Cr1163 Form 10K.Ai

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To the Shareholders of Cree, Inc.: The 2010 Annual Meeting of Shareholders of Cree, Inc. will be held at the offices of the corporation at 4425 Silicon Drive, Durham, North Carolina 27703, on Tuesday, October 26, 2010, at 10:00 a.m. local time, to consider and vote upon the following matters and to transact such other business as may be properly brought before the meeting: • Proposal No. 1—Election of eight directors • Proposal No. 2—Approval of an amendment to the 2004 Long-Term Incentive Compensation Plan to increase the number of shares authorized for issuance under the plan • Proposal No. 3—Approval of an amendment to the Bylaws to set the size of the Board of Directors at not less than five nor more than nine members, with the number within that range to be determined by the Board of Directors from time to time • Proposal No. 4—Ratification of the appointment of Ernst & Young LLP as independent auditors for the fiscal year ending June 26, 2011 All shareholders are invited to attend the meeting in person. Only shareholders of record at the close of business on August 30, 2010 are entitled to notice of and to vote at the meeting. By order of the Board of Directors, Adam H. Broome Secretary Durham, North Carolina September 3, 2010 PLEASE NOTE: We are primarily providing access to our proxy materials over the Internet pursuant to the Securities and Exchange Commission’s “notice and access” rules. Beginning on or about September 13, 2010, we expect to mail to our shareholders a Notice of Internet Availability of Proxy Materials which will indicate how to access our 2010 Proxy Statement and 2010 Annual Report on the Internet. The Notice also includes instructions on how you can receive a paper copy of your annual meeting materials, including the notice of annual meeting, proxy statement and proxy card. Whether or not you plan to attend the meeting in person, please submit voting instructions for your shares promptly using the directions on your Notice or, if you elected to receive printed proxy materials by mail, your proxy card to vote by one of the following methods: (1) by telephone, by calling the toll-free telephone number available on the Internet voting site; (2) over the Internet, by accessing the website address printed on your Notice; or (3) if you elected to receive printed proxy materials by mail, by marking, dating and signing your proxy card and returning it in the accompanying postage-paid envelope. Table of Contents PROXY STATEMENT: MEETING INFORMATION ............................................................... 1 VOTING PROCEDURES .................................................................. 1 Who Can Vote ....................................................................... 2 How You Can Vote ................................................................... 2 How You Can Revoke Your Proxy and Change Your Vote .................................... 2 How Your Proxy Will Be Voted ......................................................... 2 How You Can Vote Shares Held by a Broker or Other Nominee ................................ 2 Quorum Required .................................................................... 3 Vote Required ....................................................................... 3 PROPOSAL NO. 1—ELECTION OF DIRECTORS ............................................. 4 Nominees for Election as Directors ...................................................... 4 Director Not Standing for Re-election .................................................... 9 Executive Officers .................................................................... 9 Code of Ethics ....................................................................... 9 Board Composition and Independence of Directors .......................................... 9 The Leadership Structure of the Board of Directors .......................................... 10 Board’s Role in Risk Oversight ......................................................... 11 Compensation Program Risk Assessment .................................................. 11 Attendance at Meetings ................................................................ 12 Standing Committees ................................................................. 12 Certain Transactions and Legal Proceedings ............................................... 14 Review and Approval of Related Person Transactions ........................................ 15 Section 16(a) Beneficial Ownership Reporting Compliance ................................... 15 PROPOSAL NO. 2—APPROVAL OF AMENDMENT TO 2004 LONG-TERM INCENTIVE COMPENSATION PLAN ............................................................... 16 General ............................................................................ 16 Description of LTIP .................................................................. 16 Federal Income Tax Consequences ....................................................... 21 Plan Awards ........................................................................ 23 Equity Compensation Plans ............................................................ 24 OWNERSHIP OF SECURITIES ............................................................ 26 Principal Shareholders and Share Ownership by Management ................................. 26 EXECUTIVE COMPENSATION ........................................................... 28 Compensation Discussion and Analysis ................................................... 28 Compensation Committee Report ........................................................ 37 Summary of Cash and Certain Other Compensation ......................................... 38 Grants of Equity and Non-Equity Incentive Awards ......................................... 39 Outstanding Equity Awards ............................................................ 40 Stock Option Exercises and Vesting of Restricted Stock ...................................... 41 Potential Payments upon Termination or Change in Control ................................... 41 DIRECTOR COMPENSATION ............................................................. 51 Summary of Cash and Certain Other Compensation ......................................... 51 Summary of Director Compensation Program .............................................. 52 Compensation Committee Interlocks and Insider Participation ................................. 52 PROPOSAL NO. 3—APPROVAL OF AMENDMENT TO THE BYLAWS .......................... 53 PROPOSAL NO. 4—RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS .......... 54 Report of the Audit Committee .......................................................... 54 Independent Auditor Fee Information ..................................................... 55 OTHER MATTERS ...................................................................... 56 Other Business ....................................................................... 56 2011 Annual Meeting of Shareholders .................................................... 56 Procedures for Director Nominations .................................................... 56 Shareholder Communications with Directors .............................................. 57 Costs of Soliciting Proxies ............................................................ 57 Availability of Report on Form 10-K .................................................... 57 Shareholders Sharing the Same Last Name and Address ..................................... 57 Principal Executive Offices and Annual Meeting Location ................................... 58 APPENDIX A: RADFORD EXECUTIVE SURVEY PARTICIPANTS ($300M-$700M REVENUE) ..... A-1 APPENDIX B: RADFORD EXECUTIVE SURVEY PARTICIPANTS (SEMICONDUCTOR WITH <$200M REVENUE) .................................................................. B-1 APPENDIX C: PROPOSED AMENDMENT TO 2004 LONG-TERM INCENTIVE COMPENSATION PLAN .............................................................................. C-1 CREE, INC. PROXY STATEMENT MEETING INFORMATION The Board of Directors of Cree, Inc., or the Company, is asking for your proxy for use at the 2010 Annual Meeting of Shareholders and any adjournments of the meeting. The meeting will be held at our offices at 4425 Silicon Drive, Durham, North Carolina 27703, on Tuesday, October 26, 2010, at 10:00 a.m. local time, to conduct the following business and such other business as may be properly brought before the meeting: (1) election of eight directors; (2) approval of an amendment to the 2004 Long-Term Incentive Compensation Plan, or the LTIP, to increase the number of shares authorized for issuance under the plan; (3) approval of an amendment to the Company’s Bylaws to set the size of the Board of Directors at not less than five nor more than nine members, with the number within that range to be determined by the Board of Directors from time to time; and (4) ratification of the appointment of Ernst & Young LLP as our independent auditors for the fiscal year ending June 26, 2011. The Board of Directors recommends that you vote FOR the election of the director nominees listed in this proxy statement, FOR approval of the amendment to the LTIP, FOR approval of the amendment to the Bylaws and FOR ratification of the appointment of Ernst & Young LLP as our independent auditors for the fiscal year ending June 26, 2011. Beginning on or about September 13, 2010, proxy materials for the annual meeting, including this proxy statement and our 2010 Annual Report, are being made

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