CREE, INC. CHARLES SWOBODA EMPLOYMENT AGREEMENT As Amended and Restated Effective August 21, 2007
Exhibit
10.4
CREE,
INC.
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ EMPLOYMENT AGREEMENT
As
Amended and Restated Effective August 21, 2007
Cree,
Inc. (the “Company”) and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (“Executive”) entered into an
employment agreement (the “Agreement”) effective October 13, 2004 (the
“Effective Date”). Cree and Executive hereby amend and restate the
Agreement in its entirety (the “Revised Agreement”) in order to evidence formal
compliance with Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”), and the guidance thereunder (collectively “Section
409A”). The Revised Agreement is effective August 21, 2007
(the “Amended Effective Date”).
1. Duties
and Scope of Employment.
(a) Positions
and Duties. Executive will continue to serve as Chairman of the
Board, President and Chief Executive Officer, reporting to the Company’s Board
of Directors (the “Board”). 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 Board. The period Executive is employed by the Company under
this Revised Agreement is referred to herein as the “Employment
Term”.
(b) Board
Membership. At each annual meeting of the Company’s stockholders
during the Employment Term, the Company will nominate Executive to serve
as a
member of the Board. Executive’s service as a member of the Board
will be subject to any required stockholder approval. While a member
of the Board, Executive will be permitted to attend all meetings of the Board
and executive sessions thereof, on substantially the same basis as other
members
of the Board, except as is prohibited by applicable law or listing
standard. Notwithstanding the preceding sentence, Executive will not
have the right to attend any portion of a meeting or executive session where
the
item of discussion relates to Executive’s employment, including (but not limited
to) his compensation, performance, and/or service on the Board.
(c) 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 Board (which approval will not be unreasonably withheld);
provided, however, that Executive may, without the approval of the Board,
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 Revised Agreement, Executive may be entitled to severance benefits
depending upon the circumstances of termination of his
employment. Executive agrees to resign from his position as a member
of the Board immediately following the termination of his employment if the
Board so requests.
3. Term
of Revised Agreement. The Agreement had an initial term of three
years commencing on the Effective Date. This Revised Agreement is
effective on the Amended Effective Date. On each annual anniversary
of the Effective Date thereafter, this Revised 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. Notwithstanding any contrary provision in this
Section 3, in the event of a Change of Control during the Employment Term,
this Revised Agreement will continue for not less than 12 months after the
date
of the Change of Control.
4. Compensation.
(a) Base
Salary. As of the Amended Effective Date, the Company will pay
Executive an annual salary of $550,000.00 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) Annual
Incentive. Executive will be eligible to receive earned annual
incentives payable for the achievement of performance goals established by
the
Committee. Executive’s target annual incentive will be at least 70%
of Base Salary, as determined by the Committee. The actual earned
incentive, if any, payable to Executive for any fiscal year of the Company
will
depend upon the extent to which the applicable performance goal(s) specified
by
the Committee are achieved and will be decreased or increased for under-
or
over-performance. For each fiscal year of the Company, the Committee
will endeavor to establish the applicable performance goal(s) no later than
the
90th day of the fiscal year to which the goals relate. Executive will
have the opportunity to discuss the nature of such performance goals with
the
Committee prior to such performance goals being established. Except
as specifically provided herein, Executive’s annual incentive will be subject to
the terms and conditions of the Company’s annual incentive arrangement
designated by the Committee for this purpose, including but not limited to
payment date terms that are designed to cause the annual incentive to be
exempt
from or in compliance with Section 409A, continued employment obligations,
and
form of payment terms that may provide for payment in the form of common
stock
of the Company, except that, in the case of payments made in connection with
a
Termination of Employment, no part of any annual incentive payment may be
made
in the form of common stock.
(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 thereto, and the Committee’s terms and conditions for the applicable
type of award, including vesting criteria such as continued service or
performance objectives.
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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. Notwithstanding the preceding sentence, Executive’s eligibility
for benefits (other than annual incentive, long-term incentives or other
long-term compensation (whether payable in cash, stock, or otherwise), salary,
or similar) will be at least as great as that of any other executive officer
of
the Company, provided, however, that (a) Executive will be eligible for any
enhanced level of benefits that he approves only upon subsequent Committee
approval, and (b) Executive will not be eligible for any extraordinary or
unusual benefits provided to another executive officer as part of a negotiation
for such executive officer to commence or continue employment.
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 Revised 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 unpaid but earned and accrued annual incentive for any
completed fiscal year as of his Termination Date paid in accordance with
the
payment terms and conditions specified in Section 4(b) above, (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 or, if Executive is a Specified Employee
of
the Company on the Termination Date, such amount will be paid on the Six-Month
Delay Payment Date to the extent required to satisfy Subsection
409A(a)(2)(B)(i), (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 paid in accordance with Section 6 above, and (f) rights to
indemnification Executive may have under the Company’s Articles of
Incorporation, Bylaws, this Revised 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, Executive will be entitled to the amounts and benefits specified
in
Section 8(a) or 8(b) below, as applicable.
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8. Severance.
(a) Termination
Without Cause or Resignation for Good Reason other than in connection with
a
Change of Control. 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 not in Connection with a Change of Control or
by
the Company due to the death or LTD Disability of the Executive, then, subject
to Section 9, Executive will receive: (i) continued payment of Base
Salary for the Continuance Period, paid in accordance with the schedule
specified in Section 4(a) above except as provided in Section 8(d) below,
(ii) a lump sum payment equal to twice the average of Executive’s earned
annual incentives for the two most recently completed fiscal years immediately
preceding the Termination Date, paid within ninety (90) days following the
Termination Date except as provided in Section 8(d) below, (iii) a lump sum
payment equal to 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(d) below, and (iv) accelerated vesting with
respect to 50% of Executive’s then outstanding, unvested stock options,
restricted stock awards, and other equity awards other than performance units
used to pay Executive’s annual incentive award.
(b) Termination
Without Cause or Resignation for Good Reason in connection with a Change
of
Control. 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 of Control but not by the Company
in connection with the death or LTD Disability of the Executive, then, subject
to Section 9, Executive will receive: (i) continued payment of Base
Salary for the Continuance Period, paid in accordance with the schedule
specified in Section 4(a) above except as provided in Section 8(d) below,
(ii) a lump sum payment of an amount equal to Executive’s current target
annual incentive, multiplied by a fraction, the numerator of which is the
number
of days elapsed starting on the first day of the fiscal year during which
the
Termination Date occurs and ending on the Termination Date and the denominator
of which is 365, paid within sixty (60) days following the Termination Date
except as provided in Section 8(d) below, (iii) a lump sum payment equal to
twice the average of Executive’s earned annual incentives for the two most
recently completed fiscal years immediately preceding the Termination Date,
paid
within ninety (90) days following the Termination Date except as provided
in
Section 8(d) below, (iv) a lump sum payment equal to 24 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(d) below, and (v) full
accelerated vesting with respect to Executive’s then outstanding, unvested stock
options, restricted stock awards, and other equity awards other than performance
units used to pay Executive’s annual incentive award.
(c) Section 280G
Gross-up. If any payment or benefit Executive receives pursuant
to Section 8(b) of this Revised Agreement, or otherwise in Connection with
a Change of Control, but determined without regard to any additional payment
required under this Section 8(c), (collectively, the “Payment”) would
(y) constitute a “parachute payment” within the meaning of
Section 280G of the Code, and (z) be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties payable with
respect to such excise tax (such excise tax, together with any such interest
and
penalties, are hereinafter collectively referred to as the “Excise Tax”), then
Executive will be entitled to receive from the Company an additional payment
(the “Gross-Up Payment,” and any iterative payments pursuant to this paragraph
also will be “Gross-Up Payments”) in an amount that will fund the payment by
Executive of any Excise Tax on the Payment, as well as all income and employment
taxes on the Gross-Up Payment, any Excise Tax imposed on the Gross-Up Payment
and any interest or penalties imposed with respect to income and employment
taxes imposed on the Gross-Up Payment. For this purpose, all income
taxes will be assumed to apply to Executive at the highest marginal
rate.
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The
accounting firm engaged by the Company for general audit purposes as of the
day
prior to the effective date of the Change of Control will perform the foregoing
calculations. If the accounting firm so engaged by the Company is
also serving as accountant or auditor for the individual, entity or group
which
will control the Company upon the occurrence of a Change of Control, the
Company
will appoint a nationally recognized accounting firm other than the accounting
firm engaged by the Company for general audit purposes to make the
determinations required hereunder. The Company will bear all expenses
with respect to the determinations by such accounting firm required to be
made
hereunder.
The
accounting firm engaged to make the determinations hereunder will provide
its
calculations, together with detailed supporting documentation, to the Company
and Executive within thirty (30) calendar days after the date on which such
accounting firm has been engaged to make such determinations or such other
time
as requested by the Company or Executive; the Company shall engage such
accounting firm, and the Company or Executive shall request such determination,
on a schedule such that any Gross-Up Payment due to Executive under this
Section
8(c) is paid to Executive within the time period required by this Section
8(c). If the accounting firm determines that no Excise Tax is payable
with respect to a Payment, it will furnish the Company and Executive with
an
opinion reasonably acceptable to Executive that no Excise Tax will be imposed
with respect to such Payment. Any reasonable good faith
determinations of the accounting firm made hereunder will be final, binding,
and
conclusive upon the Company and Executive.
If
the
Excise Tax is subsequently determined to be less than the amount taken into
account hereunder at the time of Termination of Employment, Executive shall
repay to the Company the portion of the Gross-Up Payment attributed to such
reduction at the time the reduction in Excise Tax is finally
determined. If the Excise Tax is determined to exceed the amount
taken into account hereunder at the time of Termination of Employment, the
Company shall make an additional Gross-Up Payment to Executive in respect
of
such excess at the time the amount of such excess is finally
determined.
Executive
shall notify the Company in writing of any claim by the Internal Revenue
Service
that, if successful, would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as practicable but
no later than ten (10) business days after Executive is informed in writing
of
such claim and shall apprise the Company of the nature of such claim and
the
date on which such claim is requested to be paid. Executive shall not
pay such claim prior to the expiration of the thirty (30) day period following
the date on which he or she gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such
claim
is due). If the Company notifies Executive in writing prior to the
expiration of such period that it desires to contest such claim, Executive
shall:
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(a)
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give
the Company any information reasonably requested by the Company
relating
to such claim;
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(b)
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take
such action in connection with contesting such claim as the Company
shall
reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such
claim by
an attorney reasonably selected by the Company;
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(c)
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cooperate
with the Company in good faith in order to effectively contest
such claim;
and
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(d)
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permit
the Company to participate in any proceedings relating to such
claim;
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provided,
however, that the Company shall bear and pay directly all costs and expenses
(including legal and accounting fees and additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold Executive
harmless, on an after-tax basis, for any Excise Tax, FICA tax, or income
tax
(including interest and penalties with respect thereto) imposed as a result
of
such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 8(c), the Company
shall
control all proceedings taken in connection with such contest and, at its
sole
option, may pursue or forgo any and all administrative appeals, proceedings,
hearings, and conferences with the taxing authority in respect of such claim
and
may, at its sole option, either direct Executive to pay the tax claimed and
▇▇▇
for a refund or contest the claim in any permissible manner, and Executive
agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction, and in one or more appellate
courts, as the Company shall determine; provided, however, that if the Company
directs Executive to pay such claim and ▇▇▇ for a refund, the Company shall
advance the amount of such payment to Executive, on an interest-free basis,
and
shall indemnify and hold Executive harmless, on an after-tax basis, from
any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income
with
respect to such advance; and provided, further, that any extension of the
statute of limitations relating to payment of taxes for the taxable year
of
Executive with respect to which such contested amount is claimed to be due
is
limited solely to such contested amount. Furthermore, the Company’s
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and Executive shall be entitled
to
settle or contest, as the case may be, other issues raised by the Internal
Revenue Service or any other taxing authority.
If
any
such claim referred to in this Section 8(c) is made by the Internal Revenue
Service and the Company does not request Executive to contest the claim within
the thirty (30) day period following notice of the claim, the Company shall
pay
to Executive the amount of any Gross-Up Payment owed to Executive, but not
previously paid pursuant to this Section 8(c), immediately upon the expiration
of such thirty (30) day period. If any such claim is made by the
Internal Revenue Service and the Company requests Executive to contest such
claim, but does not advance the amount of such claim to Executive for purposes
of such contest, the Company shall pay to Executive the amount of any Gross-Up
Payment owed to Executive, but not previously paid under the provisions of
this
Section 8(c), within five (5) business days of a Final Determination of the
liability of Executive for such Excise Tax. For purposes of this
Revised Agreement, a “Final Determination” shall be deemed to occur with respect
to a claim when (i) there is a decision, judgment, decree, or other order
by any
court of competent jurisdiction, which decision, judgment, decree, or other
order has become final, i.e., all allowable appeals pursuant to this Section
8(c) have been exhausted by either party to the action, (ii) there is a closing
agreement made under Section 7121 of the Code, or (iii) the time for instituting
a claim for refund has expired, or if a claim was filed, the time for
instituting suit with respect thereto has expired.
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If,
after
the receipt by Executive of an amount advanced by the Company pursuant to
this
Section 8(c), Executive becomes entitled to receive any refund with respect
to
such claim, Executive shall (subject to the Company’s complying with the
requirements of this Section 8(c) within five (5) business days of receiving
any
such refund pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If
after the receipt by Executive of an amount advanced by the Company pursuant
to
this Section 8(c), a determination is made by the Internal Revenue Service
that
Executive is not entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty (30) days after the Company
learns of such determination, then such advance shall be forgiven and shall
not
be required to be repaid and the amount of such advance shall offset, to
the
extent thereof, the net amount due Executive after payment of any Gross-Up
Payment required to be paid.
Notwithstanding
the foregoing, (i) each Gross-Up Payment required to be made by the Company
to
Executive hereunder and each repayment of a Gross-Up Payment required to
be made
by Executive to the Company hereunder shall be paid as soon as feasible after
the date that the Executive remits the taxes but no later than the end of
the
calendar year next following the calendar year in which Executive remits
the
corresponding taxes to the Internal Revenue Service, and (ii) each reimbursement
of expenses related to a tax audit or litigation addressing the existence
or
amount of a tax liability required to be made by the Company to Executive
hereunder and each repayment of such a reimbursement required to be made
by
Executive to the Company hereunder shall be paid as soon as feasible after
the
date that the Executive submits to the Company documentation supporting his
payment of such amounts but no later than the end of the calendar year next
following the calendar year in which Executive remits to the Internal Revenue
Service the taxes that are the subject of the audit or litigation or, where
as a
result of the audit or litigation no taxes are due or are remitted but other
reimbursable costs and/or expenses have been incurred, as soon as feasible
after
the date that the Executive submits to the Company documentation supporting
his
payment of such amounts but no later than the end of the calendar year following
the calendar year in which the audit is completed or there is a Final
Determination of the litigation.
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(d) Payment
Delay in Event Executive is a Specified Employee. If Executive is
a Specified Employee on the Termination Date, the payments specified in
subsections 8(a)(i), (ii) and (iii) above or subsections 8(b)(i), (ii), (iii)
and (iv) above, as applicable, will be delayed until the Six-Month Delay
Payment
Date to the extent required to satisfy Subsection 409A(a)(2)(B)(i); 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.
(e) 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, (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 Revised Agreement.
(f) 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 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 Revised
Agreement.
(g) Sole
Right
to Severance. This Revised Agreement is intended to represent
Executive’s sole entitlement to severance payments and benefits in connection
with a 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 Revised 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 separation agreement and 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 until the separation
agreement and release of claims becomes effective and has not been timely
revoked in accordance with the terms thereof.
(b) Nondisparagement. During
the Employment Term and for the longer of (i) 12 months thereafter or
(ii) the Continuance Period, 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.
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(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 as amended by this Revised
Agreement.
(d) No
Duty to Mitigate. Executive will not be required to mitigate the
amount of any payment contemplated by this Revised 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 Revised Agreement. If Executive becomes Generally
Disabled, the Company will not be in breach of this Revised Agreement and
Executive will not be entitled to severance pursuant to Section 8 on account
of
the Committee, in its sole discretion, taking any action that would otherwise
be
considered Good Reason under items (i), (iii), or (iv) of the first paragraph
of
Section 10(g) below or under item (i) of the second paragraph of Section
10(g)
below provided that such action remains in effect only for so long as the
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
Revised Agreement and Executive will not be entitled to severance per Section
8
on account of the Committee permanently taking any action that would otherwise
be considered Good Reason under items (i), (iii), or (iv) of the first paragraph
of Section 10(g) below or under item (i) of the second paragraph of Section
10(g) below so long as the Committee 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 his employment is
terminated prior to the date that he is determined to have an LTD Disability,
such termination will be considered Termination without Cause. 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(g), Executive will have the right to terminate his employment for Good
Reason
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. In
the event that Executive’s employment is terminated pursuant to either of the
preceding two sentences, Executive will only be eligible for the severance
benefits provided in Section 8(a), and under no circumstances will such
termination be considered to be in connection with a Change in
Control.
10. Definitions.
(a) Benefit
Plans. For purposes of this Revised 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. Benefit Plans do not include any
other type of benefit (including, but not by way of limitation, financial
counseling, disability, life insurance, or retirement benefits).
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(b) Cause. For
purposes of this Revised Agreement, “Cause” means (i) Executive’s willful
and continued failure to perform the duties and responsibilities of his position
that is not corrected within a thirty (30) day correction period that begins
upon delivery to Executive of a written demand for performance from the Board
that describes the basis for the Board’s belief that Executive has not
substantially performed his duties; (ii) any act of personal dishonesty
taken by Executive in connection with his responsibilities as an employee
of the
Company with the intention or reasonable expectation that such may result
in
substantial personal enrichment of Executive; (iii) Executive’s conviction
of, or plea of nolo contendere 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 (iv) Executive materially breaching Executive’s
Confidential Information Agreement as modified by this Revised Agreement,
which
breach is (if capable of cure) not cured within thirty (30) days after the
Company delivers written notice to Executive of the breach.
(c) Change
of Control. For purposes of this Revised Agreement, “Change of
Control” will have the same meaning as in Section 7.1 of the Cree, Inc.
Equity Compensation Plan (as amended and restated August 5, 2002 and without
regard to any subsequent amendments).
(d) Continuance
Period. For purposes of this Revised Agreement, “Continuance
Period” means the period of time beginning on the Termination Date and ending on
the later of (i) the date twenty-four (24) months following the Termination
Date
or (ii) the date that the term of this Revised Agreement otherwise
expires. Notwithstanding the preceding sentence, in the event of a
termination of Executive’s employment where Executive is not entitled to
severance under Section 8(a) or Section 8(b), the Continuance Period shall
be of
no duration.
(e) Generally
Disabled. For purposes of this Revised Agreement, “Generally
Disabled” means that the Executive is unable 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.
(f) Good
Reason. For purposes of this Revised Agreement, except as
provided in Section 9(e) above, “Good Reason” means the occurrence of any of the
following, without Executive’s consent: (i) a significant reduction of
Executive’s duties or responsibilities, a change in Executive’s position as
Chief Executive Officer or President, or the removal of Executive from any
of
such duties, positions, or responsibilities; (ii) a reduction in
Executive’s Base Salary or target annual incentive level below 70% of Base
Salary other than a one-time reduction that also is applied to substantially
all
other executive officers of the Company on Executive’s recommendation or
approval if Executive’s reduction is substantially proportionate to, or no
greater than, the reduction applied to substantially all other executive
officers; (iii) the Company requiring Executive to report to anyone other
than the Board of Directors; (iv) the Company eliminating from reporting to
Executive any position that previously directly reported to Executive; or
(v) the Company requiring Executive 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 Executive’s
current principal place of employment; provided, however, that Executive
only
will have Good Reason if the event or circumstances constituting Good Reason
specified in any of the preceding clauses is not cured within thirty (30)
days
after Executive gives written notice to the Board. Executive’s
actions approving any change, reduction, requirement, or occurrence in his
role
as Chief Executive Officer or a director (that otherwise may be considered
Good
Reason) will be considered consent for the purposes of this Good Reason
definition.
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In
addition, except as provided in Section 9(e) above, “Good Reason” also means the
occurrence of any of the following, without Executive’s express written consent,
in Connection with a Change of Control: (i) a substantial
reduction by the Company of the facilities and perquisites (including office
space and location) available to Executive provided such reduction is not
applied to all executive officers of the Company; (ii) a material reduction
in the kind or level of employee benefits to which Executive is entitled
(other
than a reduction due to application of the rules for eligibility or coverage
under any benefit plan or policy) with the result that Executive’s overall
benefits package is significantly reduced provided such reduction is not
applied
to substantially all executive officers of the Company; or (iii) the
failure of the Company to obtain the assumption of this Revised Agreement
by the
successor (as defined in Section 14).
(g) In
Connection with a Change of Control. For purposes of this Revised
Agreement, a Termination of Employment with the Company is “in Connection with a
Change of Control” if Executive incurs a Termination of Employment within twelve
(12) months following a Change of Control.
(h) LTD
Disability. For purposes of this Revised Agreement, “LTD
Disability” will mean that the Executive 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.
(i) Six-Month
Delay Payment Date. The payment date associated with the first
regular payroll cycle after passage of six months following the Termination
Date.
(j) Specified
Employee. For purposes of this Revised Agreement, “Specified
Employee” will have the meaning prescribed by Subsection 409A(a)(2)(B)(i) of the
Code, as such meaning may be amended from time to time.
(k) Termination
of
Employment. For purposes of this Revised Agreement, “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.
11. Tax
Treatment; Section 409A Compliance. Executive acknowledges
and agrees that the Company has made no representations as to the tax treatment
of the compensation and benefits provided pursuant to this Revised
Agreement. This
Revised Agreement is intended to comply with the requirements of Section
409A. Nothing in this Revised Agreement shall requirement payment in
2007 of any payment that was required to be paid after 2007 under the Agreement;
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
Revised Agreement shall postpone beyond 2007 any payment that was required
to be
paid in 2007 pursuant to the Agreement. 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.
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12. Indemnification. Subject
to applicable law, Executive will be provided indemnification to the maximum
extent permitted by the Company’s bylaws and Certificate of Incorporation, with
such indemnification to be on terms determined by the Board or any of its
committees, but on terms no less favorable than provided to any other Company
executive officer or director and subject to the terms of any separate written
indemnification agreement.
13. Confidential
Information. Executive executed the Company’s standard form of
Employee Agreement Regarding Confidential Information, Intellectual Property,
and Noncompetition (Rev. NC 9-12-06) effective October 9, 2006 (the
“Confidential Information Agreement”); provided, however, that Executive agrees
he will be subject to the noncompetition/nonsolicitation provision of such
agreement (paragraph 11(a)) during the Employment Term and, except as provided
in Section 21 hereof, until the later of (a) the date twelve (12) months
following the Termination Date, or (b) the expiration of the Continuance
Period. For purposes of the foregoing, the term “Confidential
Information Agreement” as used herein shall refer to the version of the
agreement referenced above that is in effect as of Executive’s Termination
Date.
14. Assignment. This
Revised Agreement will be binding upon and inure to the benefit of (a) the
heirs, executors, and legal representatives of Executive upon Executive’s death,
and (b) any successor of the Company. Any such successor of the
Company will be deemed substituted for the Company under the terms of this
Revised Agreement for all purposes. For this purpose, “successor”
means any person, firm, corporation, or other business entity which at any
time,
whether by purchase, merger, or otherwise, directly or indirectly acquires
all
or substantially all of the assets or business of the Company. None
of the rights of Executive to receive any form of compensation payable pursuant
to this Revised Agreement may be assigned or transferred except by will or
the
laws of descent and distribution. Any other attempted assignment,
transfer, conveyance, or other disposition of Executive’s right to compensation
or other benefits will be null and void.
15. Notices. All
notices, requests, demands, and other communications called for hereunder
will
be in writing and will be deemed given (a) on the date of delivery if
delivered personally, (b) one business day after being sent overnight by a
well-established commercial overnight service, or (c) four days after being
mailed by registered or certified mail, return receipt requested, prepaid
and
addressed to the parties or their successors at the following addresses,
or at
such other addresses as the parties may later designate in writing:
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If
to the
Company:
Attn:
Chairman of the Compensation Committee
c/o
Corporate Secretary
Cree,
Inc.
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
If
to
Executive:
at
the
last residential address known by the Company.
16. Severability. If
any provision hereof becomes or is declared by a court of competent jurisdiction
to be illegal, unenforceable, or void, this Revised Agreement will continue
in
full force and effect without said provision.
17. Arbitration. The
Parties agree that any and all disputes arising out of the terms of this
Revised
Agreement, Executive’s employment by the Company, Executive’s service as an
officer or director of the Company, or Executive’s compensation and benefits,
their interpretation, and any of the matters herein released, will be subject
to
binding arbitration in Durham, North Carolina before the American Arbitration
Association under its National Rules for the Resolution of Employment Disputes,
supplemented by the North Carolina Rules of Civil Procedure. The
Parties agree that the prevailing party in any arbitration will be entitled
to
injunctive relief in any court of competent jurisdiction to enforce the
arbitration award. The Parties hereby agree to waive their
right to have any dispute between them resolved in a court of law by a judge
or
jury. This paragraph will not prevent either party from
seeking injunctive relief (or any other provisional remedy) from any court
having jurisdiction over the Parties and the subject matter of their dispute
relating to Executive’s obligations under this Revised Agreement and the
Confidential Information Agreement.
18. Legal
and Tax Expenses. The Company will reimburse Executive up to
$7,500.00 for
reasonable legal and tax advice expenses incurred in 2007 by him in connection
with the negotiation, preparation, and execution of this Revised Agreement;
the
Company will make such reimbursement as soon as administratively practicable
after the date on which Executive substantiates to the Company in writing
the
amount of such expenses but in no event later than the last day of 2008;
Executive must provide such written substantiation in time for the Company
to
make such reimbursement by the last day of 2008. In addition, in the
event of a dispute relating to any provision of the Agreement and/or this
Revised Agreement arising during the term of Executive’s employment with the
Company or within three (3) years following the termination of this Revised
Agreement, the Company will reimburse Executive’s fees and expenses as incurred
quarterly, including reasonable attorneys’ fees, in connection with such
dispute, provided that (i) Executive provides the Company with written
documentation substantiating the amount of such fees and expenses, and (ii)
Executive prevails on at least one material issue in such dispute or an
arbitrator does not determine that Executive’s legal positions were frivolous or
without legal foundation. The Company will make such reimbursement
payments quarterly based on the written substantiation documentation submitted
by Executive to the Company during the prior quarter; in no event will any
reimbursement be made later than the end of the calendar year next following
the
calendar year in which the expense was incurred by Executive; Executive must
provide such written substantiation in time for the Company to make such
reimbursement by such deadline. In the event Executive does not so
prevail or in the event of a determination by the arbitrator that his legal
positions were frivolous or without legal foundation (in either case, a
“Resolution”), Executive will repay to the Company any amounts previously
reimbursed by it and Executive will reimburse the Company for its fees and
expenses, including reasonable attorneys’ fees, incurred in connection with the
dispute, both within a reasonable period of time not to exceed 60 days following
the date of the Resolution. The amount of expenses eligible for
reimbursement under this Section 18 during a calendar year will not affect
the
amount of expenses eligible for reimbursement under this Section 18 in another
calendar year, and the right to such reimbursement is not subject to liquidation
or exchange for another benefit from the Company.
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19. Integration. This
Revised Agreement, together with the Confidential Information Agreement and
the
standard forms of equity award grant that describe Executive’s outstanding
equity awards, represents the entire agreement and understanding between
the
parties as to the subject matter herein and supersedes all prior or
contemporaneous agreements whether written or oral. No waiver,
alteration, or modification of any of the provisions of this Revised Agreement
will be binding unless in a writing and is signed by duly authorized
representatives of the parties hereto.
20. Waiver
of Breach. The waiver of a breach of any term or provision of
this Revised Agreement, which must be in writing, will not operate as or
be
construed to be a waiver of any other previous or subsequent breach of this
Revised Agreement.
21. Survival. The
Confidential Information Agreement, the Company’s and Executive’s
responsibilities under Sections 7, 8 and 9, and Sections 12, 13, 17,
and 18 will survive the termination of this Revised
Agreement. Notwithstanding the preceding sentence, in the event this
Revised Agreement expires because the Company delivers notice of non-renewal
of
the term of this Revised Agreement pursuant to Section 3, the amendment of
the
Confidential Information Agreement provided by Section 13 will expire as
of the
expiration of the term of this Revised Agreement.
22. Headings. All
captions and Section headings used in this Revised Agreement are for convenient
reference only and do not form a part of this Revised Agreement.
23. Tax
Withholding. All payments made pursuant to this Revised Agreement
will be subject to withholding of applicable taxes.
24. Governing
Law. This Revised Agreement will be governed by the laws of the
State of North Carolina (with the exception of its conflict of laws
provisions).
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25. Acknowledgment. Executive
acknowledges that he has had the opportunity to discuss this matter with
and
obtain advice from his private attorney, has had sufficient time to, and
has
carefully read and fully understands all the provisions of this Revised
Agreement, and is knowingly and voluntarily entering into this Revised
Agreement.
26. Counterparts. This
Revised Agreement may be executed in counterparts, and each counterpart will
have the same force and effect as an original and will constitute an effective,
binding agreement on the part of each of the undersigned.
IN
WITNESS WHEREOF, each of the parties has executed this Revised Agreement,
in the
case of the Company by a duly authorized officer, as of the day and year
written
below.
| COMPANY: | |||||
| CREE, INC. | |||||
| /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | Date: |
August
21, 2007
|
|||
| ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |||||
| Compensation Committee Chairman | |||||
| EXECUTIVE: | |||||
| /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | Date: |
August
21, 2007
|
|||
| ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |||||
CGS-B715-9
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