form8k082407.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of The Securities Exchange Act of
1934
CREE,
INC.
(Exact
name of registrant as specified in its charter)
|
North
Carolina
|
0-21154
|
56-1572719
|
|
(State
or other jurisdiction of
incorporation)
|
(Commission
File
Number)
|
(I.R.S.
Employer
Identification
Number)
|
|
4600
Silicon Drive
|
|
|
Durham,
North Carolina
|
27703
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(919)
313-5300
Registrant’s
telephone number, including area code
N/A
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[
] Written communications pursuant to Rule 425
under the Securities Act (17 CFR 230.425)
[
] Soliciting material pursuant to Rule 14a-12
under the Exchange Act (17 CFR 240.14a-12)
[
] Pre-commencement communications pursuant to
Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[
] Pre-commencement communications pursuant to
Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Item
5.02
|
Departure
of Directors or Certain Officers; Election of Directors; Appointment
of
Certain Officers; Compensatory Arrangements of Certain
Officers
|
Fiscal
2008 Management Incentive Compensation Plan
On
August
20, 2007, the Compensation Committee of the Board of Directors of Cree, Inc.
(the “Company”) adopted the Fiscal 2008 Management Incentive Compensation Plan
(the “Plan”). The Plan is designed 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 by
providing opportunities for cash incentives based on the attainment of specific
goals. The Plan relates to the Company’s fiscal year ending June 29,
2008 and covers executive officers (other than the Chairman and Chief Executive
Officer), other senior level managers who report directly to the Chief Executive
Officer and other key managers who have been identified as participants by
the
Chief Executive Officer.
Target
awards under the Plan are expressed as a percentage of salary and vary based
on
position. Awards are determined based on performance measures in two
categories: corporate goals and individual management by objectives (“MBO”)
goals. Corporate performance measures are determined based on the
Company meeting or exceeding revenue, net income and earnings per share targets
for the fiscal year, provided that the corporate performance measure will
be 0%
unless the minimum revenue and either the minimum net income or EPS targets
are
achieved. Individual MBO goals are established at the beginning of
each fiscal quarter. These goals include individual performance goals
specific to such individual or his or her business unit’s performance for the
quarter and may include a component based on corporate financial goals
established by the Chief Executive Officer for the
quarter. Individual MBO goals are measured at quarter end, and any
corresponding awards are paid to eligible participants following approval
of the
amount by the Chief Executive Officer. The actual awards paid to
participants, if any, may vary with the level of achievement of the
corresponding goals.
Unless
otherwise approved by the Compensation Committee in the case of executive
officers or by the Chief Executive Officer in any other case, and except
in the
case of termination due to death or disability or in connection with a change
in
control, eligible participants must be employed by the Company on the payment
date in order to receive payment for an award under the Plan. The Plan provides
that, in the event of a change in control, each participant’s performance
measurement against individual MBO goals for any award period ending after
the
effective date of the change in control will be 100% and the corporate
performance measurement for the plan year will be at least 100%, regardless
of
whether the participant remains employed through the end of the award
period.
The
foregoing description of the Plan is subject to, and qualified in its entirety
by the Plan, which is included as Exhibit 10.1 to this report and incorporated
herein by reference.
Grant
of Performance Units
On
August
20, 2007, the Compensation Committee of the Company’s Board of Directors
approved the grant of performance units to Charles M. Swoboda, the Company’s
Chairman, Chief Executive Officer and President, under the Company’s 2004
Long-Term Incentive Compensation Plan (the “LTIP”). The performance
units are designed to provide Mr. Swoboda incentive compensation if the
Company’s financial performance for fiscal 2008 achieves certain pre-established
targets. The targets under the performance units are the same as
those established for the corporate goals under the Fiscal 2008 Management
Incentive Compensation Plan. For fiscal 2007 and prior years, Mr.
Swoboda was eligible for incentive compensation under the Company’s Management
Incentive Compensation Plans in effect each year. For fiscal 2008,
the Compensation Committee determined instead to structure the incentive
award
for Mr. Swoboda as performance units under the LTIP. Utilizing an
award under the LTIP allowed the Compensation Committee the flexibility to
require that a portion of any future payment under the award be paid in shares
of the Company’s common stock, as described below, and also permits the award to
qualify for the performance-based compensation exemption under Section 162(m)
of
the Internal Revenue Code of 1986, as amended (the “Code”).
The
performance units awarded to Mr. Swoboda for fiscal 2008 were granted pursuant
to the terms of a Notice of Grant and Master Performance Unit Award Agreement,
each dated August 21, 2007 (collectively, the “Award
Agreement”). Under the Award Agreement, Mr. Swoboda is eligible to
receive an annual incentive award determined by multiplying his base salary,
his
target award level and a performance measurement (specified as a percentage
between 0% and 150%) derived by comparing the Company’s fiscal 2008 financial
performance against pre-established revenue, net income and earnings per
share
targets. The target award level is set at 80% of Mr. Swoboda’s base
salary. Depending on the amount of payment, if any, under the
performance units, up to 30% of the performance units may be paid in the
Company’s common stock, not to exceed 10,000 shares. The amount of
any payment under the performance units not paid in common stock will be
paid in
cash.
Except
as
provided in the Employment Agreement and except as provided with respect
to
death or long-term disability or a change in control, (i) Mr. Swoboda must
be
continuously employed by the Company as its Chief Executive Officer and
President through the date of payment of the performance units to have a
right
to such payment, (ii) his performance units will not be considered earned
until
he receives such payment, and (iii) if he terminates his employment prior
to the
date of payment, with or without cause, he will forfeit his performance
units. If there is a change in control and Mr. Swoboda’s employment
terminates prior to June 29, 2008, he will not be entitled to payment under
the
performance units.
The
foregoing description of the grant of performance units is subject to, and
qualified in its entirety by, the Notice of Grant and the Master Performance
Unit Award Agreement, which are included as Exhibits 10.2 and 10.3,
respectively, to this report and incorporated herein by
reference. The LTIP was filed as Exhibit 10.1 to the Company’s Form
8-K filed with the Securities and Exchange Commission on November 8,
2005.
Bonus
Awards
On
August
20, 2007, the Compensation Committee approved bonus payments to certain
executive officers based on overall performance in making significant progress
towards the Company’s strategic objectives, including initiating and completing
the acquisition of COTCO Luminant Device Limited, beginning the integration
of
the COTCO business and advancing the Company’s lighting strategy. The
bonus payments thus approved were as follows: $50,000 to Mr. Swoboda;
$25,000 to John T. Kurtzweil, the Company’s Executive Vice President–Finance,
Chief Financial Officer and Treasurer; and $25,000 to John W. Palmour, Ph.D.,
the Company’s Executive Vice President–Advanced Devices.
Amended
and Restated Employment Agreement
On
August
21, 2007, pursuant to approval of the Compensation Committee of the Company
on
August 20, 2007, the Company and Mr. Swoboda entered into an amended and
restated employment agreement (the “Employment Agreement”) to bring Mr.
Swoboda’s existing employment agreement into compliance with Section 409A of the
Code and the guidance thereunder. The original Employment Agreement
was entered into effective October 13, 2004. The following is a
description of the material terms of the Employment Agreement as amended
and
restated on August 21, 2007.
The
Employment Agreement provides that Mr. Swoboda will continue to serve as
the
Company’s Chairman of the Board, President and Chief Executive Officer as an
at-will employee. In addition, the Employment Agreement requires Mr. Swoboda
to
be nominated each year to serve as a member of the Company’s Board of
Directors. The current term of the Employment Agreement ends on
October 13, 2008. Thereafter, the term will automatically renew for
successive one-year renewal periods on each anniversary of the original
effective date of the agreement unless either party provides the other party
with at least 120 days’ prior written notice that the term shall not be
extended.
The
Employment Agreement provides that Mr. Swoboda’s annual base salary is $550,000,
which amount is subject to annual review and adjustment by the Compensation
Committee of the Company’s Board of Directors. In addition, Mr.
Swoboda will be eligible to receive an annual incentive upon the achievement
of
certain performance goals set by the Compensation Committee, and his target
incentive opportunity for each calendar year will be at least 70% of his
base
salary. The Employment Agreement also provides that Mr. Swoboda is
entitled to participate in certain benefit plans of the Company as well as
to be
reimbursed for certain travel, entertainment and other expenses in connection
with his services for the Company.
Mr.
Swoboda is an at-will employee, meaning that he can be terminated at any
time
with or without cause upon written notice by the Company. In
connection with any termination of Mr. Swoboda’s employment, he will be entitled
to all payments and benefits that he would be entitled to as an employee
of the
Company in the absence of the Employment Agreement. In addition, he
may be entitled to severance benefits depending on the circumstances of the
termination.
If
Mr.
Swoboda’s employment is terminated by the Company without cause, except as a
result of his death or long-term disability, or by Mr. Swoboda for good reason,
and the termination does not occur within 12 months following a change of
control, then Mr. Swoboda also will receive (i) continued payment of his base
salary for the period ending on the later of (a) the date 24 months following
the termination date or (b) the date that the term of the Employment Agreement
otherwise expires (the “Continuance Period”), (ii) a lump-sum payment equal to
twice the average of Mr. Swoboda’s earned annual incentives for the two
completed fiscal years immediately preceding the fiscal year in which the
termination occurs, (iii) a lump sum payment equal to 12 times the COBRA premium
in effect for the type of medical, dental and vision coverage then in effect
for
Mr. Swoboda, and (iv) accelerated vesting with respect to 50% of his then
outstanding, unvested stock options, restricted stock awards and other equity
awards, other than with respect to any performance units that may be used to
pay
Mr. Swoboda’s annual incentive award.
If
Mr.
Swoboda’s employment is terminated by the Company without cause, except as a
result of his death or long-term disability, or by Mr. Swoboda for good reason,
and the termination occurs within 12 months following a change of control,
then
he also will receive (i) continued payment of his base salary for the
Continuance Period, (ii) a lump sum payment of an amount equal to his current
target annual incentive, pro-rated to the date of termination, (iii) a lump
sum
payment equal to twice the average of Mr. Swoboda’s earned annual incentives for
the two completed fiscal years immediately preceding the fiscal year in which
the termination occurs, (iv) a lump sum payment equal to 24 times the COBRA
premium in effect for the type of medical, dental and vision coverage then
in
effect for Mr. Swoboda, and (v) full accelerated vesting with respect to
Mr.
Swoboda’s then outstanding, unvested stock options, restricted stock and other
equity awards, other than with respect to any performance units that may
be used
to pay Mr. Swoboda’s annual incentive award. In addition, if any
payment or benefit Mr. Swoboda receives from the Company in connection with
a
change in control would be considered a parachute payment under Section 280G
of
the Code, Mr. Swoboda will also receive from the Company an additional payment
equal to the amount of any excise tax incurred as a result of any such parachute
payments, together with any income, employment and excise taxes related to
the
additional payment, as well as any related interest and penalties that would
not
have been imposed absent such payments, in an amount sufficient to restore
him
to the same after-tax position he would have been in if the excise tax had
not
been imposed.
As
a
condition to the receipt of the severance benefits described in the prior
paragraphs, Mr. Swoboda must (i) sign and not revoke a separation agreement
and
release of claims, (ii) refrain from disparaging the Company, its directors
or
officers for the longer of (a) 12 months or (b) the Continuance Period, and
(iii) continue to comply with the noncompete restrictions contained in the
Company’s standard form of employee agreement regarding confidential
information, intellectual property and noncompetition, as previously signed
by
Mr. Swoboda (the “Confidential Information Agreement”), for the longer of (a) 12
months or (b) the Continuance Period. Under the non-competition
provisions of the Confidential Information Agreement and subject to certain
limited exceptions, an employee is restricted while employed by the Company
and
for a period of time following the termination of his or her employment from
(i)
performing services for any competing business, whether as an employee,
officer, director, consultant, agent, contractor or in any other capacity,
(ii)
being the beneficial owner of an equity interest in any competing business,
(iii) requesting any present or future customers or suppliers of the Company
to
curtail or cancel business with the Company, or (iv) inducing or attempting
to
influence any employee of the Company to terminate his or her employment
with
the Company. Competing business includes any entity which is
conducting research directed to, developing, manufacturing, marketing,
distributing, or selling any product, service, or technology that is competitive
with any product, service, or technology that the Company is developing,
manufacturing, marketing, distributing, selling, or conducting research directed
to, at the time or during the period specified in the Confidential Information
Agreement.
In
the
event of a dispute relating to any provision of the Employment Agreement arising
during its term or within three years of its termination, the Company will
reimburse Mr. Swoboda for the fees and expenses he incurs in connection with
the
dispute on a quarterly basis. In the event Mr. Swoboda does not
prevail on at least one material issue or if an arbitrator determines that
Mr.
Swoboda’s legal positions were frivolous or without legal foundation, (i) Mr.
Swoboda will repay the Company amounts previously reimbursed, and (ii) Mr.
Swoboda will reimburse the Company for its fees and expenses.
The
foregoing description of the Employment Agreement is subject to, and qualified
in its entirety by, the Employment Agreement, which is included as Exhibit
10.4
to this report and incorporated herein by reference.
|
Item
9.01
|
Financial
Statements and Exhibits
|
(d) Exhibits
| |
Exhibit
No.
|
|
Description
of Exhibit
|
| |
|
|
|
| |
|
|
Fiscal
2008 Management Incentive Compensation Plan
|
| |
Exhibit
10.2 |
|
Notice
of Grant to Charles Swoboda, dated August 21,
2007
|
| |
Exhibit
10.3 |
|
Master
Performance Unit Award Agreement, dated August 21, 2007, between
Cree,
Inc. and Charles Swoboda
|
| |
Exhibit
10.4
|
|
Charles
Swoboda Employment Agreement, as amended and restated effective
August 21,
2007
|
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| |
CREE,
INC.
|
| |
|
|
|
| |
|
|
|
| |
By:
|
|
/s/
John T. Kurtzweil
|
| |
|
|
John
T. Kurtzweil
|
| |
|
|
Executive
Vice President - Finance,
Chief
Financial Officer & Treasurer
|
Date: August
24, 2007
EXHIBIT
INDEX
| |
Exhibit
No.
|
|
Description
of Exhibit
|
| |
|
|
|
| |
|
|
Fiscal
2008 Management Incentive Compensation Plan
|
| |
Exhibit
10.2 |
|
Notice
of Grant to Charles Swoboda, dated August 21,
2007
|
| |
Exhibit
10.3 |
|
Master
Performance Unit Award Agreement, dated August 21, 2007, between
Cree,
Inc. and Charles Swoboda
|
| |
Exhibit
10.4
|
|
Charles
Swoboda Employment Agreement, as amended and restated effective
August 21,
2007
|