EXHIBIT 10.41
THE REGISTRANT HAS REQUESTED THAT CERTAIN PORTIONS OF THIS EXHIBIT BE
GIVEN CONFIDENTIAL TREATMENT. SUCH PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
COMMISSION.
CHARLES & COLVARD(TM)
------------CREATED-------------
M O I S S A N I T E
LETTER AGREEMENT
THIS LETTER AGREEMENT ("Agreement") is entered into March 15, 2000 between C3,
INC., d/b/a Charles & Colvard, 3800 Gateway Boulevard, Suite 311, Morrisville,
North Carolina 27560 ("C&C"), and The Bell Group, d/b/a Rio Grande, 7500
Bluewater Road, NW, Albuquerque, New Mexico 87121-1962 ("Rio Grande").
RECITALS
C&C is engaged in the business of designing, manufacturing, marketing, and
selling finished created jewels made of silicon carbide known as Charles &
Colvard created moissanite jewels ("Moissanite") and certain pieces of jewelry
containing Moissanite. Rio Grande is engaged in the business of manufacturing,
marketing and selling jewelry, jewelry findings, supplies, and gemstones. The
parties wish to enter into a business relationship whereby Rio Grande will
purchase Moissanite from C&C, in exchange for distribution rights to sell
Moissanite on the terms set out herein.
Now, therefore, in consideration of the mutual terms set forth herein, the
parties hereby agree as follows:
1. APPOINTMENT. Subject to the terms of this Agreement, C&C hereby appoints
Rio Grande as a nonexclusive distributor of Moissanite to all classes of
trade in the United States of America, Canada, Mexico and the Caribbean
("Territory") during the term of this Agreement. Notwithstanding such
appointment, Rio Grande acknowledges and agrees that the parties shall
honor C&C's existing agreements pursuant to their terms.
2. LIMITATIONS. Rio Grande shall not solicit sales of Moissanite, sell
Moissanite or otherwise represent C&C in any geographic area other than the
Territory, or solicit sales or sell Moissanite directly to consumers.
3. TERM. Subject to earlier termination pursuant to Section 10 of this
Agreement, the term of this Agreement shall commence as of the date of this
Agreement and terminate on December 31, 2001. This Agreement shall
automatically be renewed for successive additional one-year terms unless
either party gives notice to the other party of intent to terminate this
Agreement at least 90 days prior to the end of the then current term.
4. BRAND DEVELOPMENT. C&C shall be responsible for developing, maintaining and
delivering the Moissanite brand image to consumers. Rio Grande agrees to
support the C&C brand development efforts as set out in Section 6.
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(C)2000 Charles & Colvard(TM)All Rights Reserved.
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AND IS DENOTED HEREIN BY *****
5. TRADEMARKS. C&C and Rio Grande shall enter into the Licensing Agreement
attached as Exhibit A which provides Rio Grande during the term of this
Agreement with the non-exclusive, royalty-free right and license to use the
C&C trademarks solely for the purpose of marketing, advertising, promoting,
and selling Moissanite in the Territory.
6. MARKETING, ADVERTISING AND PROMOTION. Rio Grande shall use its best efforts
to market, promote, distribute, and sell Moissanite in the Territory as a
unique new jewel and shall use its best efforts to recruit independent
retail jewelers in the Territory to purchase Moissanite. Rio Grande shall
be responsible for advertising and promotion to the jewelry trade. Rio
Grande shall encourage the retail jewelers that carry Moissanite to
advertise Moissanite to consumers. Rio Grande has specifically committed to
the marketing, advertising and promotional activities set out on Schedule 6
hereto for the year 2000. No less than 90 days prior to the end of the then
current term, the parties shall mutually agree in writing on a proposed
marketing, advertising and promotional plan for the succeeding annual term.
Rio Grande agrees that it shall sell Moissanite only as "Charles & Colvard
created Moissanite jewels" and in compliance with the C&C Brand Identity
Guidelines, as may be amended by C&C from time to time. Rio Grande shall
only make such representations or warranties with respect to Moissanite in
marketing, advertising or promotional materials, or otherwise, as
specifically approved and authorized by C&C in writing. Rio Grande shall
comply with all applicable laws and regulations during the course of its
performance of this Agreement and shall not sell Moissanite to any customer
whom it knows or has reason to know intends to misrepresent Moissanite. C&C
shall contribute to the marketing, advertising and promotion of Moissanite
in the Territory in the form of a credit toward future purchases of
Moissanite by Rio Grande from C&C. Credits shall be deemed earned quarterly
upon receipt by C&C of a quarterly report from Rio Grande showing Rio
Grande's compliance with the agreed upon plan. The amount of the credit
granted by C&C to Rio Grande shall be ***** percent (*****%) of the net
receipts of Rio Grande's purchases of Moissanite from C&C in the prior
quarter.
7. TRAINING. Within 30 days of the date of this Agreement, Rio Grande shall
provide to its staff formal training with respect to Moissanite as
described in Schedule 7.
8. AVAILABILITY AND PRICING. C&C agrees to use commercially reasonable efforts
to supply such Moissanite as requested by Rio Grande to Rio Grande. Rio
Grande agrees to purchase as many carats of Moissanite as it may require
from C&C using the pricing and minimum order requirements set forth in
Schedule 8. Moissanite will be cut in available shapes per C&C's standard
production practices and will range in size from 2.0 mm to 9.5 mm, with the
average size 5.5 mm. The grade of Moissanite initially available shall be
"Very Good" which includes possible slight color saturations. There will be
no inclusions that are visible to the naked eye sold in this grade. Other
Moissanite cuts and grades may be made available from time to time at C&C's
discretion. C&C reserves the right to amend at any time the pricing and
minimum order requirements set forth in Schedule 8, provided that if the
pricing of Moissanite is decreased, C&C shall provide Rio Grande with a
credit toward additional purchases of Moissanite equal to the amount of
such price decrease on the lesser of (a) Rio Grande's net purchased
Moissanite during the prior 90 days or (b) Rio Grande's actual inventory at
such time.
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(C)2000 Charles & Colvard(TM)All Rights Reserved.
REDACTED - OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION
AND IS DENOTED HEREIN BY *****
9. TERMS. Except as otherwise provided herein, the terms of delivery hereunder
shall be FOB C&C's warehouse, and Rio Grande will provide all shipping and
insurance fees for the Moissanite. C&C agrees to ship the Moissanite by
whatever carrier Rio Grande designates, offering any carrier discounts that
C&C has available to it. C&C shall invoice Rio Grande upon shipment with
payment required in 30 days. Prices contained herein do not include any
taxes, and Rio Grande shall be solely responsible for collecting,
reporting, and/or paying all income (other than United States and North
Carolina income taxes imposed on C&C), sales, excise, property, value-added
tax, duty or tariff imposed by any governmental authority arising from the
performance of either party under this Agreement.
10. TERMINATION. Upon the failure of a party to fulfill a material term of this
Agreement, or to cure a failure to fulfill any term of this Agreement
within 30 days of written notice of such failure by the other party, the
nondefaulting party may immediately terminate this Agreement by notice to
the defaulting party. Either party may terminate this Agreement immediately
by notice to the non-terminating party in the event that the
non-terminating party enters or is placed in bankruptcy, receivership, or
liquidation, becomes insolvent, or makes an assignment for the benefit of
its creditors.
11. EFFECT OF TERMINATION. Upon termination of this Agreement, Rio Grande's
rights under this Agreement shall immediately terminate, and Rio Grande
shall immediately cease marketing, promoting, distributing, or selling
Moissanite (other than as may be allowed herein to dispose of inventory),
and otherwise representing in any manner that Rio Grande is authorized to
distribute Moissanite. Upon the termination of this Agreement for any
reason, C&C shall, at its option, (i) repurchase Rio Grande's inventory of
Moissanite at the price paid to C&C by Rio Grande for such products, less a
reasonable restocking charge; or (ii) permit Rio Grande to sell such
inventory; provided, that Rio Grande must complete all such distribution
and sales of Moissanite within six (6) months of the termination date and
fully perform all its obligations required by this Agreement. Termination
of this Agreement shall not relieve either party from its duty to discharge
in full all obligations accrued or due prior to the effective date of
termination. Furthermore, the provisions of Sections 5, 6, and 11 through
23 shall survive any termination of this Agreement. Neither party to this
Agreement shall be liable to the other party by reason of the valid
termination of this Agreement, for compensation, reimbursement, or damages
on account of any loss of goodwill, anticipated sales, or prospective
profits, or on account of expenditures, investments, or other commitments
relating to the performance of this Agreement or the business of either
party. The foregoing provision shall not be construed to limit the
liability of either party for a default in the performance of any provision
or obligation under this Agreement of the other party, which results in the
nondefaulting party's election to terminate this Agreement in accordance
with Section 10 above.
12. DISCLAIMER OF WARRANTY. Other than as may be set out in writing to Rio
Grande by C&C from time to time, C&C makes no warranty or other
representation concerning Moissanite; and, other than as specifically
provided in this Agreement, C&C's liability is limited to replacement of
any Moissanite not conforming
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(C)2000 Charles & Colvard(TM)All Rights Reserved.
REDACTED - OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION
AND IS DENOTED HEREIN BY *****
to the specifications set out in Section 8 of this Agreement upon its
return to C&C in compliance with the then existing standard policy of C&C
governing returned goods. Rio Grande reserves the right to return any
product not conforming to the specifications set out herein to C&C. The
warranty set forth in this Section 12 is intended solely for the benefit of
Rio Grande. All claims hereunder shall be made by Rio Grande and may not be
made directly by Rio Grande's customers to C&C. The warranty set forth
above is in lieu of all other warranties, expressed or implied, which are
hereby disclaimed and excluded by C&C, including, without limitation, any
warranty of merchantability or fitness for a particular purpose or use.
13. INDEMNIFICATION. Rio Grande shall defend, indemnify, and hold harmless C&C
and its officers, directors, agents and employees from and against any and
all claims, causes of action, damages, losses, costs, and expenses
(including reasonable attorneys' fees), judgments and liabilities made
against or incurred by C&C arising out of the acts or omissions of Rio
Grande, its employees and agents in the performance of this Agreement. C&C
shall defend, indemnify, and hold harmless Rio Grande and its officers,
directors, agents and employees from and against any and all claims, causes
of action, damages, losses, costs, and expenses (including reasonable
attorneys' fees), judgments and liabilities made against or incurred by Rio
Grande arising out of the acts or omissions of C&C, its employees and
agents in the performance of this Agreement, specifically including any
claims from C&C's existing customers to territorial exclusivity arising
from their current relationship with C&C.
14. CONFIDENTIALITY. Each of Rio Grande and C&C shall treat the terms of this
Agreement as confidential and shall not disclose such terms to any third
party for any purpose without the prior written consent of the other party
or as required by applicable law.
15. INSURANCE. Throughout the term of this Agreement, Rio Grande shall maintain
general liability and property damage liability insurance coverage
underwritten by a Best-A rated insurance carrier in a minimum amount of $1
million. Such policy shall name C&C as an additional insured and loss
payee, and shall include a provision requiring the carrier to notify C&C in
writing at least thirty (30) days prior to any cancellation, termination or
amendment of such insurance coverage. Rio Grande shall deliver to C&C a
certificate of insurance verifying the foregoing insurance coverage.
16. EVENTS BEYOND PARTY'S CONTROL. Neither party shall be liable to the other
party for delay or failure of performance of this Agreement if the delay or
failure is caused by acts of God or events completely beyond the control of
the parties. If a delay or failure of performance caused by force majeure
shall continue for a period of more than six (6) months, either party shall
have the right to terminate this Agreement by written notice to the other
party.
17. LIMITATION OF LIABILITY. C&C shall not be liable in contract, in tort
(including negligence or strict liability) or otherwise for damage or loss
of property, loss of profits or revenue, loss of use of property, cost of
capital, claims of customers of Rio Grande or for any special, indirect,
incidental, or consequential damages whatsoever. The remedies of Rio Grande
set forth herein are exclusive and the total cumulative liability of C&C
with respect to this agreement, or action taken or inaction in connection
herewith such as the performance or breach thereof, or from the
manufacture, sale, delivery, resale, or use of any product covered by or
furnished under this Agreement, whether in contract, in tort (including
negligence or strict liability) or otherwise, shall not exceed the price of
the product on which such liability is based.
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(C)2000 Charles & Colvard(TM)All Rights Reserved.
REDACTED - OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION
AND IS DENOTED HEREIN BY *****
No action, regardless of form, arising out of the transactions under this
Agreement may be brought by Rio Grande more than one (1) year after the
cause of action has accrued.
18. RELATIONSHIP OF PARTIES. This Agreement does not establish a joint venture
or legal partnership between the parties. Rio Grande is and shall be an
independent contractor and shall not be deemed to be an agent, employee or
legal representative of C&C. Rio Grande, its agents, employees and
customers shall not have or represent themselves as having any authority to
enter into contracts or make any commitments on behalf of C&C.
19. ENTIRE AGREEMENT; VALIDITY; WAIVER. This Agreement constitutes the entire
agreement between the parties and supersedes all previous agreements,
negotiations and commitments between the parties, and shall not be changed
or modified in any manner, except by mutual written consent signed by duly
authorized representatives of each of the parties. Should any provisions of
this Agreement be invalid or unenforceable under any applicable laws or
regulations, all other provisions of the Agreement shall remain in effect.
The terms and conditions of this Agreement may only be waived in writing by
the party waiving compliance. The failure of either party to require
performance of any provision of this Agreement or to exercise any right
hereunder shall not constitute a waiver or prejudice that party's right to
enforce the same at any later date. This Agreement may be executed in one
or more counterparts, each of which will be deemed an original, but all of
which together shall constitute one and the same instrument.
20. ASSIGNABILITY. Neither party shall have the right to assign, delegate,
sublicense or otherwise transfer its rights and obligations under this
Agreement without the prior written consent of the other party.
21. NOTICE. Any notice required or permitted in this Agreement shall be in
writing and be given by facsimile or an express mail delivery service,
which is able to track and confirm delivery, properly addressed to the
party to be notified at its last known address, and shall be deemed
delivered when so transmitted, if sent by facsimile and receipt is
acknowledged in writing or otherwise when actually received, or on the
second day after mailing, if sent via an express mail delivery service.
22. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina, without regard to
its conflicts-of-law rules, and the laws of the United States of America.
Rio Grande consents to the jurisdiction of the courts of the State of North
Carolina in connection with all disputes or controversies arising under
this Agreement.
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(C)2000 Charles & Colvard(TM)All Rights Reserved.
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AND IS DENOTED HEREIN BY *****
IN WITNESS WHEREOF, the parties hereto, through their duly authorized officers,
have executed this Agreement as of the date first written above.
C3, Inc., d/b/a Charles & Colvard
/s/ Robert S. Thomas
-----------------------------------------------
Robert S. Thomas, President
The Bell Group, d/b/a Rio Grande
/s/ Hugh Bell
-----------------------------------------------
Hugh Bell, Chairman and Chief Executive Officer
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(C)2000 Charles & Colvard(TM)All Rights Reserved.
SCHEDULE 6
RIO GRANDE'S INTENDED MOISSANITE MARKETING EFFORTS
Insertion within our 2000-2001 Gems and Findings catalog. Moissanite will be
featured on a full page in the front of our annual catalog, that will be
released in July of this year. Our catalog is sent to 200,000+ customers and
prospects.
We will write a comprehensive article about Moissanite, and feature it in our
quarterly newsletter, News & Product Review. This newsletter is sent to all of
our customers. We can feature Moissanite in our next issue.
We will feature Moissanite in future jewelry-trade shows, including:
JCK Las Vegas, in June
Prime Time Las Vegas, in September
Catalog in Motion Tucson, in February 2001
MJSA New York, in March 2001
SCHEDULE 7
Rio Grande shall provide a formal moissanite training program for its customer
service, marketing and other personnel as designated by Rio Grande. This
training program includes the following general topics:
>> Manufacturing Specifications (jewelry manufacturing and repair)
>> Branding (product positioning, advertising and promotion)
>> Gemological Characteristics and Identification
>> Product Selection and Availability (shapes, sizes, colors and grades)
>> Operating Procedures (selected employees only)
C&C shall conduct a series of two-hour training sessions for Rio Grande
personnel designated as "trainers" within 30 days of the date of this Agreement.
Furthermore, C&C agrees to provide each participant with a training guide. C&C
will provide a master copy of the training guide that Rio Grande can use to copy
for future internal training of its employees.
Rio Grande agrees to train all appropriate employees, using the materials
developed and refined for the initial training, within 30 days of the date of
the last training session provided by C&C for Rio Grande's trainers. Rio Grande
agrees to incorporate the formal moissanite training program as part of its new
employee orientation training for appropriate employees, and agrees to provide
such employees with a refresher course on moissanite as needed or requested by
C&C.
C&C agrees to provide additional training up to one week to the Rio Grande
"trainers" twice during the first year and annually thereafter.
Rio Grande and C&C agree to review the formal moissanite training program at the
request of either party.
REDACTED - OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION
AND IS DENOTED HEREIN BY *****
SCHEDULE 8
This information is confidential.
All prices are subject to change without notice.
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ROUND APPROX. CT. WT. PRICE LEVEL 1 PRICE LEVEL 2 PRICE LEVEL 3 PRICE LEVEL 4 PRICE LEVEL 5
- --------------------------------------------------------------------------------------------------------------------------
2mm 0.03 ***** ***** ***** ***** *****
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2.5mm 0.05 ***** ***** ***** ***** *****
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3mm 0.09 ***** ***** ***** ***** *****
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3.5mm 0.14 ***** ***** ***** ***** *****
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4mm 0.2 ***** ***** ***** ***** *****
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4.5mm 0.29 ***** ***** ***** ***** *****
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5mm 0.4 ***** ***** ***** ***** *****
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5.5mm 0.53 ***** ***** ***** ***** *****
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6mm 0.69 ***** ***** ***** ***** *****
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6.5mm 0.87 ***** ***** ***** ***** *****
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7mm 1.09 ***** ***** ***** ***** *****
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7.5mm 1.34 ***** ***** ***** ***** *****
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8mm 1.63 ***** ***** ***** ***** *****
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8.5mm 1.95 ***** ***** ***** ***** *****
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9mm 2.31 ***** ***** ***** ***** *****
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9.5mm 2.72 ***** ***** ***** ***** *****
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10mm 3.17 ***** ***** ***** ***** *****
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10.5mm 3.67 ***** ***** ***** ***** *****
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11mm 4.22 ***** ***** ***** ***** *****
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11.5mm 4.83 ***** ***** ***** ***** *****
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12mm 5.48 ***** ***** ***** ***** *****
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OVAL APPROX. CT. WT. PRICE LEVEL 1 PRICE LEVEL 2 PRICE LEVEL 3 PRICE LEVEL 4 PRICE LEVEL 5
- ---------------------------------------------------------------------------------------------------------------------
6x4 0.48 ***** ***** ***** ***** *****
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7x5 0.82 ***** ***** ***** ***** *****
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8x6 1.32 ***** ***** ***** ***** *****
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PRINCESS APPROX. CT. WT. PRICE LEVEL 1 PRICE LEVEL 2 PRICE LEVEL 3 PRICE LEVEL 4 PRICE LEVEL 5
- ---------------------------------------------------------------------------------------------------------------------
3x3 0.16 ***** ***** ***** ***** *****
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3.5x3.5 0.23 ***** ***** ***** ***** *****
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4x4 0.35 ***** ***** ***** ***** *****
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4.5x4.5 0.5 ***** ***** ***** ***** *****
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5x5 0.68 ***** ***** ***** ***** *****
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5.5x5.5 0.86 ***** ***** ***** ***** *****
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6x6 1.12 ***** ***** ***** ***** *****
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6.5x6.5 1.41 ***** ***** ***** ***** *****
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7x7 1.72 ***** ***** ***** ***** *****
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TRIANGULAR APPROX. CT. WT. PRICE LEVEL 1 PRICE LEVEL 2 PRICE LEVEL 3 PRICE LEVEL 4 PRICE LEVEL 5
- ---------------------------------------------------------------------------------------------------------------------
3.5x3.5x3.5 0.14 ***** ***** ***** ***** *****
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4x4x4 0.2 ***** ***** ***** ***** *****
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4.5x4.5x4.5 0.29 ***** ***** ***** ***** *****
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5x5x5 0.36 ***** ***** ***** ***** *****
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5.5x5.5x5.5 0.51 ***** ***** ***** ***** *****
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6x6x6 0.69 ***** ***** ***** ***** *****
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6.5x6.5x6.5 0.88 ***** ***** ***** ***** *****
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7x7x7 1.11 ***** ***** ***** ***** *****
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7.5x7.5x7.5 1.3 ***** ***** ***** ***** *****
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8x8x8 1.6 ***** ***** ***** ***** *****
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(C)2000 Charles & Colvard(TM)All Rights Reserved.
REDACTED - OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION
AND IS DENOTED HEREIN BY *****
SCHEDULE 8
This information is confidential.
All prices are subject to change without notice.
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Radiant Approx. Ct. Wt. Price Level 1 Price Level 2 Price Level 3 Price Level 4 Price Level 5
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6x4 0.6 ***** ***** ***** ***** *****
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7x5 1.02 ***** ***** ***** ***** *****
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8x6 1.6 ***** ***** ***** ***** *****
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Price Level 1: Distributor price minimum order ***** carats per calendar quarter
Price Level 2: Distributor price minimum order ***** carats per calendar quarter
Price Level 3: Distributor price minimum order ***** carats per calendar quarter
Price Level 4: Distributor price minimum order ***** carats per calendar quarter
Price Level 5: Distributor price minimum order ***** carats per calendar quarter
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(C)2000 Charles & Colvard(TM)All Rights Reserved.