Exhibit 10.49
REDACTED - OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION AND IS
DENOTED HEREIN BY ***
July 2, 2001
Robert S. Thomas
President & CEO
Charles & Colvard, Ltd,
P.O. 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. This letter
agreement supersedes the parties' letter agreement dated December 7, 2000.
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.
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Delivery Period Forecasted quantity
(grams)
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1/1/01 - 1/21/01 *** grams
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1/22/01 - 2/18/01 *** grams
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2/19/01 - 3/25/01 *** grams
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3/26/01 - 4/22/01 *** grams
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4/23/01 - 5/20/01 *** grams
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5/21/01 - 6/24/01 *** grams
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6/25/01 - 7/22/01 *** grams
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7/23/01 - 8/19/01 *** grams
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8/20/01 - 9/23/01 *** grams
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9/24/01 - 10/21/01 *** grams
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10/22/01 - 11/18/01 *** grams
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11/19/01 - 12/23/01 *** grams
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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 December 31. 2002, and the term of the
Development Agreement is extended through December 31, 2002.
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 S of the Supply Agreement.
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 and CEO President & CEO
Attachment A
Specification of usable material:
Except where noted below, "Usable mm" is calculated by adding the length of net
"light" material plus 55% of the length of 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 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 ( Le, 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.