release will not become effective until the eighth
(8th) day after it has been signed by both Parties and then only if Executive
does not revoke it as permitted in Section 5(c) above (the “Effective
Date”).  In order to revoke this Release, the Executive must deliver a
letter expressly stating that he is revoking this Release to the Company’s Vice
President, Administration, at 4600 Silicon Drive, Durham, North Carolina 27703
within seven (7) days after he signs this Release.

     

    17.   Voluntary Execution of
Release.  This Release is executed voluntarily and with the
full intent of releasing all claims, and without any duress or undue influence
by any of the Parties.  The Parties acknowledge that:

     

    (a)    They have
read this Release;

     

    (b)    They have
been represented in the preparation, negotiation, and execution of this Release
by legal counsel of their own choice or that they have voluntarily declined to
seek such counsel;

     

    (c)    They
understand the terms and consequences of this Release and of the releases it
contains; and

     

    (d)    They are
fully aware of the legal and binding effect of this Release.

     

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS WHEREOF, each of the Parties has executed this Release, in the case of
the Company by a duly authorized officer, as of the day and year written
below.

     

    
      
        
          	 COMPANY:	
                   

                	 
	 	 	 	 	 	 
	 CREE,
      INC.	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 By:	 	 	 	
                   Date:
    

                	 
	 Title:	 	 	 	 	 
	 	 	 	 	 	 


        

         

        
          	 EMPLOYEE:	
                   

                	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 Date: 	 
	 Print
      Name: