EXECUTIVE CHANGE IN CONTROL AGREEMENT

Cree, Inc. (the “Company”) and John T. Kurtzweil (“Executive”) entered into a Severance Agreement effective as of September 29, 2006 (the “Existing Agreement”).  This Executive Change in Control Agreement (the “Agreement”) between Company and Executive is intended to supersede and replace the Existing Agreement as of the effective date of this Agreement, which shall be August 18, 2008 (the “Effective Date”).  Upon full execution and delivery of this Agreement and the exchange of good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties hereby agree to terminate the Existing Agreement as of the Effective Date, except to the extent provided in Section 18 of this Agreement.

1.       Duties and Scope of Employment .

(a)       Positions and Duties .  Executive will continue to serve as Executive Vice President-Finance, Chief Financial Officer and Treasurer, reporting to the Company’s Chief Executive Officer and President (“CEO”).  Executive will render such business and professional services in the performance of his duties, consistent with Executive’s positions within the Company, as will reasonably be assigned to him by the CEO.  The period Executive is employed by the Company under this Agreement is referred to herein as the “Employment Term”.

(b)       Obligations .  During the Employment Term, Executive will devote Executive’s full business efforts and time to the Company.  For the duration of the Employment Term, Executive agrees not to actively engage in any other employment, occupation, or consulting activity for any direct or indirect remuneration without the prior approval of the CEO (which approval will not be unreasonably withheld); provided, however, that Executive may, without the approval of the CEO, serve in any capacity with any civic, educational, or charitable organization, provided such services do not interfere with Executive’s obligations to Company.

2.       At-Will Employment .  Executive and the Company agree that Executive’s employment with the Company constitutes “at-will” employment.  Executive and the Company acknowledge that this employment relationship may be terminated at any time, upon written notice to the other party, with or without good cause or for any or no cause, at the option either of the Company or Executive.  However, as described in this Agreement, Executive may be entitled to severance benefits depending upon the circumstances of termination of his employment.  Executive agrees to resign from all positions held with the Company and its affiliates immediately following the termination of his employment if the Company's Board of Directors (the "Board") or the CEO so requests.

3.       Term of Agreement .  This Agreement will have an initial term of one year commencing on the Effective Date.  On each anniversary of the Effective Date thereafter, this Agreement will automatically renew for an additional one-year term unless either party provides the other party with written notice of non-renewal at least 120 days prior to the date of automatic renewal.  Notwithstanding any contrary provision in this Section 3, (i) in the event the Company

and another party enter into a written agreement that contemplates a transaction the consummation of which would result in a Change in Control as defined in Subsection (a), (b), or (d) of such definition, this Agreement will continue until the occurrence of either the resulting Change in Control or the termination or expiration of the written agreement without the occurrence of a Change in Control, whichever comes first, and (ii) in the event a Change in Control (including without limitation a resulting Change in Control as described in the preceding clause (i)) occurs during the Employment Term, this Agreement will continue for not less than twelve (12) months after the date of the Change in Control.

4.       Compensation .

(a)       Base Salary .  As of the Effective Date, the Company will pay Executive an annual salary of $ 364,000.00 as compensation for his services (such annual salary, as is then effective, to be referred to herein as “Base Salary”).  The Base Salary will be paid periodically in accordance with the Company’s normal payroll schedule and practices and be subject to the usual, required withholdings.  Executive’s salary will be subject to review by the Compensation Committee of the Board (the “Committee”) not less than annually, and adjustments will be made in the discretion of the Compensation Committee.

(b)       Incentive Compensation .  Executive will be eligible to receive incentive compensation payable for the achievement of individual performance goals established by the CEO and corporate performance goals established by the Committee.  The Committee will determine executive’s annual target incentive award level.  The actual earned incentive, if any, payable to Executive for any fiscal period of the Company will depend upon the extent to which the performance goal(s) specified by the CEO or Committee, as applicable, are achieved.  For each fiscal quarter of the Company, the CEO will endeavor to establish the applicable individual performance goal(s) no later than the 30th day of the fiscal quarter to which the goals relate.  For each fiscal year of the Company, the Committee will endeavor to establish the applicable corporate performance goal(s) no later than the 90th day of the fiscal year to which the goals relate.  Executive’s incentive compensation will be subject to the terms and conditions of the Company’s incentive plan or arrangement designated by the Committee for this purpose, including but not limited to continued employment requirements and payment date terms that are designed to cause the incentive compensation to be exempt from or in compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the guidance thereunder (collectively “Section 409A”).

(c)       Long-Term Incentive .  Executive will be eligible to receive long-term incentives subject to terms and conditions established by the Committee, the underlying Cree, Inc. 2004 Long-Term Incentive Compensation Plan or any successor plan thereto, and the Committee’s terms and conditions for the applicable type of award, including vesting criteria such as continued service or performance objectives.

5.       Employee Benefits .  Executive will be eligible to participate in all Company employee benefit plans, policies, and arrangements that are applicable to other executive officers of the Company in accordance with the terms of such plans, policies, and arrangements as may exist from time to time.

6.       Expenses .  The Company will reimburse Executive for reasonable travel, entertainment, and other expenses incurred by Executive in the furtherance of the performance of Executive’s duties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time.  To the extent that any such reimbursement does not qualify for exclusion from Federal income taxation, the Company will make the reimbursement only if the corresponding expense is incurred during the term of this Agreement and the reimbursement is made on or before the last day of the calendar year following the calendar year in which the expense is incurred, the amount of expenses eligible for such reimbursement during a calendar year will not affect the amount of expenses eligible for such reimbursement in another calendar year, and the right to such reimbursement is not subject to liquidation or exchange for another benefit from the Company.

7.       Termination of Employment .  In the event of Executive’s Termination of Employment with the Company, Executive will be entitled to any (a) unpaid Base Salary accrued up to the date of such Termination of Employment (the “Termination Date”) paid in accordance with the schedule specified in Section 4(a) above, (b) any incentive compensation that is earned as of Executive’s Termination Date in accordance with the terms and conditions of the applicable incentive plan or arrangement but has not yet been paid, which amount, if any, will be paid in accordance with the terms and conditions of the applicable incentive arrangement, (c) pay for accrued but unused vacation that the Company is legally obligated to pay Executive, which amount will be paid in the first regular payroll cycle occurring after the Termination Date, except as provided in Section 8(b) below, (d) benefits or compensation as provided under the terms of any employee benefit and compensation agreements or plans applicable to Executive, (e) unreimbursed business expenses required to be reimbursed to Executive, which amount, if any, will be paid in accordance with Section 6 above, and (f) rights to indemnification Executive may have under the Company’s Articles of Incorporation, Bylaws, this Agreement, or a separate indemnification agreement, as applicable.  In addition, if the Termination of Employment is initiated by the Company without Cause or by Executive for Good Reason, and the Termination of Employment is In Connection with a Change in Control, Executive will be entitled to the amounts and benefits specified in Section 8(a) below.

8.       Severance .

(a)       Change in Control Benefits .  If Executive’s Termination of Employment is initiated by the Company without Cause or by Executive for Good Reason, and the Termination of Employment is In Connection with a Change in Control (but not by the Company in connection with the death or LTD Disability of Executive), then, subject to Section 9, Executive will receive: (i) continued payment of Base Salary for twelve (12) months, paid in accordance with the schedule specified in Section 4(a) above, but commencing within thirty (30) days following Termination of Employment with payments retroactive to that date, except as provided in Section 8(b) below, (ii)  a lump sum payment equal to twelve (12) multiplied by the COBRA premium in effect for the type of medical, dental and vision coverage in effect for Executive (e.g., family coverage vs. employee-only coverage) at the time of his Termination of Employment, paid within ninety (90) days following the Termination Date, except as provided in Section 8(b) below, and (iii) full accelerated vesting with respect to Executive’s then outstanding, unvested stock options, time-vested restricted stock awards and other equity awards that vest solely based on the passage of time.

(b)       Section 409A Payment Provisions; Possible Payment Delay in Event Executive is a Specified Employee .  For purposes of Section 409A, each installment payment of severance specified in Sections 7(c) and 8(a)(i) and (ii) above is a separate payment; all payments specified in Sections 7(c) and 8(a)(i) and (ii) above made through the date that is 2-½ months following the later of the last day of the calendar year containing the Termination Date and the last day of the Company’s fiscal year containing the Termination 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”); in the event that Executive is a Specified Employee on the Termination Date, all such payments made after the Short Term Deferral Deadline, that exceed the limits of the Severance Pay Exemption, and that would be paid earlier than the Six-Month Delay Payment 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 Executive a lump sum consisting of all payments that would have been paid to Executive prior to the Six-Month Delay Payment Date had Executive 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 Executive not been a Specified Employee and ending on the Six-Month Delay Payment Date; however, if Executive dies after the Termination Date but before such lump sum payment is made, it will be paid to Executive’s estate without regard to any six-month delay that otherwise applies to Specified Employees.

(c)       Voluntary Termination without Good Reason; Termination for Cause .  If Executive’s employment with the Company terminates voluntarily by Executive without Good Reason or is terminated for Cause by the Company, then, except as provided in Section 7, (i) all further vesting of Executive’s outstanding equity awards will terminate immediately, and Executive’s outstanding equity awards will terminate in accordance with the terms and conditions of the applicable award agreement(s), (ii) all payments of compensation by the Company to Executive hereunder will terminate immediately, and (iii) Executive will be entitled to receive benefits, including severance benefits, only in accordance with the Company’s then established plans, programs, and practices other than this Agreement.

(d)       Termination due to Death or LTD Disability .  If Executive’s employment is terminated by reason of his death or LTD Disability, then, except as provided in Section 7, (i) Executive’s outstanding equity awards will vest and terminate in accordance with the terms and conditions of the applicable award agreement(s); (ii) all payments of compensation by the Company to Executive hereunder will terminate immediately, and (iii) Executive will be entitled to receive benefits, including severance benefits, only in accordance with the Company’s then established plans, programs, and practices other than this Agreement.

(e)       Sole Right to Severance .  This Agreement is intended to represent Executive’s sole entitlement to severance payments and benefits in connection with a termination of his employment In Connection with a Change in Control, except for such payments and benefits to which Executive would be entitled as an employee of the Company in the absence of this Agreement.

9.       Conditions to Receipt of Severance; No Duty to Mitigate .

(a)       Separation Agreement and Release of Claims .  The receipt of any severance pursuant to Section 8 will be subject to Executive signing and not revoking a release of claims in substantially 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.  No severance will be paid or provided unless and until the release of claims is timely executed and returned by Executive to the Company, becomes effective and has not been timely revoked in accordance with the terms thereof.  The Company will complete and provide to Executive the release of claims in sufficient time so that if Executive timely executes and returns it, the revocation period will expire before severance payments are required to commence under Section 8.

(b)       Nondisparagement .  As a condition to receipt of severance, during the Employment Term and for twelve (12) months thereafter, Executive will not knowingly disparage, criticize, or otherwise make any derogatory statements regarding the Company, its directors, or its officers.  The foregoing restrictions will not apply to any statements that are made truthfully in response to a subpoena or other compulsory legal process.

(c)       Other Requirements .  Executive’s receipt of continued severance payments will be subject to Executive continuing to comply with the terms of the Confidential Information Agreement.

(d)       No Duty to Mitigate .  Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any earnings that Executive may receive from any other source reduce any such payment.

(e)       Generally Disabled; LTD Disability . The provisions of this Section 9(e) will control in the event of conflict between this Section 9(e) and any other language in this Agreement. If Executive becomes Generally Disabled, the Company will not be in breach of this Agreement and Executive will not be entitled to severance pursuant to Section 8(a) on account of the Company, in its sole discretion, taking any action that would otherwise be considered Good Reason under Section 10(f) below provided that such action remains in effect only for so long as Executive remains Generally Disabled.  If Executive 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 Executive will not be entitled to severance per Section 8(a) on account of the Company permanently taking any action that would otherwise be considered Good Reason under Section 10(f) below so long as the Company does not terminate Executive’s employment prior to the date that Executive is determined to have an LTD Disability.  If Executive is Generally Disabled and the Company terminates his employment without Cause In Connection with a Change in Control prior to the date that he is determined to have an LTD Disability, such termination will be considered Termination of Employment by the Company without Cause for purposes of Section 8(a) of this Agreement; provided that, in such circumstances, Executive will only be eligible for the severance benefits set forth in items (i) and (ii) of Section 8(a) of this

Agreement.   If Executive ceases to be Generally Disabled before his employment is terminated by reason of LTD Disability, subject to the notice and cure provisions in Section 10(f), for purposes of Section 8(a) of this Agreement Executive will have the right to terminate his employment for Good Reason (if the Termination of Employment is In Connection with a Change in Control) on account of any event or circumstances that occurred while Executive was Generally Disabled that would otherwise have constituted Good Reason except for the provisions of this Section 9(e) unless such event or circumstances has already been cured by the Company or consented to by Executive; provided that, in such circumstances, Executive will only be eligible for the severance benefits set forth in items (i) and (ii) of Section 8(a) of this Agreement.  Notwithstanding any language herein to the contrary, nothing in this paragraph creates a right to severance benefits other than if Executive’s Termination of Employment is In Connection with a Change in Control.

10.       Definitions .

(a)       Benefit Plans .  For purposes of this Agreement, “Benefit Plans” means plans, policies, or arrangements that the Company sponsors (or participates in) and that immediately prior to the Termination Date provide Executive, Executive’s spouse, and/or Executive’s eligible dependents with medical, dental, or vision benefits.  The term “Benefit Plans” does not include plans, policies, or arrangements providing for any other type of benefit (including, but not by way of limitation, financial counseling, disability, life insurance, or retirement benefits).

(b)       Cause .  For purposes of this Agreement, “Cause” means (i) Executive’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 Executive a reasonable period of time to cure; (ii) any material and willful violation of any federal or state law by Executive in connection with his responsibilities as an employee of the Company; (iii) any act of personal dishonesty taken by Executive in connection with his responsibi