Document:

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                                                                    Exhibit 10.5

                                   CREE, INC.

                            FISCAL 2001 STOCK OPTION
                                   BONUS PLAN

                         ARTICLE I - GENERAL PROVISIONS

1.1     The Plan is designed to provide for grants of Nonqualified Stock Options
        to Eligible Participants upon the achievement by the Company of earnings
        per share targets for each quarter of the fiscal year ending June 24,
        2001. Directors and officers of the Company are not eligible for Awards
        under the Plan.

1.2     Awards under the Plan may be made to Participants only in the form of
        Nonqualified Stock Options at a purchase price per share that is not
        less than the Fair Market Value of the Stock on the Option Grant Date.
        Awards may otherwise be made, to the extent not inconsistent with the
        Plan, at such times, in such amounts, under such terms and to such
        Eligible Participants as is determined from time to time by the
        Committee administering the Plan.

1.3     The Plan was adopted effective October 19, 2000.

                            ARTICLE II - DEFINITIONS

        Except where the context otherwise indicates, the following definitions
apply:

2.1     "Act" means the Securities Exchange Act of 1934, as now in effect or as
        hereafter amended. All citations to sections of the Act or rules
        thereunder are to such sections or rules as they may from time to time
        be amended or renumbered.

2.2     "Agreement" means the written agreement evidencing an Award or Awards
        granted to a Participant under the Plan and includes the notice of grant
        issued by the Company to the Participant with respect to the Award if
        the agreement applicable to the Award so provides.

2.3     "Award" means a Stock Option granted to a Participant in accordance with
        the provisions of the Plan.

2.4     "Board" means the Board of Directors of Cree, Inc.

2.5     "Code" means the Internal Revenue Code of 1986, as now in effect or as
        hereafter amended. All citations to sections of the Code are to such
        sections as they may from time to time be amended or renumbered.

2.6     "Committee" means the Compensation Committee of the Board or such other
        committee consisting of two or more members of the Board as may be
        appointed by the Board to administer this Plan pursuant to Article III.

2.7     "Company" means Cree, Inc., a North Carolina corporation, and its
        successors and assigns. The term "Company" shall include any corporation
        which is a member of a controlled group of corporations (as defined in
        Section 414(b) of the Code, as modified by Section 415 (h) of the

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        Code) which includes the Company; any trade or business (whether or not
        incorporated) which is under common control (as defined in Section
        414(c) of the Code, as modified by Section 415(h) of the Code) with the
        Company; any organization (whether or not incorporated) which is a
        member of an affiliated service group (as defined in Section 414(m) of
        the Code) which includes the Company; and any other entity required to
        be aggregated with the Company pursuant to regulations under Section
        414(o) of the Code. With respect to all actions relating to the Plan,
        including, but not limited to, the establishment, amendment,
        termination, operation and administration of the Plan, Cree, Inc. shall
        be authorized to act on behalf of all other entities included within the
        definition of "Company."

2.8     "Disability" means (i) with respect to a Participant who is eligible to
        participate in the Company's program of long-term disability insurance,
        a condition with respect to which the Participant is entitled to
        commence benefits under such program of long-term disability insurance,
        and (ii) with respect to any Participant (including a Participant who is
        eligible to participate in the Company's program of long-term disability
        insurance), a disability as determined under procedures established by
        the Committee or in any Award.

2.9     "Eligible Participant" means any employee of the Company, as shall be
        determined by the Committee; provided, however, that no officers or
        directors of the Company shall be Eligible Participants.

2.10    "Fair Market Value" means the last sale price of the Stock in the
        regular trading session on The Nasdaq Stock Market on the date of
        reference (or, if there is no regular trading session that day, the
        nearest preceding day on which there was a regular trading session);
        provided, however, that for purposes of Awards granted on the effective
        date of this Plan, the Fair Market Value shall be the last sale price of
        the Stock in the regular trading session on The Nasdaq Stock Market on
        the day prior to the effective date of this Plan. The Committee may in
        its discretion establish an alternative method of determining Fair
        Market Value.

2.11    "Nonqualified Stock Option" means a Stock Option which is not an
        incentive stock option under Section 422 of the Code. All Awards under
        this Plan shall be Nonqualified Stock Options.

2.12    "Option Grant Date" means, as to any Stock Option, the latest of:

        (a)   the date on which the Committee approves the grant of the Stock
              Option to the Participant;

        (b)   such other date (later than the date described in (a) above) as
              the Committee may designate.

2.13    "Participant" means an Eligible Participant to whom an Award has been
        granted and who has entered into an Agreement evidencing the Award.

2.14    "Plan" means the Cree, Inc. Fiscal 2001 Stock Option Bonus Plan as set
        forth herein and as further amended or amended and restated from time to
        time.

2.15    "Stock" means shares of the Common Stock of Cree, Inc., par value
        $0.0025 per share, as may be adjusted pursuant to the provisions of
        Section 3.10.

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2.16    "Stock Option" means an Award under this Plan of an option to purchase
        Stock.

2.17    "Termination of Employment" means the discontinuance of employment of a
        Participant with the Company for any reason, whether voluntary or
        involuntary. The determination of whether a Participant has discontinued
        employment shall be made by the Committee in its discretion.

                          ARTICLE III - ADMINISTRATION

3.1     The Plan shall be administered by the Committee. The Committee, in its
        discretion, may delegate to one or more of its members such of its
        powers as it deems appropriate. The Committee also may limit the power
        of any member to the extent necessary to comply with any law. Members of
        the Committee shall be appointed originally, and as vacancies occur, by
        the Board, to serve at the pleasure of the Board. The Board may serve as
        the Committee if all Board members are otherwise eligible to serve on
        the Committee.

3.2     The Committee shall meet at such times and places as it determines. A
        majority of its members shall constitute a quorum, and the decision of a
        majority of those present at any meeting at which a quorum is present
        shall constitute the decision of the Committee. A memorandum or other
        document signed by all of its members shall constitute the decision of
        the Committee without the necessity, in such event, for holding an
        actual meeting.

3.3     The Committee shall have the exclusive right to interpret, construe and
        administer the Plan, to determine the persons who are eligible to
        receive Awards, and to act in all matters pertaining to the granting of
        Awards and the contents of the Agreements evidencing the Awards,
        including without limitation, the determination of the number of shares
        of Stock subject to an Award, and the form, terms, conditions and
        duration of each Award, and any amendment thereof, consistent with the
        provisions of the Plan. All acts, determinations and decisions of the
        Committee made or taken pursuant to grants of authority under the Plan
        or with respect to any questions arising in connection with the
        administration and interpretation of the Plan, including the
        severability of any and all of the provisions thereof, shall be
        conclusive, final and binding upon all Participants, Eligible
        Participants and their beneficiaries.

3.4     The Committee may adopt such rules, regulations and procedures of
        general application for the administration of the Plan as it deems
        appropriate.

3.5     The number of shares of Stock which are available for Award under the
        Plan shall be Three Hundred Thousand (300,000) shares. Such shares of
        Stock shall be made available from authorized and unissued shares. If,
        for any reason, any shares of Stock subject to purchase under the Plan
        are not purchased, or are reacquired by the Company, for reasons
        including, but not limited to, forfeiture, termination, expiration or
        cancellation of a Stock Option, such shares of Stock shall not be
        charged against the aggregate number of shares of Stock available for
        Awards under the Plan and shall again be available for Award under the
        Plan.

3.6     Each Award granted under the Plan shall be evidenced by a written
        Agreement. Each Agreement shall be subject to and incorporate, by
        reference or otherwise, the applicable terms and conditions of the Plan,
        and any other terms and conditions, not inconsistent with the Plan, as
        may be directed by the Committee.

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3.7     The Company shall not be required to issue any shares of Stock or
        deliver certificates therefor prior to:

        (a)   the listing of such shares on any stock exchange on which the
              Stock may then be listed; and

        (b)   the completion of any registration or qualification of such shares
              of Stock under any federal or state law, or any ruling or
              regulation of any government body which the Company shall, in its
              discretion, determine to be necessary or advisable.

3.8     All certificates for shares of Stock delivered under the Plan shall also
        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 national market system upon which the Stock is then listed
        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. In making such
        determination, the Committee may rely upon an opinion of counsel for the
        Company.

3.9     Except as provided otherwise in the Plan or in an Agreement, no
        Participant awarded a Stock Option shall have any right as a shareholder
        with respect to any shares of Stock covered by his or her Stock Option
        prior to the date of issuance to him or her of a certificate or
        certificates for such shares of Stock.

3.10    If any reorganization, recapitalization, reclassification, stock
        split-up, stock dividend, or consolidation of shares of Stock, merger or
        consolidation 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 results in the outstanding shares of Stock, or any
        securities exchanged therefor or received in their place, being
        exchanged for a different number or class of shares of Stock or other
        securities of the Company, or for shares of Stock or other securities of
        any other corporation; or new, different or additional shares or other
        securities of the Company or of any other corporation being received by
        the holders of outstanding shares of Stock, then equitable adjustments
        shall be made by the Committee in:

        (a)   the limitation on the aggregate number of shares of Stock that may
              be awarded as set forth in Section 3.5 of the Plan;

        (b)   the number and class of shares of Stock that may be purchased upon
              exercise of outstanding Stock Options;

        (c)   the purchase price to be paid per share of Stock under outstanding
              Stock Options; and

        (d)   the terms, conditions or restrictions of any Award and the
              Agreement evidencing such Award.

3.11    The Committee may require each person purchasing shares of Stock
        pursuant to a Stock Option or other Award under the Plan to represent to
        and agree with the Company in writing that he is acquiring the shares of
        Stock without a view to distribution thereof and/or that he has met such
        other requirements as the Committee determines may be applicable to such
        purchase. The

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        certificates for such shares of Stock may include any legend which the
        Committee deems appropriate to reflect any restrictions on transfer.

3.12    The Committee shall be authorized to make adjustments in the terms and
        conditions of Awards in recognition of unusual or nonrecurring events
        affecting the Company or its financial statements or changes in
        applicable laws, regulations or accounting principles. The Committee may
        correct any defect, supply any omission or reconcile any inconsistency
        in the Plan or any Agreement in the manner and to the extent it shall
        deem desirable to carry it into effect. Notwithstanding any other
        provisions of the Plan, the Committee is also authorized to take such
        action as it determines to be necessary or advisable, and fair and
        equitable to Participants, with respect to outstanding Awards in the
        event the shareholders of the Company approve a definitive agreement or
        plan to merge or consolidate the Company with or into another
        corporation, to sell or otherwise dispose of all or substantially all of
        its assets, or to liquidate the Company. Such action by the Committee
        may include, but is not limited to, establishing, amending or waiving
        the forms, terms, conditions and duration of the Award and the Agreement
        evidencing the Award, so as to provide for earlier, later, extended or
        additional times for exercise or payments, differing methods for
        calculating payments, alternate forms and amounts of payment or other
        modifications. The Committee may take such actions pursuant to this
        section by adopting rules and regulations of general applicability to
        all Participants or to certain categories of Participants, by including,
        amending or waiving terms and conditions in Awards and the Agreements
        evidencing the Awards, or by taking action with respect to individual
        Participants.

3.13    The Committee shall have full power and authority to determine whether,
        to what extent and under what circumstances, any Award or the exercise
        thereof shall be canceled, suspended or rescinded if (a) the
        Participant, without the consent of the Committee, while employed by the
        Company or after termination of such employment, becomes associated
        with, employed by, renders services to, or owns any interest in, other
        than any insubstantial interest, as determined by the Committee, any
        business that is in competition with the Company as determined by the
        Committee in its discretion; (b) is terminated for cause as determined
        by the Committee in its discretion; or (c) otherwise engages in activity
        detrimental to the Company as determined by the Committee in its
        discretion.

                     ARTICLE IV - NONQUALIFIED STOCK OPTIONS

4.1     One or more Stock Options may be granted as Nonqualified Stock Options
        to persons who are Eligible Participants on the Option Grant Date of
        such Awards, granting such persons the right to purchase shares of Stock
        at such time or times determined by the Committee, following the
        Effective Date, subject to the terms and conditions set forth in this
        Article IV.

4.2     The purchase price per share of Stock under each Nonqualified Stock
        Option shall be established in the Agreement but may not be less than
        100% of the Fair Market Value on the Option Grant Date.

4.3     The Nonqualified Stock Option may be exercised in full or in part from
        time to time within such period as may be specified in the Agreement;
        provided, that, in any event, the Nonqualified Stock Option shall lapse
        and cease to be exercisable upon a Termination of Employment or within
        such period following a Termination of Employment as shall have been
        specified in the Nonqualified Stock Option Agreement, which period shall
        not exceed three months unless:

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        (a)   employment shall have terminated as a result of death or
              Disability, in which event such period shall not exceed one year
              after the date of death or Disability; or

        (b)   death shall have occurred following a Termination of Employment
              and while the Nonqualified Stock Option was still exercisable, in
              which event such period shall not exceed one year after the date
              of death;

        provided, further, that such period following a Termination of
        Employment shall in no event extend the original exercise period of the
        Nonqualified Stock Option.

4.4     The Nonqualified Stock Option Agreement may include any other terms and
        conditions not inconsistent with this Article IV or Article V below, as
        determined by the Committee.

                     ARTICLE V - INCIDENTS OF STOCK OPTIONS

5.1     Each Stock Option shall be granted subject to such terms and conditions,
        if any, not inconsistent with this Plan, as shall be determined by the
        Committee, including any provisions as to continued employment as
        consideration for the grant or exercise of such Stock Option and any
        provisions that may be advisable to comply with applicable laws,
        regulations or rulings of any governmental authority.

5.2     Except as provided below, a Stock Option shall be exercisable during the
        lifetime of the Participant only by him or his guardian or legal
        representative and shall not be transferable by the Participant other
        than by will or by the laws of descent and distribution. However, the
        Committee may, in its sole discretion, either pursuant to an Agreement
        or otherwise, permit a Participant to transfer a Nonqualified Stock
        Option by gift or other donative transfer without payment of
        consideration, conditioned upon and subject to compliance with all
        applicable law (including, but not limited to, securities law).

5.3     Shares of Stock purchased upon exercise of a Stock Option shall be paid
        for in such amounts, at such times and upon such terms as shall be
        determined by the Committee, subject to limitations set forth in the
        Stock Option Agreement. Without limiting the foregoing, the Committee
        may establish payment terms for the exercise of Stock Options which
        permit the Participant to deliver shares of Stock, or other evidence of
        ownership of Stock satisfactory to the Company, with a Fair Market Value
        equal to the Stock Option price as payment.

5.4     The Committee may at any time offer to buy out for a payment in cash or
        Stock an Option previously granted, based on such terms and conditions
        as the Committee shall establish and communicate to the Participant at
        the time that such offer is made.

5.5     If a Participant is required to pay to the Company an amount with
        respect to income and employment tax withholding obligations in
        connection with exercise of a Nonqualified Stock Option, the Committee,
        in its discretion and subject to such rules as it may adopt, may permit
        the Participant to satisfy the obligation, in whole or in part, by
        making an irrevocable election that a portion of the total Fair Market
        Value of the shares of Stock subject to the Nonqualified Stock Option be
        paid in the form of cash in lieu of the issuance of Stock and that such
        cash payment be applied to the satisfaction of the withholding
        obligations. The amount to be withheld shall not exceed the statutory
        minimum federal and state income and employment tax liability arising
        from the Stock Option exercise transaction.

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                     ARTICLE VI - AMENDMENT AND TERMINATION

6.1     The Board, upon recommendation of the Committee, or otherwise, at any
        time and from time to time may amend or terminate the Plan.

6.2     No amendment to or discontinuance of this Plan or any provision thereof
        by the Board or the shareholders of the Company shall, without the
        written consent of the Participant, adversely affect, as shall be
        determined by the Committee, any Award previously granted to such
        Participant under this Plan; provided, however, the Committee retains
        the right and power to:

        (a)   annul any Award if the Participant is terminated for cause as
              determined by the Committee; and

        (b)   provide for the forfeiture of shares of Stock or other gain under
              an Award for competing against the Company as determined by the
              Committee or for engaging in such other activities detrimental to
              the Company as may be specified in the Agreement evidencing the
              Award.

                     ARTICLE VII - MISCELLANEOUS PROVISIONS

7.1     Nothing in the Plan or any Award granted hereunder shall confer upon any
        Participant any right to continue in the employ of the Company, or to
        serve as a director thereof, or interfere in any way with the right of
        the Company to terminate his or her employment at any time. Unless
        specifically provided otherwise, no Award granted under the Plan shall
        be deemed salary or compensation for the purpose of computing benefits
        under any employee benefit plan or other arrangement of the Company for
        the benefit of its employees unless the Company shall determine
        otherwise. No Participant shall have any claim to an Award until it is
        actually granted under the Plan. To the extent that any person acquires
        a right to receive payments from the Company under the Plan, such right
        shall, except as otherwise provided by the Committee, be no greater than
        the right of an unsecured general creditor of the Company. All payments
        to be made hereunder shall be paid from the general funds of the
        company, and no special or separate fund shall be established and no
        segregation of assets shall be made to assure payment of such amounts,
        except as otherwise provided by the Committee.

7.2     The Company may make such provisions and take such steps as it may deem
        necessary or appropriate for the withholding of any taxes which the
        Company is required by any law or regulation of any governmental
        authority, whether federal, state or local, domestic or foreign, to
        withhold in connection with any Stock Option or the exercise thereof,
        including, but not limited to, the withholding of payment of all or any
        portion of such Award or another Award under this Plan until the
        Participant reimburses the Company for the amount the Company is
        required to withhold with respect to such taxes, or canceling any
        portion of such Award or another Award under this Plan in an amount
        sufficient to reimburse itself for the amount it is required to so
        withhold, or selling any property contingently credited by the Company
        for the purpose of paying such Award or another Award under this Plan,
        in order to withhold or reimburse itself for the amount it is required
        to so withhold.

                                                                     Page 7 of 8

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7.3     The Plan and the grant of Awards shall be subject to all applicable
        federal and state laws, rules, and regulations and to such approvals by
        any United States government or regulatory agency as may be required.

7.4     The terms of the Plan shall be binding upon the Company, and its
        successors and assigns.

7.5     No Stock Option shall be transferable except as provided for herein. If
        a Participant attempts to transfer a Stock Option in violation hereof,
        the Committee shall have the authority to terminate the Stock Option.

7.6     This Plan and all actions taken hereunder shall be governed by the laws
        of the State of North Carolina.

7.7     If any provision of this Plan or an Agreement is or becomes or is deemed
        invalid, illegal or unenforceable in any jurisdiction, or would
        disqualify the Plan or any Agreement under any law deemed applicable by
        the Committee, such provision shall be construed or deemed amended to
        conform to applicable laws or if it cannot be construed or deemed
        amended without, in the determination of the Committee, materially
        altering the intent of the Plan or the Agreement, it shall be stricken
        and the remainder of the Plan or the Agreement shall remain in full
        force and effect.

7.8     This Plan shall expire immediately following the Option Grant Date of
        any Award made based on the Company's financial performance for the
        fourth quarter of its fiscal year ending June 24, 2001 and shall in any
        event expire on September 30, 2001.

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                                                                    Exhibit 10.6

                                   CREE, INC.

                            FISCAL 2002 STOCK OPTION
                                   BONUS PLAN

                         ARTICLE I - GENERAL PROVISIONS

1.1     The Plan is designed to provide for grants of Nonqualified Stock Options
        to Eligible Participants upon the achievement by the Company of certain
        financial targets for each quarter of the fiscal year ending June 30,
        2002. Directors and officers of the Company are not eligible for Awards
        under the Plan.

1.2     Awards under the Plan may be made to Participants only in the form of
        Nonqualified Stock Options at a purchase price per share that is not
        less than the Fair Market Value of the Stock on the Option Grant Date.
        Awards may otherwise be made, to the extent not inconsistent with the
        Plan, at such times, in such amounts, under such terms and to such
        Eligible Participants as is determined from time to time by the
        Committee administering the Plan.

1.3     The Plan was adopted effective July 31, 2001.

                            ARTICLE II - DEFINITIONS

        Except where the context otherwise indicates, the following definitions
apply:

2.1     "Act" means the Securities Exchange Act of 1934, as now in effect or as
        hereafter amended. All citations to sections of the Act or rules
        thereunder are to such sections or rules as they may from time to time
        be amended or renumbered.

2.2     "Agreement" means the written agreement evidencing an Award or Awards
        granted to a Participant under the Plan and includes the notice of grant
        issued by the Company to the Participant with respect to the Award (the
        "Notice of Grant").

2.3     "Award" means a Stock Option granted to a Participant in accordance with
        the provisions of the Plan.

2.4     "Board" means the Board of Directors of Cree, Inc.

2.5     "Code" means the Internal Revenue Code of 1986, as now in effect or as
        hereafter amended. All citations to sections of the Code are to such
        sections as they may from time to time be amended or renumbered.

2.6     "Committee" means the Compensation Committee of the Board or such other
        committee consisting of two or more members of the Board as may be
        appointed by the Board to administer this Plan pursuant to Article III.

2.7     "Company" means Cree, Inc., a North Carolina corporation, and its
        successors and assigns. Where the context so requires, the term
        "Company" shall include any corporation which is a member of a
        controlled group of corporations (as defined in Section 414(b) of the
        Code, as

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        modified by Section 415(h) of the Code) which includes the Company; any
        trade or business (whether or not incorporated) which is under common
        control (as defined in Section 414(c) of the Code, as modified by
        Section 415(h) of the Code) with the Company; any organization (whether
        or not incorporated) which is a member of an affiliated service group
        (as defined in Section 414(m) of the Code) which includes the Company;
        and any other entity required to be aggregated with the Company pursuant
        to regulations under Section 414(o) of the Code. With respect to all
        actions relating to the Plan, including, but not limited to, the
        establishment, amendment, termination, operation and administration of
        the Plan, Cree, Inc. shall be authorized to act on behalf of all other
        entities included within the definition of "Company."

2.8     "Disability" means (i) with respect to a Participant who is eligible to
        participate in the Company's program of long-term disability insurance,
        a condition with respect to which the Participant is entitled to
        commence benefits under such program of long-term disability insurance,
        and (ii) with respect to any Participant (including a Participant who is
        eligible to participate in the Company's program of long-term disability
        insurance), a disability as determined under procedures established by
        the Committee or in any Award.

2.9     "Eligible Participant" means any employee of the Company, as shall be
        determined by the Committee; provided, however, that no officers or
        directors of the Company shall be Eligible Participants.

2.10    "Fair Market Value" means the last sale price of the Stock in the
        regular trading session on The Nasdaq Stock Market on the date of
        reference (or, if there is no regular trading session that day, the
        nearest preceding day on which there was a regular trading session). The
        Committee may in its discretion establish an alternative method of
        determining Fair Market Value.

2.11    "Nonqualified Stock Option" means a Stock Option which is not an
        incentive stock option under Section 422 of the Code. All Awards under
        this Plan shall be Nonqualified Stock Options.

2.12    "Option Grant Date" means, as to any Stock Option, the latest of:

        (a)   the date on which the Committee approves the grant of the Stock
              Option to the Participant;

        (b)   such other date (later than the date described in (a) above) as
              the Committee may designate.

2.13    "Participant" means an Eligible Participant to whom an Award has been
        granted and who has entered into an Agreement evidencing the Award.

2.14    "Plan" means the Cree, Inc. Fiscal 2002 Stock Option Bonus Plan as set
        forth herein and as further amended or amended and restated from time to
        time.

2.15    "Stock" means shares of the Common Stock of Cree, Inc., par value
        $0.00125 per share, as may be adjusted pursuant to the provisions of
        Section 3.10.

2.16    "Stock Option" means an Award under this Plan of an option to purchase
        Stock.

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2.17    "Termination of Employment" means the discontinuance of employment of a
        Participant with the Company for any reason, whether voluntary or
        involuntary. The determination of whether a Participant has discontinued
        employment shall be made by the Committee in its discretion.

                          ARTICLE III - ADMINISTRATION

3.1     The Plan shall be administered by the Committee. The Committee, in its
        discretion, may delegate to one or more of its members such of its
        powers as it deems appropriate. The Committee also may limit the power
        of any member to the extent necessary to comply with any law. Members of
        the Committee shall be appointed originally, and as vacancies occur, by
        the Board, to serve at the pleasure of the Board. The Board may serve as
        the Committee if all Board members are otherwise eligible to serve on
        the Committee.

3.2     The Committee shall meet at such times and places as it determines. A
        majority of its members shall constitute a quorum, and the decision of a
        majority of those present at any meeting at which a quorum is present
        shall constitute the decision of the Committee. A memorandum or other
        document signed by all of its members shall constitute the decision of
        the Committee without the necessity, in such event, for holding an
        actual meeting.

3.3     The Committee shall have the exclusive right to interpret, construe and
        administer the Plan, to determine the persons who are eligible to
        receive Awards and to act in all matters pertaining to the granting of
        Awards and the contents of the Agreements evidencing the Awards,
        including without limitation, the determination of the number of shares
        of Stock subject to an Award, and the form, terms, conditions and
        duration of each Award, and any amendment thereof, consistent with the
        provisions of the Plan. All acts, determinations and decisions of the
        Committee made or taken pursuant to grants of authority under the Plan
        or with respect to any questions arising in connection with the
        administration and interpretation of the Plan, including the
        severability of any and all of the provisions thereof, shall be
        conclusive, final and binding upon all Participants, Eligible
        Participants and their beneficiaries.

3.4     The Committee may adopt such rules, regulations and procedures of
        general application for the administration of the Plan as it deems
        appropriate.

3.5     The number of shares of Stock which are available for Award under the
        Plan shall be Six Hundred Thousand (600,000) shares. Such shares of
        Stock shall be made available from authorized and unissued shares. If,
        for any reason, any shares of Stock subject to purchase under the Plan
        are not purchased, or are reacquired by the Company, for reasons
        including, but not limited to, forfeiture, termination, expiration or
        cancellation of a Stock Option, such shares of Stock shall not be
        charged against the aggregate number of shares of Stock available for
        Awards under the Plan and shall again be available for Award under the
        Plan.

3.6     Each Award granted under the Plan shall be evidenced by a written
        Agreement. Each Agreement shall be subject to and incorporate, by
        reference or otherwise, the applicable terms and conditions of the Plan,
        and any other terms and conditions, not inconsistent with the Plan, as
        may be directed by the Committee.

3.7     The Company shall not be required to issue any shares of Stock or
        deliver certificates therefor prior to:

                                                                     Page 3 of 8

<PAGE>

        (a)   the listing of such shares on any stock exchange on which the
              Stock may then be listed; and

        (b)   the completion of any registration or qualification of such shares
              of Stock under any federal or state law, or any ruling or
              regulation of any government body which the Company shall, in its
              discretion, determine to be necessary or advisable.

3.8     All certificates for shares of Stock delivered under the Plan shall also
        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 national market system upon which the Stock is then listed
        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. In making such
        determination, the Committee may rely upon an opinion of counsel for the
        Company.

3.9     Except as provided otherwise in the Plan or in an Agreement, no
        Participant awarded a Stock Option shall have any right as a shareholder
        with respect to any shares of Stock covered by his or her Stock Option
        prior to the date of issuance to him or her of a certificate or
        certificates for such shares of Stock.

3.10    If any reorganization, recapitalization, reclassification, stock
        split-up, stock dividend, or consolidation of shares of Stock, merger or
        consolidation 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 results in the outstanding shares of Stock, or any
        securities exchanged therefor or received in their place, being
        exchanged for a different number or class of shares of Stock or other
        securities of the Company, or for shares of Stock or other securities of
        any other corporation; or new, different or additional shares or other
        securities of the Company or of any other corporation being received by
        the holders of outstanding shares of Stock, then equitable adjustments
        shall be made by the Committee in:

        (a)   the limitation on the aggregate number of shares of Stock that may
              be awarded as set forth in Section 3.5 of the Plan;

        (b)   the number and class of shares of Stock that may be purchased upon
              exercise of outstanding Stock Options;

        (c)   the purchase price to be paid per share of Stock under outstanding
              Stock Options; and

        (d)   the terms, conditions or restrictions of any Award and the
              Agreement evidencing such Award.

3.11    The Committee may require each person purchasing shares of Stock
        pursuant to a Stock Option or other Award under the Plan to represent to
        and agree with the Company in writing that he is acquiring the shares of
        Stock without a view to distribution thereof and/or that he has met such
        other requirements as the Committee determines may be applicable to such
        purchase. The certificates for such shares of Stock may include any
        legend which the Committee deems appropriate to reflect any restrictions
        on transfer.

                                                                     Page 4 of 8

<PAGE>

3.12    The Committee shall be authorized to make adjustments in the terms and
        conditions of Awards in recognition of unusual or nonrecurring events
        affecting the Company or its financial statements or changes in
        applicable laws, regulations or accounting principles. The Committee may
        correct any defect, supply any omission or reconcile any inconsistency
        in the Plan or any Agreement in the manner and to the extent it shall
        deem desirable to carry it into effect. Notwithstanding any other
        provisions of the Plan, the Committee is also authorized to take such
        action as it determines to be necessary or advisable, and fair and
        equitable to Participants, with respect to outstanding Awards in the
        event the shareholders of the Company approve a definitive agreement or
        plan to merge or consolidate the Company with or into another
        corporation, to sell or otherwise dispose of all or substantially all of
        its assets or to liquidate the Company. Such action by the Committee may
        include, but is not limited to, establishing, amending or waiving the
        forms, terms, conditions and duration of the Award and the Agreement
        evidencing the Award, so as to provide for earlier, later, extended or
        additional times for exercise or payments, differing methods for
        calculating payments, alternate forms and amounts of payment or other
        modifications. The Committee may take such actions pursuant to this
        section by adopting rules and regulations of general applicability to
        all Participants or to certain categories of Participants, by including,
        amending or waiving terms and conditions in Awards and the Agreements
        evidencing the Awards, or by taking action with respect to individual
        Participants.

3.13    The Committee shall have full power and authority to determine whether,
        to what extent and under what circumstances, any Award or the exercise
        thereof shall be canceled, suspended or rescinded if (a) the
        Participant, without the consent of the Committee, while employed by the
        Company or after termination of such employment, becomes associated
        with, employed by, renders services to, or owns any interest in, other
        than any insubstantial interest, as determined by the Committee, any
        business that is in competition with the Company as determined by the
        Committee in its discretion; (b) is terminated for cause as determined
        by the Committee in its discretion; (c) takes an extended unpaid leave
        of absence as determined by the Committee in its discretion, or (d)
        otherwise engages in activity detrimental to the Company as determined
        by the Committee in its discretion.

                     ARTICLE IV - NONQUALIFIED STOCK OPTIONS

4.1     One or more Stock Options may be granted as Nonqualified Stock Options
        to persons who are Eligible Participants on the Option Grant Date of
        such Awards, granting such persons the right to purchase shares of Stock
        at such time or times determined by the Committee, following the
        Effective Date, subject to the terms and conditions set forth in this
        Article IV.

4.2     The purchase price per share of Stock under each Nonqualified Stock
        Option shall be established in the Agreement but may not be less than
        100% of the Fair Market Value on the Option Grant Date.

4.3     Unless the Committee, in its discretion at the time of the grant of the
        Stock Option, provides for a longer or shorter period and such longer or
        shorter period is specified in the Notice of Grant, or the Committee
        extends the termination date as provided in Section 3.12 of the Plan,
        the Stock Options granted under the Plan shall terminate and cease to be
        exercisable at 11:59 p.m. local time Durham, North Carolina, on the
        seventh (7/th/) anniversary of the Option Grant Date if not sooner
        exercised or terminated.

                                                                     Page 5 of 8

<PAGE>

4.4     The Nonqualified Stock Option may be exercised in full or in part from
        time to time within such period as may be specified in the Agreement
        (including the Notice of Grant); provided, that, in any event, the
        Nonqualified Stock Option shall lapse and cease to be exercisable upon a
        Termination of Employment or within such period following a Termination
        of Employment as shall have been specified in the Agreement, which
        period shall not exceed the later of ninety (90) days following
        Termination of Employment or nine (9) months following the Option Grant
        Date, unless:

        (a)   employment shall have terminated as a result of death or
              Disability, in which event such period shall not exceed one year
              after the date of death or Disability; or

        (b)   death shall have occurred following a Termination of Employment
              and while the Nonqualified Stock Option was still exercisable, in
              which event such period shall not exceed one year after the date
              of death;

        provided, further, that such period following a Termination of
        Employment shall in no event extend the original exercise period of the
        Nonqualified Stock Option.

4.5     The Agreement may include any other terms and conditions not
        inconsistent with this Article IV or Article V below, as determined by
        the Committee.

                     ARTICLE V - INCIDENTS OF STOCK OPTIONS

5.1     Each Stock Option shall be granted subject to such terms and conditions,
        if any, not inconsistent with this Plan, as shall be determined by the
        Committee, including any provisions as to continued employment as
        consideration for the grant or exercise of such Stock Option and any
        provisions that may be advisable to comply with applicable laws,
        regulations or rulings of any governmental authority.

5.2     Except as provided below, a Stock Option shall be exercisable during the
        lifetime of the Participant only by him or his guardian or legal
        representative and shall not be transferable by the Participant other
        than by will or by the laws of descent and distribution. However, the
        Committee may, in its sole discretion, either pursuant to an Agreement
        or otherwise, permit a Participant to transfer a Nonqualified Stock
        Option by gift or other donative transfer without payment of
        consideration, conditioned upon and subject to compliance with all
        applicable law (including, but not limited to, securities law).

5.3     Shares of Stock purchased upon exercise of a Stock Option shall be paid
        for in such amounts, at such times and upon such terms as shall be
        determined by the Committee, subject to limitations set forth in the
        Agreement. Without limiting the foregoing, the Committee may establish
        payment terms for the exercise of Stock Options which permit the
        Participant to deliver shares of Stock, or other evidence of ownership
        of Stock satisfactory to the Company, with a Fair Market Value equal to
        the Stock Option price as payment.

5.4     The Committee may at any time offer to buy out for a payment in cash or
        Stock an Option previously granted, based on such terms and conditions
        as the Committee shall establish and communicate to the Participant at
        the time that such offer is made.

                                                                     Page 6 of 8

<PAGE>

5.5     If a Participant is required to pay to the Company an amount with
        respect to income and employment tax withholding obligations in
        connection with exercise of a Nonqualified Stock Option, the Committee,
        in its discretion and subject to such rules as it may adopt, may permit
        the Participant to satisfy the obligation, in whole or in part, by
        making an irrevocable election that a portion of the total Fair Market
        Value of the shares of Stock subject to the Nonqualified Stock Option be
        paid in the form of cash in lieu of the issuance of Stock and that such
        cash payment be applied to the satisfaction of the withholding
        obligations. The amount to be withheld shall not exceed the statutory
        minimum federal and state income and employment tax liability arising
        from the Stock Option exercise transaction.

                     ARTICLE VI - AMENDMENT AND TERMINATION

6.1     The Board, upon recommendation of the Committee, or otherwise, at any
        time and from time to time may amend or terminate the Plan.

6.2     No amendment to or discontinuance of this Plan or any provision thereof
        by the Board or the shareholders of the Company shall, without the
        written consent of the Participant, adversely affect, as shall be
        determined by the Committee, any Award previously granted to such
        Participant under this Plan; provided, however, the Committee retains
        the right and power to:

        (a)   annul any Award if the Participant is terminated for cause as
              determined by the Committee; and

        (b)   provide for the forfeiture of shares of Stock or other gain under
              an Award for competing against the Company as determined by the
              Committee or for engaging in such other activities detrimental to
              the Company as may be specified in the Agreement evidencing the
              Award.

                     ARTICLE VII - MISCELLANEOUS PROVISIONS

7.1     Nothing in the Plan or any Award granted hereunder shall confer upon any
        Participant any right to continue in the employ of the Company or
        interfere in any way with the right of the Company to terminate his or
        her employment at any time. Unless specifically provided otherwise, no
        Award granted under the Plan shall be deemed salary or compensation for
        the purpose of computing benefits under any employee benefit plan or
        other arrangement of the Company for the benefit of its employees unless
        the Company shall determine otherwise. No Participant shall have any
        claim to an Award until it is actually granted under the Plan. To the
        extent that any person acquires a right to receive payments from the
        Company under the Plan, such right shall, except as otherwise provided
        by the Committee, be no greater than the right of an unsecured general
        creditor of the Company. All payments to be made hereunder shall be paid
        from the general funds of the company, and no special or separate fund
        shall be established and no segregation of assets shall be made to
        assure payment of such amounts, except as otherwise provided by the
        Committee.

7.2     The Company may make such provisions and take such steps as it may deem
        necessary or appropriate for the withholding of any taxes which the
        Company is required by any law or regulation of any governmental
        authority, whether federal, state or local, domestic or foreign, to
        withhold in connection with any Stock Option or the exercise thereof,
        including, but not limited

                                                                     Page 7 of 8

<PAGE>

        to, the withholding of payment of all or any portion of such Award or
        another Award under this Plan until the Participant reimburses the
        Company for the amount the Company is required to withhold with respect
        to such taxes, or canceling any portion of such Award or another Award
        under this Plan in an amount sufficient to reimburse itself for the
        amount it is required to so withhold, or selling any property
        contingently credited by the Company for the purpose of paying such
        Award or another Award under this Plan, in order to withhold or
        reimburse itself for the amount it is required to so withhold.

7.3     The Plan and the grant of Awards shall be subject to all applicable
        federal and state laws, rules, and regulations and to such approvals by
        any United States government or regulatory agency as may be required.

7.4     The terms of the Plan shall be binding upon the Company, and its
        successors and assigns.

7.5     No Stock Option shall be transferable except as provided for herein. If
        a Participant attempts to transfer a Stock Option in violation hereof,
        the Committee shall have the authority to terminate the Stock Option.

7.6     This Plan and all actions taken hereunder shall be governed by the laws
        of the State of North Carolina.

7.7     If any provision of this Plan or an Agreement is or becomes or is deemed
        invalid, illegal or unenforceable in any jurisdiction, or would
        disqualify the Plan or any Agreement under any law deemed applicable by
        the Committee, such provision shall be construed or deemed amended to
        conform to applicable laws or if it cannot be construed or deemed
        amended without, in the determination of the Committee, materially
        altering the intent of the Plan or the Agreement, it shall be stricken
        and the remainder of the Plan or the Agreement shall remain in full
        force and effect.

7.8     This Plan shall expire immediately following the Option Grant Date of
        any Award made based on the Company's financial performance for the
        fourth quarter of its fiscal year ending June 30, 2002 and shall in any
        event expire on September 30, 2002.

                                   CERTIFICATE

        I, Adam H. Broome,  Secretary of Cree, Inc.,  having in my custody
and possession the corporate records of said corporation, do hereby certify that
the foregoing is a true and correct copy of the Cree, Inc. Fiscal 2002 Stock
Option Bonus Plan as adopted by the Board of Directors on July 31, 2001.

        Witness my hand and seal this ______ day of ___________, 2001.

                                                     ___________________________
                                                     Adam H. Broome

                                                                     Page 8 of 8

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