Exhibit 10.3
CREE, INC.
SEVERANCE
AGREEMENT
This Severance Agreement (the
“Agreement”) is entered into as of September 29,
2006 (the “Effective Date”) by and between Cree, Inc.
(the “Company”) and John T. Kurtzweil
(“Executive”).
1. Background . As of the
Effective Date, Executive has been employed by the Company as its
Executive Vice President-Finance, Chief Financial Officer and
Treasurer. The period during which Executive is employed by the
Company is referred to in this Agreement as the “Employment
Term.” The Company and Executive are entering into this
Agreement to provide Executive severance benefits, as set forth
herein, in connection with termination of Executive’s
employment following any Change in Control that may occur during
the Employment Term and in certain other circumstances.
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 Executive’s
termination of 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”) so
requests.
3. Term of Agreement . This
Agreement will have an initial term of one year commencing on the
Effective Date. On the first anniversary of the Effective Date and
on each anniversary of the Effective Date thereafter, this
Agreement automatically will 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 or unless Executive’s employment terminates for any
reason prior to the anniversary date. Notwithstanding any contrary
provision in this Section 3, in the event of a Change in
Control during the Employment Term, this Agreement will continue
for twelve months after the effective date of the Change in
Control.
4. Severance .
(a) Termination Without Cause or
Resignation for Good Reason not in connection with a Change in
Control . If Executive’s employment is terminated by the
Company without Cause or by Executive for Good Reason, and the
termination is not in Connection with a Change in Control, then,
subject to Section 4(d)(i) and Section 5 below, Executive
will receive: (i) continued payment of base salary for twelve
(12) months following the termination of Executive’s
employment in accordance with the Company’s regular payroll
cycle, and (ii) reimbursement of premiums through the
Company’s payroll system as explained below for continuation
of medical benefits for Executive, Executive’s spouse, and
Executive’s eligible dependents under the Company’s
Benefit Plans under the Consolidated Omnibus Budget Reconciliation
Act of 1986, as amended (“COBRA”) for twelve
(12) months following
Executive’s termination of employment;
provided Executive validly elects to continue coverage under COBRA,
continues coverage in accordance with applicable law, and pays the
applicable premiums to the Company’s COBRA administrator when
due. When applicable, COBRA premiums will be reimbursed as follows:
the monthly COBRA premium in effect at the time of termination will
be multiplied by twelve and the product will be divided by the
number of pay periods remaining in the twelve (12) months
following the termination of Executive’s employment, and an
amount equal to the result (i.e., the quotient rounded to the
nearest whole cent) will be included in Executive’s
compensation each of the remaining pay periods, so long as
Executive remains eligible for reimbursement of COBRA premiums
under the terms of this Agreement.
(b) Termination Without Cause or
Resignation for Good Reason in connection with a Change in
Control . If Executive’s employment is terminated by the
Company without Cause or by Executive for Good Reason, and the
termination is in Connection with a Change in Control, then,
subject to Section 4(d)(i) and Section 5 below, Executive
will receive: (i) continued payment of base salary for twelve
(12) months following the termination of Executive’s
employment in accordance with the Company’s regular payroll
cycle, (ii) reimbursement of premiums through the
Company’s payroll system as explained above for continuation
of medical benefits for Executive, Executive’s spouse, and
Executive’s eligible dependents under the Company’s
Benefit Plans under the Consolidated Omnibus Budget Reconciliation
Act of 1986, as amended (“COBRA”) for twelve
(12) months following Executive’s termination of
employment; provided Executive validly elects to continue coverage
under COBRA, continues coverage in accordance with applicable law,
and pays the applicable premiums to the Company’s COBRA
administrator when due, and (iii) accelerated vesting of all
of Executive’s then outstanding, unvested equity
awards.
(c) Sole Right to Severance .
Any severance payment will be paid pursuant to and in accordance
with the Company’s Severance Program. This Agreement is
intended to represent Executive’s sole entitlement to
severance payments and benefits in connection with the termination
of his employment, except for such payments and benefits to which
Executive would be entitled as an employee of the Company in the
absence of this Agreement.
(d) Section 409A
.
(i) Notwithstanding anything to the
contrary in this Agreement, if the Company determines, in its good
faith judgment, that the Executive is a “specified
employee” within the meaning of Section 409A of the Internal
Revenue Code of 1986, as amended, and the regulations thereunder
(the “Code”), the Company will restructure payment of
the severance benefits so that the severance benefits will accrue
during the first six (6) months after the Executive’s
termination, and the accrued amount will be paid in a lump sum
payment on the first regular payroll payment date after expiration
of the 6-month period, with all subsequent payments, if any, made
in accordance with the Company’s regular payroll cycle as
otherwise provided in this Agreement.
2
(ii) The Executive agrees to work in
good faith with the Company to consider amendments to this
Agreement which are necessary or appropriate to avoid imposition of
any additional tax or income recognition under Section 409A of
the Code prior to the actual payment to the Executive of payments
or benefits under this Agreement.
5. Conditions to Receipt of
Severance; No Duty to Mitigate .
(a) Separation Agreement and
Release of Claims . The receipt of any severance pursuant to
Section 4 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 is 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 until the sep
