Exhibit 10.1 Oct 21 2005


    Exhibit
      10.1

    


    


    CREE,
      INC.

    


    FISCAL
      2006

    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 25, 2006: 

    


    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 level within the organization. The Plan rewards participants
      with
      incentives based on their contributions and the attainment of specific corporate
      and individual performance goals. Incentives are calculated in part based on
      a
      performance multiplier multiplied by the participant’s Target annual incentive.
      Target annual incentive awards vary according to the position
      level.

    


    2.
       Eligibility.
      Eligible participants include the Chairman, the Chief Executive Officer, senior
      level managers of the Company who report directly to the Company’s Chief
      Executive Officer, and other key managers who have been identified as
      participants by the Chief Executive Officer. No participant or other employees
      have a right to be selected for participation in the Plan despite having
      participated in any predecessor Plan.

    


    3.
       Plan
      Awards:
      

    


    3.1
       Target
      Award Levels.
      The
      target award level represents the award for 100% achievement of objectives.
      The
      target awards are expressed as a percentage of salary and vary based on
      position. The actual target award amount is determined by multiplying the
      participant’s base salary earned during the award period by the target award
      percentage.

    


    3.2
       Determination
      of Awards.
      For the
      positions of Chairman and Chief Executive Officer, awards are based 100% on
      achieving predetermined corporate goals. Awards for all other eligible positions
      are determined based on performance against measures in two categories.
      Corporate and Individual. Unless otherwise approved by the Compensation
      Committee, corporate performance goals are weighted at 60% of the individuals’
      target award and individual performance goals are weighted at 40% of the
      individual’s total target award. Eligible participants can earn from 0% to 100%
      of the individual target award for individual performance goals, and eligible
      participants can earn from 0% to 150% of the target award measured against
      corporate performance.

    


    3.3
       Corporate
      Measures.
      The
      Corporate performance measures and corresponding goals are based on meeting
      or
      exceeding revenue targets for the fiscal year and meeting or exceeding net
      income or earnings per share targets for the fiscal year. Financial performance
      is measured at fiscal year end and any corresponding awards paid to eligible
      participants following approval of the Compensation Committee, in the case
      of
      executive officers, and approval of the Chief Executive Officer, in all other
      cases.


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    3.4
       Individual
      Measures.
      Individual performance measures are established at the beginning of each fiscal
      quarter. Each participant, in conjunction with the Chief Executive Officer,
      will
      develop a minimum of three (3) performance measures specific to his or her
      unit’s performance. For each performance measure, a performance goal (as a
      percentage) is determined. Performance goals are standards for evaluating
      success associated with a specific performance measure and are expressed as
      either Minimum or Target goals. Minimum performance goals are the lowest level
      of competent performance that is eligible for the award. Performance at the
      minimum performance level will yield an award that is 25% of the individual
      performance target award. Target individual performance goals are the expected
      level of performance. Performance at the target performance level will yield
      an
      award that is equal to the individual performance target award. Performance
      below the minimum individual performance level will result in no incentive
      payment for that fiscal quarter for the individual measure. Individual
      performance measures are measured at quarter end and any corresponding awards
      paid to eligible participants following approval of the Chief Executive
      Officer.

    


    4.
       Other
      Provisions:

    


    4.1
       Termination
      of Employment.
      If a
      participant’s employment terminates prior to the end of an award period on
      account of death, or disability determined under the Company’s long-term
      disability plan, the award will be calculated on a pro rata basis based on
      the
      number of months employed during the period. If a participant terminates during
      the award period for reasons other than those stated above, no award will be
      made. Unless otherwise approved by the Compensation Committee, in the case
      of
      executive officers, or by the Chief Executive Officer, in any other case, a
      participant must be employed by the Company on the date of payment in order
      to
      have a right to payment and any participant who terminates employment with
      the
      Company prior to the date of payment, with or without cause, shall forfeit
      his
      or her rights to any unpaid award.

    


    4.2
       New
      Hires.
      Except
      as otherwise provided in Section 4.1, participants whose participation begins
      after commencement of an award period are eligible to receive a pro rata portion
      of the award based on the number of months of employment with the
      Company.

    


    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 Chief Executive Officer, except that no change with respect
      to
      any award to the Chairman, the Chief Executive Officer or any executive officer
      of the Company shall be made without Compensation Committee
      approval.

    


    4.4
       Amendment;
      Termination.
      The
      Plan can be amended, modified or terminated at any time by the Company without
      prior notice to participants.

    


    4.5
       Earned
      Upon Payment.
      No
      amounts 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 of a Change In Control, as that term is defined in the Equity Compensation
      Plan, unless there is a written agreement between the participant and the
      Company which provides benefits to the participant in connection with a Change
      of Control, target awards for each participant will be paid at the 100%
      achievement level for the remainder of the performance period subject to the
      other provisions of this Plan. If there is a written agreement between the
      participant and the Company that provides benefits to the participant in
      connection with a Change of Control, the participant will not be eligible for
      a
      payment pursuant to this Plan’s Section 4.7.


    
      
         

      

      
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    4.7
       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
      execution, levy, garnishment, attachment, pledge, and bankruptcy.

    


    4.8
       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.


    
      
         

      

      
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