Exhibit 10.5

ADDENDUM TO MASTER STOCK OPTION AWARD AGREEMENT

TERMS AND CONDITIONS

(For Grants of Nonqualified Stock Options to Outside Directors)

This Addendum to Master Stock Option Award Agreement (this “Addendum”) 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”) and modifies the existing Master Stock Option Award Agreement (the “Agreement”) between you and the Company.

1. This Addendum shall be effective as of the 1st day of September 2009 (the “Effective Date”). Capitalized terms used in this Addendum which are not defined herein but are defined in the Agreement or the Plan shall have the meanings specified in the Agreement or the Plan, respectively.

2. The following new Section 2 shall apply with respect to Options granted to the Participant on or after the Effective Date so long as the Participant is an Outside Director at the time of the grant:

“2. Term of Options . Unless sooner terminated in accordance with the Plan or this Agreement or as otherwise provided in the Notice of Grant,