Exhibit 99.2
THE REGISTRANT HAS REQUESTED THAT CERTAIN PORTIONS OF THIS EXHIBIT
BE GIVEN CONFIDENTIAL TREATMENT. SUCH PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE COMMISSION.
Robert S. Thomas
President & CEO
Charles & Colvard, Ltd.
Post Office Box 13533
Research Triangle Park, NC 27709-3533
This letter, when signed by both parties, will serve as an agreement between
Charles & Colvard, Ltd. (formerly C3, Inc.) and Cree, Inc. as set forth below
and will apply to SiC production crystals purchased by Charles & Colvard
from Cree, during the period of twelve months beginning January 1, 2001.
1. Charles & Colvard intends to purchase and Cree intends to sell production
crystals in the quantities and according to the following schedule, and at
a price of $*** per gram of "usable material," determined in the manner
described in Paragraph 3. Purchases of the indicated quantity for the 3
monthly periods beginning 3/26/01 will be committed only upon issuance of a
purchase order by Charles & Colvard on or before 1/5/01 and Cree's written
acceptance of such order. Purchases of the indicated quantity for the
monthly periods June 25 through December 23, 2001 will be committed only
upon issuance of a purchase order by Charles & Colvard and Cree's written
acceptance of such order. The price of $*** per gram is contingent on
purchase orders requesting minimum monthly quantities of *** grams. Cree
will quote lead times dependent on business conditions at the time of
issuance of the purchase order.
Delivery Period Forecasted Quantity
(grams)
1/1/01 - 1/21/01 *** grams
1/22/01 - 2/18/01 *** grams
2/19/01 - 3/25/01 *** grams
3/26/01 - 4/22/01 *** grams
4/23/01 - 5/20/01 *** grams
5/21/01 - 6/24/01 *** grams
6/25/01 - 7/22/01 *** grams
7/23/01 - 8/19/01 *** grams
8/20/01 - 9/23/01 *** grams
9/24/01 - 10/21/01 *** grams
10/22/01 - 11/18/01 *** grams
11/19/01 - 12/23/01 *** grams
REDACTED- OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
COMMISSION AND IS NOTED HEREIN BY ***
<PAGE>
2. The quantity of "usable material" of crystals delivered to Charles &
Colvard pursuant to this agreement will be determined according to the
following:
A. Material will be graded using the same practices used by the parties to
grade crystals during calendar 2000 and in accordance with Attachment A.
B. Grams of usable material will be calculated on a crystal by crystal basis
according to the following equation:
(usable mm) as a percent of total length of the crystal in mm multiplied
by the actual weight of the crystal in grams
"Usable mm" has the meaning defined in Attachment A.
C. Crystals shipped to Charles & Colvard must contain at least *** grams of
usable material for 2" crystals or *** grams for 3" crystals. Crystal
diameter to be shipped will be 2" or 3" as determined by Cree.
D. All grading will be concluded in a timely manner and consistent with past
practice.
4. Charles & Colvard shall not be obligated to fund, and Cree shall not be
obligated to carry out, the development program described in the July 1,
1998 Amended and Restated Development Agreement, as amended (the
"Development Agreement"), for the period from January 1, 2001 through June
30, 2001.
5. Except as provided above, purchases will be subject to the terms and
conditions of the Supply Agreement and the development program will be
subject to the terms and conditions of the Development Agreement.
6. The contents of this letter shall be considered "Confidential Information"
of each party subject to the provisions of Section 5 of the Supply
Agreement.
REDACTED- OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION
AND IS NOTED HEREIN BY ***
<PAGE>
If acceptable, please sign below and date to indicate Charles & Colvard's
binding agreement to these terms.
/s/ Charles M. Swoboda /s/ Robert S. Thomas
--------------------------- -----------------------------
Charles M. Swoboda Robert S. Thomas
President & COO President & CEO
<PAGE>
REDACTED- OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION AND
IS NOTED HEREIN BY ***
Attachment A
Specification of usable material:
Except where noted below,^ "Usable mm" is calculated by adding the length of net
"light" material plus ***% of the length of the net "medium light" material.
Except where noted below,^ Net material is calculated as "light" or "medium
light" material, as applicable, minus the % yield loss caused by the color
grading green and the inclusions and defects listed below, determined in
accordance with the practices followed by the parties in grading production
crystals during calendar 2000.
The inclusions and defects considered in determining yield loss are:
ID D-Type
1 ***
2 ***
3 ***
5 ***
6 ***
8 ***
9 ***
^ Note: The sum total of the net medium light and non-gray net light included in
the "usable mm" shall be limited to ***% of the total usable mm shipped in any
given fiscal month (i.e., the monthly periods defined in paragraph 1 of the
attached letter agreement). Beyond this limit, said material shipped for the
remainder of that month will not be included in "usable mm" calculations.
