Exhibit 10.1



                   FORM OF MASTER STOCK OPTION AWARD AGREEMENT
                              TERMS AND CONDITIONS
      (For Grants of Nonqualified Stock Options to Non-Employee Directors)

This Master Stock Option  Agreement (this "Master  Agreement" or "Agreement") is
entered  into  between you (the  "Participant"  named  below) and Cree,  Inc., a
corporation  formed  under  the  laws  of  the  State  of  North  Carolina  (the
"Company").  As used in this  Agreement,  "Company"  includes Cree, Inc. and any
entity that is part of the "Company", as defined in the applicable Plan.

This Agreement  states the terms and conditions that govern  nonqualified  stock
options (each an "Option") the Company may from time to time award  granting you
the right to purchase  shares (the  "Shares") of the Common Stock of Cree,  Inc.
(the "Common Stock").  The Options may include awards under the Company's Equity
Compensation  Plan or any other  plan  previously  or  hereafter  adopted by the
Company's Board of Directors (a "Plan" or "Plans," as applicable). The number of
Shares,  vesting  schedule,  per  share  purchase  price  and  other  provisions
applicable  to each  Option  will be stated  in a Notice of Grant  issued by the
Company for each Option, and each such Notice of Grant is incorporated herein by
reference. The Notice of Grant, together with the terms and conditions set forth
in this  Agreement and the  applicable  Plan,  constitute  the entire  agreement
between you and the Company with  respect to the Option  described in the Notice
of Grant.

Unless otherwise specified in the Notice of Grant or agreed to in writing by you
and the Company,  this Master Agreement will apply to all Options granted to you
on and after  the  effective  date  stated  below  that are  nonqualified  stock
options.  This Agreement is subject to and shall be construed in accordance with
the applicable  Plan. As used in this Agreement,  "Termination of Service" shall
mean  the  cessation  of  Participant's  services  as a member  of the  Board of
Directors  of the  Company,  whether due to  resignation,  death,  failure to be
re-elected or re-appointed or any other reason. Unless otherwise defined in this
Agreement or the Notice of Grant,  capitalized  terms used in this Agreement and
defined in the Plan shall have the same meaning as defined in the Plan.

Please  indicate  that your have read and agree to the terms and  conditions  of
this  Agreement by signing below and returning the signed copy to the Company at
its principal  offices in Durham,  North Carolina.  By your signature below, you
agree to be bound by the  provisions of this Agreement and the Plans and Notices
of Grant applicable to the Options to which this Agreement applies. Upon receipt
of a signed copy of this  Agreement  at the  Company's  principal  office,  this
Agreement  shall be effective  as of the first date on which the Company  grants
you an Option.

CREE, INC.                               PARTICIPANT:

By:
   ------------------------------        ---------------------------------------
   [Name & Title]                        [Name]


To be Completed by Company:

Date of First Option Grant (Agreement Effective Date):
<PAGE>
1.   Grants of Options. Subject to the terms and conditions contained herein and
     in the  applicable  Notice of Grant and Plan, the Company may, from time to
     time in its  discretion,  grant you  Options to  purchase  shares of Common
     Stock.

2.   Term of Options.  Unless sooner  terminated in accordance  with the Plan or
     this Agreement or as otherwise provided in the Notice of Grant, each Option
     will  expire  and  cease to be  exercisable  upon the first to occur of the
     following:

     (a)  the expiration of ninety (90) calendar days following your Termination
          of Service,  except where the  termination  results from your death or
          Disability or where your death occurs  following the  termination  but
          while the Option is otherwise still exercisable;

     (b)  the expiration of one (1) year  following your  Termination of Service
          if the termination results from your death,

     (c)  the expiration of one (1) year  following your  Termination of Service
          if the  termination  results from your  Disability,  except where your
          death occurs after the  termination  but while the Option is otherwise
          still exercisable;

     (d)  the  expiration  of one (1) year  following  your  death if your death
          occurs  after  your  Termination  of  Service  but while the Option is
          otherwise still exercisable; or

     (e)  the seventh  (7th)  anniversary  of the Grant Date of the  Option,  at
          11:59 P.M., local time, Durham, North Carolina.

     Upon  expiration  or  termination  of an Option,  the  Option  will have no
     further effect and cannot thereafter be exercised to purchase any Shares.

3.   Accelerated  Vesting.  Each Option will become fully vested and exercisable
     to purchase  all Shares  subject to the  Option,  to the extent not already
     vested  and  exercisable,  upon your  death or at such time as the  Company
     determines  you have become  Disabled  within the meaning of the applicable
     Plan,  provided  you hold the office of Director of the Company at the time
     of your death or when you became Disabled.

4.   Exercise of Option. To exercise an Option,  you must complete,  execute and
     deliver to the Company of a notice of exercise in the form  supplied by the
     Company and pay to the Company the purchase  price for the number of Shares
     specified  in the  notice  together  with all  taxes or other  amounts  the
     Company is  required to  withhold  or collect  pursuant to this  Agreement.
     Exercise of the Option will be effective  only when the notice and required
     payments  are  actually  received  by  the  Company.  If  the  exercise  is
     facilitated  through a  "broker-assisted  exercise" or "cashless  exercise"
     transaction  by a brokerage  firm you have  designated,  you agree that the
     brokerage  firm is acting  as your  agent in the  transaction  and that the
     Company may rely upon notices,  instructions and information  given by such
     firm in connection with the exercise, as if the same were given by you. The
     Company will deliver a certificate or certificates for the purchased Shares
     to you, or to such other person as you  designate  in writing,  or make the
     Shares  available  for  electronic  delivery  in the U.S. to an account you
     designate  in writing,  within  three (3)  business  days after the Company
     receives the notice of exercise and required payments.

5.   Withholding  Taxes. The Company's  obligation to issue Shares upon exercise
     of an Option is subject to the  condition  that you pay to the Company,  in
     addition to the purchase price of the Shares  purchased,  all taxes and any
     other  amounts  the  Company  is  required  by  law  or  regulation  of any
     governmental  authority,  whether  federal,  state or  local,  domestic  or
     foreign, to withhold or collect in connection with the Option exercise,  if
     any, as determined by the Committee.

6.   Transfer of Option. Neither an Option nor any rights under an Option may be
     assigned,  pledged  as  collateral  or  otherwise  transferred,  except  as
     permitted by the applicable  Plan, nor is any Option or such rights subject
     to  attachment,  execution or other judicial  process.  In the event of any
     attempt to assign,  pledge or  otherwise  dispose of an Option or any right
     under an Option,  except as permitted  by the  applicable  Plan,  or in the
     event of the levy of any attachment,  execution or similar judicial process
     upon the rights or interests  conferred by an Option,  the Committee may in
     its discretion terminate an Option by notice to you.
<PAGE>
7.   Rights Prior to  Exercise.  You will have no rights as a  shareholder  with
     respect  to any  Shares  until  such  Shares  have been duly  issued by the
     Company or its transfer agent pursuant to exercise of an Option.

8.   Provisions  of  the  Plan.  The  provisions  of  the  applicable  Plan  are
     incorporated  by reference  herein as if set out in full in this Agreement.
     To the extent that any  conflict may exist  between any other  provision of
     this  Agreement  and a  provision  of the Plan,  the Plan  provision  shall
     control. All decisions of the Committee with respect to the interpretation,
     construction  and application of the Plan or this Agreement shall be final,
     conclusive and binding upon you and the Company.

9.   Cancellation and Rescission. The Committee may cancel, terminate,  rescind,
     suspend,   withhold  or  otherwise  limit  or  restrict   exercise  of  the
     unexercised  portion  of an  Option  if  you  engage  in  any  "Detrimental
     Activity" as defined below or otherwise violate any applicable provision of
     this  Agreement  or the Plan.  Upon each  exercise  of an Option,  you must
     certify in a manner  acceptable  to the Company that you are in  compliance
     with all applicable  provisions of this  Agreement and the Plan,  including
     the  provisions  of this section  regarding  Detrimental  Activity.  If you
     engage in any  Detrimental  Activity  prior to or within one (1) year after
     any exercise of an Option,  the exercise may be rescinded  pursuant to this
     section  within  two (2) years  after such  exercise.  In the event of such
     rescission,  you will be  obligated to pay to the Company the amount of any
     gain realized as a result of the rescinded exercise,  in such manner and on
     such terms and conditions as the Company may require,  and the Company will
     be entitled  to set-off  against the amount of any such gain any amount the
     Company owes to you. For purposes of this section,  "Detrimental  Activity"
     means:

     (a)  the rendering of services for any organization or engaging directly or
          indirectly in any business  which is or becomes  competitive  with the
          Company,  or which  organization  or  business,  or the  rendering  of
          services to such  organization  or business,  is or becomes  otherwise
          prejudicial  to or in  conflict  with the  interests  of the  Company,
          provided  that  such  organization  or  business  is  engaged  in  the
          development,  manufacture,  marketing,  distribution  or sale  of,  or
          research  directed to: (i) silicon  carbide or AIII nitride  materials
          for electronic  applications,  or for any other applications for which
          the  Company is selling  such  materials  at such time;  (ii)  devices
          fabricated on or from silicon  carbide or AIII nitride  materials;  or
          (iii) Si LDMOS power devices, 10 watts and above, for RF applications;

     (b)  the disclosure to anyone outside the Company, or the use in other than
          the Company's business,  without prior written  authorization from the
          Company,  of any confidential  information or material relating to the
          business  of the  Company,  acquired  by you  either  during  or after
          service to the Company;

     (c)  any attempt to induce any employee of the Company to leave  employment
          with the  Company  to perform  services  elsewhere  or any  attempt to
          solicit the trade or business of any current or prospective  customer,
          supplier or partner of the Company;

     (d)  any   breach   by   you  of   any   confidentiality,   noncompetition,
          nonsolicitation or nondisparagement  obligations  undertaken by you in
          any written agreement between you and the Company; or

     (e)  any act of  fraud,  misappropriation,  embezzlement,  or  tortious  or
          criminal behavior that adversely impacts the Company.

10.  General.

     (a)  This  Agreement  shall be binding upon and inure to the benefit of you
          and  the   Company   and  upon  our   respective   heirs,   executors,
          administrators, representatives, successors and permitted assigns.

     (b)  Notices  under this  Agreement  must be in writing  and sent either by
          hand  delivery or by certified  mail  (return  receipt  requested  and
          first-class postage prepaid), in the case of the Company, addressed to
          its  principal  executive  offices to the  attention of the Stock Plan
          Administrator,  and,  in your  case,  to your  address as shown on the
          Company's records.
<PAGE>
     (c)  This  Agreement is governed by and  construed in  accordance  with the
          laws of the State of North Carolina, without reference under conflicts
          of laws principles.

     (d)  No amendment or  modification  of this Agreement shall be valid unless
          the same is in writing and signed by you and by an authorized  officer
          of Cree,  Inc. The provisions of this Agreement are severable.  If any
          provision of this  Agreement  is held to be invalid or  unenforceable,
          such  determination  shall  not  affect  the other  provisions  of the
          Agreement  and the  Agreement  shall be construed as if the invalid or
          unenforceable  provision  were  omitted  and a valid  and  enforceable
          provision, as nearly comparable as possible, substituted therefor.

     (e)  This Agreement and the  applicable  Notice of Grant and Plan set forth
          all of the promises,  agreements  and  understandings  between you and
          Company  relating to each Option  evidenced  by this  Agreement.  This
          Agreement  supersedes any and all prior agreements or  understandings,
          whether oral or written, with respect to each Option evidenced by this
          Agreement unless otherwise specified in the Notice of Grant.

     (f)  Shares  issued  upon  exercise  of an Option  may be  subject  to such
          stop-transfer  orders and other restrictions as the Committee may deem
          advisable under the rules,  regulations and other  requirements of the
          Securities  and  Exchange  Commission,  any stock  exchange or trading
          system  upon  which the  Common  Stock is listed  or  traded,  and any
          applicable federal or state laws, and the Committee may cause a legend
          or legends to be placed on any such  certificates to make  appropriate
          reference to such restrictions.

     (g)  You agree  that each  Option  evidenced  by this  Agreement  serves as
          additional,  valuable  consideration  for  your  obligations,  if any,
          undertaken  in any  existing  agreement  between  you and the  Company
          regarding confidential information, noncompetition, nonsolicitation or
          similar covenants.

     (h)  You acknowledge,  represent and warrant to the Company, and agree with
          the Company,  that,  except for information  provided in the Company's
          filings with the U.S.  Securities  and Exchange  Commission and in the
          Company's current prospectus  relating to the applicable Plan: (i) you
          have not relied and will not rely upon the Committee,  the Company, or
          any employee or agent of the Company in determining  whether to accept
          or exercise an Option, or in connection with any disposition of Shares
          purchased  upon  exercise  of an  Option,  or with  respect to any tax
          consequences  related  to the  grant or  exercise  of an Option or the
          disposition of Shares purchased pursuant to exercise of an Option; and
          (ii)  you  will  seek  from  your  own   professional   advisors  such
          investment, tax and other advice as you believe necessary.

     (i)  You  acknowledge  that you may incur a substantial  tax liability as a
          result of exercise of an Option.  You assume full  responsibility  for
          all such  consequences and the filing of all tax returns and elections
          you may be required or find desirable to file in connection therewith.
          If you are  required  to make any  valuation  of an  Option  or Shares
          purchased pursuant to exercise of the Option under any federal,  state
          or other  applicable  tax law,  and if the  valuation  affects any tax
          return or election of the Company or affects the  Company's  financial
          statement  reporting,  you agree that the  Company may  determine  the
          value  and that  you will  observe  any  determination  so made by the
          Company in all tax returns and elections filed by you.
<PAGE>

                 FORM OF NOTICE OF GRANT - NON-EMPLOYEE DIRECTOR

          [CREE LOGO]                                  NOTICE OF GRANT

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Company:                       Participant:
Cree, Inc.                   Option Number:
4600 Silicon Drive             Option Plan:  Equity Compensation Plan
Durham, NC  27703              Option Type:
Tax I.D. 56-1572719             Grant Date:
                             Number Shares:
                            Exercise Price:
                          Vesting Schedule:
                           Expiration Date:
--------------------------------------------------------------------------------
Dear [name]:

I am  pleased to inform  you that you have been  awarded  an option to  purchase
[number of shares] shares of the common stock of Cree, Inc., at a purchase price
of  $[price]  per share,  effective  as of [grant  date],  the Grant Date of the
award.  Please note that the option is subject to and governed by the Cree, Inc.
Equity  Compensation  Plan (the "Plan") and the terms of the  applicable  Master
Stock Option Agreement between you and Cree, Inc.

You may  exercise the option to purchase up to the number of Shares for which it
has vested  unless  the option has  earlier  terminated  or  expired.  Upon your
Termination  of Service or  employment,  the option will be  forfeited as to all
Shares not then vested.  Provided  that you are serving as a member of the Board
of Directors of Cree,  Inc., or as an employee of the Company (as defined in the
Plan, which includes being employed by a wholly-owned subsidiary of Cree, Inc.),
on the  indicated  vesting  date,  the option  will vest and may  thereafter  be
exercised  to purchase  Shares as set forth  below,  except that all options not
then vested shall vest and may thereafter be exercised on the date of the [year]
Annual Meeting of Shareholders of Cree, Inc.:

              [number of shares] Shares on [vest date];
              [number of shares] additional Shares on [vest date];
              [number of shares] additional Shares on [vest date]; and
              [number of shares] additional Shares on [vest date].

Notwithstanding  the  foregoing,  the  Option  shall  become  fully  vested  and
exercisable, to the extent not already fully vested and exercisable, immediately
prior to any  Change in Control  (as  defined  in the  Plan),  provided  you are
serving as a member of the Board of Directors  of Cree,  Inc. on the date of the
Change in Control, except that the Option shall not become exercisable if and to
the extent it is cashed out upon the Change in Control  pursuant to the terms of
the Plan.

Date:

For CREE, INC.                           Accepted and agreed to:

By:
    ---------------------------------    ---------------------------------------
    [Name & Title]                       [Name]