August 6,
2008
Mr. Steve
Kelley
1716 MacGregor
Drive
Plano, TX
75093
Dear
Steve:
It is my pleasure to extend to you an offer of
regular, full-time employment with Cree, Inc. (“Cree”
or the “Company”) at our principle offices in Durham,
NC. With your skills, qualifications and enthusiasm, we
are excited about the prospect of you joining the Cree team and
believe that you will make an excellent addition to the management
team. The terms of our offer are as follows:
TITLE: You will be employed by Cree, Inc. as its Chief
Operating Officer (COO). The Company’s Bylaws
require the Board of Directors to approve your appointment as an
Executive Vice President of the Company. The Board will
be asked to approve your appointment to such position on or before
its next regularly scheduled meeting on August 19, 2008.
SUPERVISION: You will be reporting directly to Chuck Swoboda
in his role as Chief Executive Officer (CEO).
COMPENSATION: You will receive an annual base salary of
$350,000 to be paid in accordance with the Company’s standard
payroll practices in effect from time to time. Our
payroll is currently paid on a bi-weekly basis. The
Compensation Committee of the Board of Directors will review your
total compensation on an annual basis, beginning September
2009.
SIGN-ON BONUS: You will be paid a sign-on bonus of
$90,000, grossed-up for income and withholding taxes (other than
Social Security withholding taxes) based on the tax rates
applicable to supplemental wage payments at the time of payment,
within sixty (60) days following your start date. (We will not
gross-up such amount for Social Security withholding because you
will be able to obtain a full credit for any such amount withheld
by Cree on your 2008 federal individual income tax
return.) If you voluntarily resign or your employment is
terminated for cause within twelve (12) months of your start date,
you will be obligated to repay the Company the amount you received
on account of the sign-on bonus, less one-twelfth of such amount
for each full month of employment that you have
completed. The bonus will be considered a salary advance
for so long as you have a repayment obligation with respect to any
part of it. If repayment is necessary, your total
earnings for the year will be adjusted to reflect the forfeiture of
part of or the entire sign-on bonus, as applicable, after receipt
of the amount due.
MANAGEMENT INCENTIVE COMPENSATION
PLAN: Effective as of your date of hire, you will be
eligible to participate in the Company’s Management Incentive
Compensation Program (MICP) with an annual target award level of
60% of your base salary. The actual amount of the MICP
incentive payment will be determined based on meeting objectives
tied to quarterly (weighted at 40%) and annual (weighted at 60%)
performance goals set in accordance with the plan
document. Your performance measurement against the
individual component of your quarterly goals during your first two
fiscal quarters of participation (i.e., Q1FY09 and Q2FY09) will be
deemed to be 100%, without regard to actual
results. Your award amount for such quarters and the
remainder of fiscal 2009 will otherwise be determined in accordance
with the
terms of the plan document, except that,
provided your date of hire is on or before August 29, 2008, your
awards for your first quarter of participation and the annual award
will not be reduced to reflect that you were employed for less than
the full award period. The terms and conditions of the
MICP and your participation therein are subject to review and
approval of the Compensation Committee
annually. We expect the Compensation Committee to
approve the MICP for fiscal year 2009 in August 2008.
START DATE: Your start date will be no later than August 19,
2008, or such other date as agreed by you and the CEO.
EQUITY PROGRAM:
You will be eligible to receive
long-term incentive awards from time to time subject to terms and
conditions established by the Compensation Committee, the
underlying long-term incentive plan document, and the
Company’s terms and conditions for the applicable type of
award, including vesting criteria such as continued service or
performance objectives. Initially you will be granted an
option to purchase 80,000 shares of the Company’s common
stock at a purchase price equal to the fair market value on the
grant date, determined as the last sale price reported for the
regular trading session on the Nasdaq Stock Market on the grant
date (or, if the grant date is not a trading day, the last day of
regular trading preceding the grant date). You will also
be granted 20,000 shares of restricted stock. Both the
option grant and the restricted stock award will be made pursuant
to the Company’s 2004 Long-Term Incentive Compensation Plan
(the “Plan”). The grant date for both awards
will be the first business day of the calendar month following the
first day of your employment. The option will be a
nonqualified stock option and will vest over a three-year period in
equal installments on each anniversary of the grant date so long as
you remain employed with the Company or a related Employer under
the Plan. The restricted stock award will vest over a
five-year period in equal installments beginning on September 1,
2009 and on each anniversary of such date so long as you remain
employed with the Company or a related Employer under the
Plan. The option will be subject to the provisions of
the Plan and the Cree, Inc. Master Stock Option Award Agreement to
be entered into by you and the Company. The restricted
stock award will be subject to the provisions of the Plan and the
Cree, Inc. Master Restricted Stock Award Agreement to be entered
into by you and the Company. Copies of these agreements
have been provided to you under separate cover.
BENEFITS: You will be eligible to participate in all
benefit plans offered to Company employees generally, subject to
applicable service periods and other terms of the governing
pl
