EXHIBIT 10.34
THE REGISTRANT HAS REQUESTED THAT CERTAIN PORTIONS OF THIS EXHIBIT BE GIVEN
CONFIDENTIAL TREATMENT. AN UNREDACTED VERSION OF THIS EXHIBIT HAS BEEN FILED
WITH THE COMMISSION.
LETTER AGREEMENT
DATED MAY 3, 1997
BETWEEN CREE RESEARCH, INC. AND C3, INC.
REDACTED--OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION AND IS
DENOTED HEREIN BY *****
May 3, 1999
Xxxxxx X. Xxxxxx
President
C3, Inc.
X.X. Xxx 00000
Xxxxxxxx Xxxxxxxx Xxxx, XX
00000-0000
This letter, if accepted by C3, will serve as an agreement between Cree and C3
to the following terms:
1. Cree agrees to supply production crystals and C3 agrees to purchase
production crystals according to the terms outlined in this letter
agreement for a period of one year beginning July 1, 1999.
2. C3 agrees to purchase *****, 3" production crystal growth systems according
to the terms outlined in the June 6, 1997 Amended and Restated Exclusive
Supply Agreement (the "Supply Agreement") with a condition that the maximum
price per system will not exceed $*****. C3 will issue a purchase order for
these ***** systems concurrently with the execution of this agreement. The
systems are being built as new for use by Cree on behalf of C3 in
accordance with the Supply Agreement. These ***** systems represent the
growth systems in excess of ***** as outlined in section *****. The first
***** systems will be brought on-line as 3" systems and the second *****
systems will be brought on-line as 2" systems.
3. C3 will purchase the output of crystal growers according to the following
schedule:
------------------------------------- --------------------------
DATE # OF CRYSTAL GROWTH
SYSTEMS
------------------------------------- --------------------------
July 1, 1999 - August 31, 1999 *****
------------------------------------- --------------------------
August 31, 1999 - September 30, 1999 *****
------------------------------------- --------------------------
October 1, 1999 - June 30, 2000 *****
------------------------------------- --------------------------
4. Cree will supply crystals from the systems outlined in Section 3 according
to the pricing schedule outlined in Exhibit A.
5. C3 will continue funding of the development program at Cree under the July
1, 1998 Amended and Restated Development Agreement (the "Development
Agreement] at the current funding level of $240,000 per month until *****
new 3" systems are on line or October 1, 1999, whichever is sooner, and
thereafter, at $120,000 per month.
6. C3 may switch growers from 2" to 3" diameter crystals or from 3" to 2"
diameter crystals provided it gives Cree at least 30 days notice and such
additional time as reasonably required to address any conversion and
ramp-up issues. C3 agrees to pay for any upgrade costs, not to exceed
$***** associated with converting systems owned by C3.
7. As used in Exhibit A, 'usable mm' means light or medium light material, as
previously defined by both parties, judged versus the master crystal. Any
discrepancies in usable material will be mutually resolved by Cree and C3.
All grading will be concluded in a timely manner consistent with past
practice.
REDACTED--OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION AND IS
DENOTED HEREIN BY *****
8. During the term of this agreement, the parties will negotiate in good faith
a mutually acceptable method and process for quantifying micropipe defects
in the crystals. The parties will then negotiate a mutually acceptable
means to include these defects in the grading specifications for production
crystals.
9. 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.
10. If the parties do not agree in writing, prior to July 1, 2000, on a
mutually acceptable definition of "Repeatable Process" for purposes of
Sections 1.1 and 2.4 of the Supply Agreement, then unless otherwise agreed
in writing by the parties, thereafter C3 will purchase from Cree and Cree
will sell to C3, material in accordance with the pricing and other terms
and conditions set forth in the Supply Agreement and no minimum
specifications shall be applicable to such material.
11. The contents of this letter shall be considered 'Confidential Information'
of each party subject to the provisions of Section 5 of the Supply
Agreement."
If acceptable, please sign below and date to indicate C3's binding agreement to
these terms.
/s/ Xxxxxxx X. Xxxxxxx /s/ Xxxxxx X. Xxxxxx
---------------------- ---------------------
Xxxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxx
President & COO President & COO
REDACTED--OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION AND IS
DENOTED HEREIN BY *****
EXHIBIT A
C3 CRYSTAL PRICING SCHEDULES
PERIOD 1 - JULV 1, 1999 THROUGH DECEMBER 31, 1999
2" crystals will be sold according to 2" Schedule A
3" crystals will be sold according to 3" Schedule C
PERIOD 2 - JANUARY 1, 2000 THROUGH JUNE 30, 2000
The pricing will be according to the same schedules as Period 1, unless Cree's
monthly product revenue has increased by at least *****% versus any prior 2
month average covered by this agreement due to;
1. Yield as defined by comparing the average xxxxxxx xxxxx charged to C3
for any month beginning in July 1999 versus any single month covered
by this letter agreement, or
2. C3's conversion of the existing 2" growers to 3" growers, or
3. The issuance of a purchase order by C3 to Cree for the purchase of
additional grower capacity not committed in this agreement.
2" crystals will be sold according to 2" Schedule B
3" crystals will be sold according to 3" Schedule D subject to Cree achieving
yields, which are in-line with comparable 2" yields.
Terms of Pricing
The 'usable mm' is calculated by adding the 'net light material plus the 'net
medium light material' protoype yield. 'Net materials' are defined as total
material minus the % volume yield loss caused by inclusions and defects
including *****, *****, *****, *****, *****, etc. as previously defined by both
parties and in accordance with past practice. In the case where the 'usable mm'
results in <***** mm, the medium light price will be calculated as [(L Price -
Scrap)*ML Yield + Scrap] The 'medium light material' prototype yield will be
based on a rolling month average of stones not greater than 1 carat (7 mm).
* The >*****mm cap for 2" is subject to increase as yield improvements warrant
according to the following schedule; $*****/mm of length >*****mm for
schedule A and $*****/mm of length >*****mm for schedule B
** The >*****mm cap for 3" is subject to increase as yield improvements warrant
according to the following schedule: $*****/mm of length >*****mm for
schedule C and $*****/mm of length >*****mm for schedule D
------------------------------ -------- ------- ------------ ------------------------------ ---------- -------- -----------
2" Schedule A 2" Schedule B
USABLE MM LIGHT PRICE MM CM3 $/CM3 USABLE MM LIGHT PRICE MM CM 3 $/CM3
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3" Schedule C 3" Schedule D
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Cree Research, Inc.
Company Confidential
