MANAGEMENT INCENTIVE COMPENSATION PLAN

The purpose of the Management Incentive Compensation Plan (the “Plan”) is to motivate and reward excellent performance, to attract and retain outstanding management, to create a strong link between individual performance and the Company’s operating and strategic plans, to achieve greater corporate performance by focusing on results, and to encourage teamwork at the highest levels within the organization.  The Plan rewards Participants with incentives based on their contributions and the attainment of specific corporate and individual goals.

For purposes of this Plan, "Company" collectively includes Cree, Inc. (“Cree”), Cree Hong Kong Limited, Cree Asia-Pacific, Ltd., CPM Sdn Bhd, and such other affiliates of Cree as may be added by written consent of the Plan Administrators.

To be eligible to participate in the Plan, a Participant must:  (i) be a regular, full-time employee of the Company or a part-time employee regularly scheduled to work 30 hours or more per week who is paid through the Company’s payroll system(s); and (ii) not be disqualified from participation in the Plan as provided below.  A Participant is disqualified from participation in the Plan for any Performance Period in which: (i) the Participant is on disability leave, an unpaid leave of absence or a leave covered by worker’s compensation insurance, or any combination of the foregoing, for the entire Performance Period, unless such disqualification is otherwise prohibited by law; (ii) the Plan Administrator exercises the right, as provided in Section 5.2 below, to terminate Participant’s participation in the Plan prior to the end of such Performance Period on account of a material change in the Participant’s duties and responsibilities; or (iii) the Participant is not employed by the Company on the last day of the Performance Period, except in the case of termination of employment due to the Participant’s death or disability (meeting the requirements for benefits under the Company’s long-term disability (LTD) plan or in the case of Participant who is not eligible to participate in the LTD plan, the determination by a qualified, objective medical professional that the Participant is disabled, as such term is defined in the LTD plan) or termination of employment after Change In Control as provided in Section 6.3. Moreover, no Participant in this Plan may participate in any other Company incentive plan that provides for payment of additional cash compensation based on achievement of individual sales or performance goals and/or corporate, subsidiary or division financial or performance goals (including but not limited to the Employee Incentive Compensation Plan, the Sales Incentive Plan or any substantially similar incentive cash compensation program, but not including the Cree LED Lighting Solutions, Inc. Cash Incentive Plan), whether or not there is a payout under such other plan for the Performance Period.

The Plan Administrators reserve the right to disqualify an otherwise eligible Participant from receiving a payment under the Plan if the Company terminates the Participant’s employment before payment is made, whether during or after the Performance Period, as a result of the employee engaging in any activity deemed by the Compensation Committee for executive officers and the CEO for all other Participants to be detrimental to the Company, including without limitation, breach by the employee of any confidentiality, non-competition or non-solicitation obligation, or any act of fraud, misappropriation, embezzlement, or tortious or criminal behavior that adversely impacts the Company.

Awards are determined based on performance against Annual Corporate Performance Goals, Quarterly Corporate Performance Goals and Individual Goals. Unless otherwise approved by the Compensation Committee for executive officers or by the CEO for all other Participants, 60% of a Participant’s Target Award Level will be dependent upon achievement of Annual Corporate Performance Goals. The remaining 40% of a Participant’s Target Award Level will be dependent upon achievement of quarterly performance measures.

The CEO will recommend and the Compensation Committee will approve Annual Corporate Performance Goals during the first fiscal quarter of each Plan Year.  The statement of Annual Corporate Performance Goals will include a method of calculating a percentage reflecting the level of achievement of each financial measure comprising the goals ( i.e., revenue and EPS), with full achievement of the target assigned 100% and failure to meet a specified threshold for the measure assigned 0%.  Performance in excess of the target for the measure may be assigned percentages greater than 100%, up to a maximum percentage corresponding to a specified maximum amount for the measure.  Unless otherwise