Exhibit 99.2
INSTRUCTIONS FOR USE OF CHARLES & COLVARD, LTD.
SUBSCRIPTION CERTIFICATES
The following instructions relate to a rights offering (the "Rights
Offering") by Charles & Colvard, Ltd., a North Carolina corporation ("Charles &
Colvard"), to the holders of its common stock, no par value per share ("Common
Stock"), as described in Charles & Colvard's prospectus dated , 2001
(the "Prospectus"). Holders of record of Common Stock at the close of business
on , 2001 (the "Record Date") will receive a non-transferable
subscription right (the "Subscription Rights") to purchase one share of Common
Stock for each share of Common Stock held by them as of the close of business
on the Record Date. Subscription Rights exercisable to purchase an aggregate of
shares of the Common Stock of Charles & Colvard are being
distributed in connection with the Rights Offering. Each Subscription Right is
exercisable, upon payment of $ in cash (the "Subscription Price"), to
purchase one share of Common Stock (the "Basic Subscription Privilege"). In
addition, subject to the allocation described below, each Subscription Right
also carries the right to subscribe at the Subscription Price for additional
shares of Common Stock (the "Over-Subscription Privilege") (to the extent
available, and subject to proration). See "The Rights Offering" in the
Prospectus.
The Subscription Rights will expire at 5:00 p.m., Eastern Standard Time, on
, 2001 (as it may be extended, the "Expiration Date").
The number of Subscription Rights to which you are entitled is printed on
the face of your Subscription Certificate. You should indicate your wishes with
regard to the exercise of your Subscription Rights by completing the
appropriate section on the back of your Subscription Certificate and returning
the Subscription Certificate to the Subscription Agent in the envelope
provided.
YOUR SUBSCRIPTION CERTIFICATE MUST BE RECEIVED BY THE SUBSCRIPTION AGENT, OR
GUARANTEED DELIVERY REQUIREMENTS WITH RESPECT TO YOUR SUBSCRIPTION CERTIFICATES
MUST BE COMPLIED WITH, ON OR BEFORE THE EXPIRATION DATE. PAYMENT OF THE
SUBSCRIPTION PRICE OF ALL SUBSCRIPTION RIGHTS EXERCISED, INCLUDING OVER-
SUBSCRIPTION SHARES, INCLUDING FINAL CLEARANCE OF ANY CHECKS, MUST BE RECEIVED
BY THE SUBSCRIPTION AGENT ON OR BEFORE THE EXPIRATION DATE. ONCE A HOLDER OF
SUBSCRIPTION RIGHTS HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE AND/OR THE
OVER-SUBSCRIPTION PRIVILEGE, SUCH EXERCISE MAY NOT BE REVOKED.
1. SUBSCRIPTION PRIVILEGES. To exercise Subscription Rights, complete your
Subscription Certificate and send your properly completed and executed
Subscription Certificate, together with payment in full of the Subscription
Price for each share of Common Stock subscribed for pursuant to the Basic
Subscription Privilege and the Over-Subscription Privilege, to the Subscription
Agent. Delivery of the Subscription Certificate must be made by mail or by
overnight delivery. FACSIMILE DELIVERY OF THE SUBSCRIPTION CERTIFICATE WILL NOT
CONSTITUTE VALID DELIVERY. We recommend delivery by registered mail or
overnight delivery. All payments must be made in United States dollars by (i)
check or bank draft drawn upon a United States bank or postal, telegraphic or
express money order payable to First Union National Bank, as Subscription
Agent; or (ii) wire transfer of immediately available funds to First Union
National Bank, as Subscription Agent.
ACCEPTANCE OF PAYMENTS. Payments will be deemed to have been received by the
Subscription Agent only upon the (a) clearance of any uncertified check, or (b)
receipt by the Subscription Agent of any certified check or bank draft drawn
upon a United States bank or postal, telegraphic or express money order or
funds transferred through a wire transfer. IF PAYING BY UNCERTIFIED PERSONAL
CHECK, PLEASE NOTE THAT THE FUNDS PAID THEREBY MAY TAKE AT LEAST TEN BUSINESS
DAYS TO CLEAR. ACCORDINGLY, HOLDERS OF SUBSCRIPTION RIGHTS WHO WISH TO PAY THE
SUBSCRIPTION
PRICE BY MEANS OF UNCERTIFIED PERSONAL CHECK ARE URGED TO MAKE PAYMENT
SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO ENSURE THAT SUCH PAYMENT IS
RECEIVED AND CLEARS BY SUCH DATE. YOU ARE URGED TO CONSIDER PAYMENT BY MEANS OF
CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.
PROCEDURES FOR GUARANTEED DELIVERY. You may cause a written guarantee
substantially in the form available from the Subscription Agent (the "Notice of
Guaranteed Delivery") from a member firm of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc. or
a commercial bank or trust company having an office or correspondent in the
United States, to be received by the Subscription Agent on or prior to the
Expiration Date guaranteeing delivery of your properly completed and executed
Subscription Certificate within three Nasdaq National Market ("NNM") trading
days following the date of the Notice of Guaranteed Delivery. If this procedure
is followed, your Subscription Certificates must be received by the
Subscription Agent within three NNM trading days of the Notice of Guaranteed
Delivery. Additional copies of the Notice of Guaranteed Delivery may be
obtained upon request from the Subscription Agent at the address, or by calling
the telephone number, indicated below. Banks, brokers and other nominee holders
of Subscription Rights who exercise the Basic Subscription Privilege and the
Over-Subscription Privilege on behalf of beneficial owners of Subscription
Rights will be required to certify to the Subscription Agent and Charles &
Colvard as to the aggregate number of Subscription Rights that have been
exercised, and the number of shares of Common Stock that are being subscribed
for pursuant to the Over-Subscription Privilege, by each beneficial owner of
Subscription Rights (including such nominee itself) on whose behalf such
nominee holder is acting. In the event such certification is not delivered in
respect of a Subscription Certificate, the Subscription Agent shall for all
purposes (including for purposes of any allocation in connection with the Over-
Subscription Privilege) be entitled to assume that such certificate is
exercised on behalf of a single beneficial owner. If the number of shares
remaining after the exercise of all basic subscription privileges is not
sufficient to satisfy all over-subscription privileges, holders will be
allocated shares pro rata (subject to elimination of fractional shares), in
proportion to the number of shares purchased by those over-subscribing
shareholders through the basic subscription privilege.
CONTACTING THE SUBSCRIPTION AGENT. The address and facsimile numbers of the
Subscription Agent are as follows:
By Mail (Registered Mail is By Hand or Overnight
recommended): By Facsimile Transmission: Delivery:
First Union National
Bank Attention:
( ) -
1525 West W.T. Harris
Boulevard, 3C3 To confirm receipt of facsimile only:
Charlotte, North
Carolina 28262-1153 ( ) -
PARTIAL EXERCISES; EFFECT OF OVER-AND UNDERPAYMENTS. If you exercise less than
all of the Subscription Rights evidenced by your Subscription Certificate, the
Subscription Agent will, upon your request, issue to you a new Subscription
Certificate evidencing the unexercised Subscription Rights. However, if you
choose to have a new Subscription Certificate sent to you, you may not receive
any such new Subscription Certificate in sufficient time to permit exercise of
the Subscription Rights evidenced thereby. If you have not indicated the number
of Subscription Rights being exercised, or if the dollar amount you have
forwarded is not sufficient to purchase (or exceeds the amount necessary to
purchase) the number of shares subscribed for, you will be deemed to have
exercised the Basic Subscription Privilege with respect to the maximum number
of whole Subscription Rights which may be exercised for the Subscription Price
payment delivered by you. To the extent that the Subscription Price payment
delivered by you exceeds the product of the Subscription Price multiplied by
the number of Subscription Rights evidenced by the Subscription Certificates
delivered by you (such excess being the "Subscription Excess"), you will be
deemed to have exercised your Over-Subscription
Privilege to purchase, to the extent available, that number of whole shares of
Common Stock equal to the quotient obtained by dividing the Subscription Excess
by the Subscription Price.
2. DELIVERY OF STOCK CERTIFICATES, ETC. The following deliveries and
payments to you will be made to the address shown on the face of your
Subscription Certificate unless you provide instructions to the contrary on the
back of your Subscription Certificate.
(a) BASIC SUBSCRIPTION PRIVILEGE. As soon as practicable after the valid
exercise of Subscription Rights and the Expiration Date, the Subscription Agent
will mail to each exercising Subscription Rights holder certificates
representing shares of Common Stock purchased pursuant to the Basic
Subscription Privilege.
(b) OVER-SUBSCRIPTION PRIVILEGE. As soon as practicable after the Expiration
Date and after all prorations and adjustments contemplated by the terms of the
Rights Offering have been effected and taking into account any delays or
extensions in closing the over-subscription purchases, the Subscription Agent
will mail to each Subscription Rights holder who validly exercises the Over-
Subscription Privilege the number of shares allocated to such Subscription
Rights holder pursuant to the Over-Subscription Privilege. See "The Rights
Offering" in the Prospectus.
(c) EXCESS PAYMENTS. As soon as practicable after the Expiration Date and
after all prorations and adjustments contemplated by the terms of the Rights
Offering have been effected, the Subscription Agent will mail to each
Subscription Rights holder who exercises the Over-Subscription Privilege any
excess funds received (without interest or deduction) in payment of the
Subscription Price for shares that are subscribed for but not allocated to such
Subscription Rights holder pursuant to the Over-Subscription Privilege.
3. EXECUTION.
(a) EXECUTION BY REGISTERED HOLDER. The signature on the Subscription
Certificate must correspond with the name of the registered holder exactly as
it appears on the face of the Subscription Certificate without any alteration
or change whatsoever. Persons who sign the Subscription Certificate in a
representative or other fiduciary capacity must indicate their capacity when
signing and, unless waived by the Subscription Agent in its sole and absolute
discretion, must present to the Subscription Agent satisfactory evidence of
their authority so to act.
(b) EXECUTION BY PERSON OTHER THAN REGISTERED HOLDER. If the Subscription
Certificate is executed by a person other than the holder named on the face of
the Subscription Certificate, proper evidence of authority of the person
executing the Subscription Certificate must accompany the same unless the
Subscription Agent, in its discretion, dispenses with proof of authority.
(c) SIGNATURE GUARANTEES. Your signature must be guaranteed by an Eligible
Guarantor Institution if you wish a new Subscription Certificate or
Certificates to be issued in a name other than that in which the old
Subscription Certificate was issued, or if you specify special payment or
delivery instructions.
4. METHOD OF DELIVERY. The method of delivery of Subscription Certificates
and payment of the Subscription Price to the Subscription Agent will be at the
election and risk of the Subscription Rights holder. If sent by mail, it is
recommended that they be sent by registered mail, properly insured, with return
receipt requested, and that a sufficient number of days be allowed to ensure
delivery to the Subscription Agent prior to the Expiration Date.
5. SPECIAL PROVISIONS RELATING TO THE DELIVERY OF SUBSCRIPTION RIGHTS
THROUGH DEPOSITORY FACILITY PARTICIPANTS. In the case of holders of
Subscription Rights that are held of record through The Depository Trust
Company ("DTC"), exercises of the Basic Subscription Privilege and the Over-
Subscription Privilege may be effected by instructing DTC to transfer
Subscription
Rights (such Subscription Rights, "Depository Rights") from the DTC account of
such holder to the DTC account of the Subscription Agent, together with payment
of the Subscription Price for each share of Common Stock subscribed for
pursuant to the Basic Subscription Privilege and the Over-Subscription
Privilege.