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
Date of Report (Date of Earliest Event Reported): November 3, 2004
CREE, INC.
(Exact name of registrant as specified in its charter)
North Carolina 0-21154 56-1572719
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) 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 1.01 Entry into a Material Definitive Agreement.
Option Grant to Executive Officer
The Company from time to time has made stock option awards to its directors
and employees, including employees of its controlled subsidiaries, pursuant to
the shareholder-approved Cree, Inc. Amended and Restated Equity Compensation
Plan (the "Equity Compensation Plan"). On November 3, 2004, the Company granted
a non-qualified stock option under the Equity Compensation Plan to its Chairman,
F. Neal Hunter, to purchase 16,000 shares at an exercise price of $33.95 per
share, pursuant to the form of master stock option award agreement filed with
the Securities and Exchange Commission on October 7, 2004 as Exhibit 10.2 to the
Company's report on Form 8-K. The option granted to Mr. Hunter expires on
November 3, 2011, if not sooner terminated in accordance with the agreement, and
vests and becomes exercisable to purchase 16,000 shares on November 3, 2005
provided Mr. Hunter remains employed by the Company. The option will vest and
become exercisable as to all shares if Mr. Hunter's employment is terminated by
the Company without cause, or by Mr. Hunter for good reason, within 90 days
preceding or within 12 months following a "change of control" as defined in the
Equity Compensation Plan.
Adoption of 2004 Long-Term Incentive Compensation Plan
On November 4, 2004, the shareholders of Cree, Inc. (the "Company")
approved the adoption of the Cree, Inc. 2004 Long-Term Incentive Compensation
Plan (the "2004 Plan"), which replaces the Company's Equity Compensation Plan.
No further awards will be made under the Equity Compensation Plan after November
4, 2004. The Company has not yet issued any shares or awarded any options under
the 2004 Plan, and the 2004 Plan will terminate on June 28, 2009. The summary of
the terms of the 2004 Plan set forth below is not intended to be complete and is
qualified in its entirety by the 2004 Plan, which was filed as an exhibit to the
Company's Form 10-Q for the quarterly period ended September 26, 2004, filed
with the Securities and Exchange Commission on November 5, 2004.
Nature and Purpose. The 2004 Plan provides for grants to eligible
participants in the form of non-qualified stock options, incentive stock
options, stock appreciation rights ("SARs"), restricted stock, stock units and
performance units. The objectives of the 2004 Plan are to: (i) attract and
retain employees for the Company and its affiliates and directors of the Company
by providing competitive compensation opportunities; (ii) provide incentives to
those individuals who contribute significantly to the long-term performance and
growth of the Company and its affiliates; and (iii) align the long-term
financial interests of employees and directors with those of the Company's
shareholders.
The 2004 Plan is not generally subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended. The 2004 Plan is not a
qualified plan under Section 401 of the Internal Revenue Code of 1986, as
amended (the "Code").
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Eligible Participants. Only employees of the Company and its subsidiaries,
and non-employee directors of the Company, are eligible to receive awards under
the 2004 Plan.
Administration. The 2004 Plan will be administered by a committee (the
"Committee") consisting of two or more non-employee directors appointed by the
Board of Directors. The Committee has the exclusive right to interpret, construe
and administer the 2004 Plan, to select the persons eligible to receive awards
and to act in all matters pertaining to the granting of awards and the contents
of agreements evidencing awards, except that awards to non-employee directors
must also be approved by the Board. The Committee's decisions are conclusive,
final and binding upon all parties.
Unless the Board directs otherwise, the Compensation Committee of the Board
shall serve as the Committee. The charter adopted by the Board for the
Compensation Committee provides that all members of the Compensation Committee
must be: (i) independent directors who meet the independence requirements of
Nasdaq's Marketplace Rules; (ii) "non-employee directors" as defined by Rule
16b-3 under the Securities Exchange Act of 1934, as amended; and (iii) "outside
directors" as defined by Section 162(m) of the Code. The Board, in its sole
discretion, may exercise any authority of the Committee under the 2004 Plan. To
the extent permitted by law and the Company's Bylaws, and subject to the
applicable rules of any securities exchange or quotation or trading system on
which the Company's shares are traded, the Committee may delegate authority
under the 2004 Plan to one or more Committee members or executive officers of
the Company, except that the Committee may not delegate such authority with
respect to awards to directors or executive officers. The Committee may also
delegate authority for certain administrative functions under the 2004 Plan to
an officer or officers of the Company.
Securities to be Offered. The Company would be authorized to issue shares
of the Company's common stock, with a par value $0.00125 per share (the
"Shares"), pursuant to awards under the 2004 Plan. Shares subject to awards
under the 2004 Plan will be made available from the authorized and unissued
Shares of the Company's common stock.
The aggregate number of Shares that may be issued pursuant to awards under
the plan is: (i) 1,200,000 plus (ii) the number of Shares which, immediately
prior to the date of shareholder approval of the 2004 Plan (the "Effective
Date"), were authorized for issuance under the Equity Compensation Plan and are
not thereafter used for awards under the Equity Compensation Plan. The number of
authorized Shares include Shares which, immediately prior to the Effective Date,
were authorized for issuance under the Equity Compensation Plan and either were
not subject to then outstanding awards or were subject to then outstanding
awards that subsequently expire, are canceled or otherwise terminate unexercised
for any reason. No more than an aggregate of 600,000 Shares may be issued
pursuant to awards of restricted stock, stock units or performance units under
the 2004 Plan. If for any reason any Shares awarded or subject to purchase under
the 2004 Plan are not delivered or purchased, or are reacquired by the Company,
such Shares will again be available for issuance pursuant to an award under the
2004 Plan. The determination of the number of Shares that may again become
available for issuance with respect to grants of incentive stock options will be
made in accordance with the requirements of applicable regulations under the
Code.
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The Committee will determine the individuals to whom awards will be
granted, the number of Shares subject to an award, and the other terms and
conditions of an award. Except to the extent the Committee determines that an
award shall not comply with the performance-based compensation provisions of
Section 162(m) of the Code: (i) the aggregate number of Shares subject to
options or SARs granted in any one fiscal year to any one participant shall not
exceed 300,000; (ii) the aggregate number of Shares subject to restricted stock
or stock unit awards granted in any one fiscal year to any one participant shall
not exceed 100,000; and (iii) the aggregate value of performance unit awards
(valued as of the grant date) that may be granted in any one fiscal year to any
one participant shall not exceed the fair market value of 100,000 Shares.
The Committee will make equitable adjustments upon the occurrence of
certain events that result in changes in the outstanding shares of the Company's
common stock or that result in exchanges of shares of common stock for a
different number or class of common stock or other securities of the Company or
another corporation. These events include changes in corporate capitalization,
such as a stock split, reverse stock split or stock dividend or any corporate
transaction such as a reorganization, reclassification, merger or consolidation
or separation, including a spin-off, of the Company or sale or other disposition
by the Company of all or a portion of its assets, any other change in the
Company's corporate structure or any distribution to shareholders (other than a
cash dividend). Under such circumstances, adjustments may be made by the
Committee in the number of Shares that may be awarded under the 2004 Plan, the
limitations on the aggregate number of Shares that may be awarded to any one
participant, the number and class of Shares that may be subject to an award and
which have not been issued or transferred under an outstanding award, the
exercise price under outstanding options and the number of Shares to be
transferred in settlement of outstanding SARs and the terms, conditions or
restrictions of any award and award agreement, including the price payable for
the acquisition of Shares.
Amendments. The Committee or the Board may at any time terminate or from
time to time amend the 2004 Plan, but no such action may adversely affect any
rights or obligations with respect to any awards previously granted under the
2004 Plan unless the affected participants consent in writing. However, neither
the Committee nor the Board may, without approval of the shareholders, amend the
2004 Plan to materially: (i) increase benefits accruing to participants; (ii)
increase the number of Shares which may be issued under the 2004 Plan; or (iii)
modify the requirements for participation in the 2004 Plan. The Company must
also obtain the approval of the shareholders before amending the 2004 Plan to
the extent required by Section 162(m) or Section 422 of the Code or the rules of
any securities exchange or quotation or trading system on which Shares are
traded or other applicable law.
The Committee may amend outstanding awards in a manner not inconsistent
with the terms of the 2004 Plan; provided, however, that: (i) if the amendment
is adverse to the participant, as determined by the Committee, the amendment
will not be effective unless and until the participant consents, except as
otherwise permitted by the 2004 Plan or the award agreement; and (ii) the
Committee shall not have the authority to decrease the exercise price of any
outstanding option or SAR, nor award any option or SAR in replacement of a
canceled option or SAR with a higher exercise price, except for adjustments in
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connection with changes in corporate capitalization and other events as
described above, unless such an amendment is approved by the shareholders.
Stock Options. The number of Shares subject to a stock option, the type of
stock option (i.e., incentive stock option or non-qualified stock option), the
exercise price of the option and the period of exercise will be determined by
the Committee and set forth in an award agreement. The exercise price may not be
less than the fair market value of a Share on the date of grant. No option
granted under the 2004 Plan shall be exercisable after the seventh anniversary
of the date of grant.
Options granted under the 2004 Plan shall be exercised by the delivery of
written or electronic notice of exercise to the Company or its designated
representative, setting forth the number of Shares with respect to which the
option is to be exercised and satisfying any requirements that the Committee may
establish in or pursuant to the award agreement. Unless otherwise authorized by
the Committee, no Shares shall be delivered, whether in certificated or
uncertificated form, until the full exercise price has been paid. The option
price upon exercise shall be payable to the Company either: (a) in cash; (b)
cash equivalent approved by the Committee; (c) if approved by the Committee, by
tendering previously acquired Shares (or delivering a certification or
attestation of ownership of such Shares) having an aggregate fair market value
at the time of exercise equal to the total option price (provided that the
tendered Shares must have been held by the participant for any period required
by the Committee); or (d) by a combination of (a), (b) or (c). The Committee
also may allow cashless exercises as permitted under Regulation T of the Federal
Reserve Board, subject to applicable securities law restrictions, or by any
other means which the Committee determines to be consistent with the 2004 Plan's
purpose and applicable law.
SARs. SARs granted under the 2004 Plan would entitle the participant to
receive an amount payable in Shares and/or cash, as determined by the Committee,
equal to the excess of the fair market value of a Share on the day the SAR is
exercised over the specified purchase price. SARs may be granted in tandem with
a related stock option or independently. If a SAR is granted in tandem with a
stock option, the participant may exercise the stock option or the SAR, but not
both. The Committee shall determine and set forth in the award agreement the
extent to which SARs are exercisable after termination of employment.
Restricted Stock and Stock Units. A restricted stock award under the 2004
Plan is an award of Shares issued to a participant with such restrictions as the
Committee may impose, including restrictions on the right to retain the Shares,
to sell, transfer, pledge or assign the Shares, to vote the Shares and/or to
receive any cash dividends with respect to the Shares. A stock unit award under
the 2004 Plan is an award, valued by reference to a Share, in which the Company
promises to pay the value of the award to the participant by delivery of such
property as the Committee shall determine, including cash or Shares or any
combination thereof, and that has such restrictions as the Committee may impose,
including restrictions on the right to retain the awards, to sell, transfer,
pledge or assign the award, and/or to receive any cash dividend equivalents with
respect to the award.
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The restrictions on restricted stock and stock unit awards may lapse
separately or in combination at such time or times, in installments or
otherwise, as the Committee may deem appropriate, subject to certain minimum
restriction periods described below. Restricted stock and stock unit awards may
be made either alone, in addition to or in tandem with other types of awards
permitted under the 2004 Plan and may be current grants of restricted stock or
stock units or deferred grants, except that a non-employee director may not be
granted restricted stock or stock units in any fiscal year in which the director
is granted an option or SAR.
The terms of restricted stock and stock unit awards, including the purchase
price, if any, to be paid for the restricted stock or stock unit, any
restrictions applicable to the restricted stock or stock unit such as continued
service or achievement of performance goals, the length of the restriction
period and whether any circumstances will shorten or terminate the restriction
period, and rights of the participant during the restriction period to vote and
receive dividends in the case of restricted stock, or to receive dividend
equivalents in the case of stock units that accrue dividend equivalents, will be
determined by the Committee and set forth in the agreement relating to such
award. All grants of restricted stock or stock units shall have a restriction
period of at least three years, except that: (i) the restriction period for any
award may be shortened pursuant to the award agreement in connection with death,
disability or retirement of the participant or certain corporate transactions to
which the Company is a party (such as a merger in which the successor does not
assume or provide replacements for the award); (ii) awards with restrictions
based upon achievement of performance goals shall have a restriction period of
at least one year; and (iii) awards to non-employee directors shall have a
restriction period of at least one year.
Unless otherwise set forth in an agreement relating to a restricted stock
award, a participant awarded Shares as restricted stock shall have all of the
rights of a shareholder of the Company, including the right to vote the Shares
and the right to receive dividends, provided however that the Committee may
require that any dividends on such Shares of restricted stock be automatically
deferred and reinvested in additional restricted stock or may require that
dividends on such shares be paid to the Company for the account of the
participant. A participant to whom stock units are awarded has no rights as a
shareholder with respect to the Shares represented by the stock units unless and
until Shares are actually delivered to the participant in settlement of the
award. However, the Committee may specify in the award agreement that stock
units have dividend equivalent rights.
Performance Units. Performance units are awards granted in terms of a value
set by the Committee (or that is determined by reference to a valuation formula
specified by the Committee), in which the Company promises to pay the value of
the award by delivery of such property as the Committee shall determine,
including without limitation, cash or Shares, or any combination thereof, upon
achievement of such performance objectives during the relevant performance
period as the Committee shall establish. Such awards may be granted subject to
any restrictions deemed appropriate by the Committee. The determination of the
Committee with respect to the form and timing of payout of such awards shall be
set forth in the award agreement. Except as otherwise provided in the award
agreement, a participant shall be entitled to receive any dividends declared
with respect to earned grants of performance units that are being settled in
Shares and that have not yet been distributed to the participant (such dividends
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may be subject to the same accrual, forfeiture and payout restrictions as apply
to dividends earned with respect to stock units under the 2004 Plan). In
addition, unless otherwise provided in the award agreement, a participant shall
be entitled to exercise full voting rights with respect to such Shares.
Performance Measures. For awards under the 2004 Plan that are intended to
qualify under the performance-based compensation provisions of Section 162(m) of
the Code, the performance measure or measures to be used for purposes of such
awards shall be chosen from among the following: earnings, earnings per share,
consolidated pre-tax earnings, net earnings, operating income, EBIT (earnings
before interest and taxes), EBITDA (earnings before interest, taxes,
depreciation and amortization), gross margin, revenues, revenue growth, market
value added, economic value added, return on equity, return on investment,
return on assets, return on net assets, return on capital employed, total
shareholder return, profit, economic profit, after-tax profit, pre-tax profit,
cash flow measures, cash flow return, sales, sales volume, stock price, cost
and/or unit cost. The Committee can establish other performance measures for
awards granted to participants that are not intended to qualify under the
performance-based compensation provisions of Section 162(m) of the Code.
Awards to Outside Directors. A non-employee director may be granted awards
(i) in the form of non-qualified stock options, SARs or a combination thereof or
(ii) in lieu of any award of non-qualified stock options or SARs in any fiscal
year, in the form of restricted stock or stock units or a combination thereof.
The aggregate number of Shares subject to non-qualified stock options or SARs
granted under the 2004 Plan in any one fiscal year to any non-employee director
shall not exceed 16,000. The aggregate number of Shares subject to restricted
stock or stock units granted under the 2004 Plan in any one fiscal year to any
non-employee director shall not exceed 5,000. The number of Shares subject to
such awards, any formula pursuant to which such number shall be determined, the
date of grant and the vesting, expiration and other terms applicable to such
awards shall be recommended from time to time by the Committee and approved by
the Board and shall be subject to the terms of the 2004 Plan applicable to
awards in general.
Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.
(b) On November 4, 2004, William J. O'Meara completed his term of service
on the Company's Board of Directors and did not stand for reelection. Effective
November 4, 2004, Mr. O'Meara has been employed to serve as a Director Emeritus
for a term of one year to provide advice and assistance on such matters within
his expertise or experience as the Chairman of the Board of Directors may from
time to time request.
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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 W. Palmour
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John W. Palmour
Executive Vice President
Date: November 9, 2004
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