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EXHIBIT 10.11
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.
AMENDED AND RESTATED EXCLUSIVE SUPPLY AGREEMENT,
DATED JUNE 6, 1997, BETWEEN
CREE RESEARCH, INC. AND C3, INC.
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AMENDED AND RESTATED EXCLUSIVE SUPPLY AGREEMENT
THIS AMENDED AND RESTATED EXCLUSIVE SUPPLY AGREEMENT (this
"Agreement") is made and entered into effective as of the 6th day of June,
1997, by and between CREE RESEARCH, INC. ("Cree"), a North Carolina corporation
having its principal offices at 0000 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx
Xxxxxxxx, 00000, and C3, INC. ("C3"), a North Carolina corporation formerly
known as C3 Diamante, Inc. and having its principal offices at X.X.
Xxx 00000, Xxxxxxxx Xxxxxxxx Xxxx, Xxxxx Xxxxxxxx 00000-0000.
Recitals
WHEREAS, Cree is engaged in the business of developing, manufacturing
and selling silicon carbide (SiC) substrates and material for various
electronic applications; and
WHEREAS, C3 intends to develop, manufacture and market gemstones
fabricated from SiC material and desires to purchase such material from Cree;
and
WHEREAS, Cree and C3 entered into an Exclusive Supply Agreement dated
September 15, 1995 and a First Amendment to Exclusive Supply Agreement dated
July 10, 1996 wherein Cree and C3 agreed, inter alia, for Cree to supply C3 SiC
material and C3 agreed to purchase certain SiC material as provided therein;
and
WHEREAS, Cree and C3 desire to amend and restate the Exclusive Supply
Agreement, as amended as set out herein; and
WHEREAS, Cree and C3 shall simultaneously with the execution of this
Agreement enter into a Development Agreement (the "Development Agreement");
NOW, THEREFORE, the parties hereto, in consideration of the foregoing
premises and the covenants and undertakings herein contained, mutually agree as
follows:
1. Duties of C3
1.1 C3 agrees to purchase from Cree in each calendar quarter at least
50% (by dollar volume) of C3's requirements for SiC material for the production
of gemstones in each calendar quarter. A purchase shall be considered to be
made on the shipment date requested by C3 in any order submitted by it and
accepted by Cree, or as otherwise mutually agreed by C3 and Cree. C3 shall not
be in breach of this Section 1.1 if the dollar volume of purchases by C3 in a
given calendar quarter falls below such 50% due to Cree's failure to accept
orders requesting delivery in the quarter, provided that C3's orders do not
request delivery during the quarter for an aggregate number of boules in excess
of the number delivered during the preceding quarter, plus a commercially
reasonable increase (taking into consideration the time periods for capacity
increases specified in Sections 1.6 and 1.7 which are intended to address
capacity increases demanded for normal growth). C3 shall be obligated to
purchase from Cree under this Agreement, and Cree shall be obligated to sell to
C3, only SiC material in colors available from Cree. As used in this Agreement,
"colors available from Cree" means:
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(a) SiC material in colors that result from standard processes
Cree may from time to time employ for manufacturing SiC
semiconductor material; and
(b) Transparent or nearly transparent SiC material that results
from either the process claimed in U.S. Patent Application
Serial No. 08/596,526 entitled "Growth of Colorless Silicon
Carbide Crystals" or any other process using then standard
crystal growth equipment and processes of Cree capable of
producing transparent or nearly transparent SiC material,
which processes are currently under development by Cree or as
such processes may be developed by Cree from time to time.
References in this Agreement to "transparent" and "nearly
transparent" material are understood to mean colorless
material (and vice versa) and references in this Agreement to
"gemstones" are understood to mean "gems" (and vice versa).
As of June 6, 1997, the colors available from Cree are green, blue, amber, and
colorless, with processes for significantly improved colorless material under
development by Cree pursuant to the Development Agreement. Cree will give C3
written notice of the availability of other colors as they become available.
Without limiting the foregoing, when Cree notifies C3 that it has developed a
"Repeatable Process," as defined in the Development Agreement, for producing
SiC boules that meet specifications set forth in the Specifications and
Timetable Chart in Section 1.3 of the Development Agreement, boules meeting
such specifications shall be deemed standard products in colors available from
Cree under this Agreement.
1.2 Should C3 require SiC material in a color other than the colors
available from Cree, C3 will extend to Cree a right of first refusal with
respect to the development, manufacture and sale of such material as provided
in this paragraph. C3 agrees that it will not purchase such material from, or
otherwise enter into any agreement for the development, manufacture or sale of
such material with, any person or entity other than Cree except in compliance
with this paragraph. C3 will give Cree written notice referencing this Section
1.2 setting out the terms of the proposed transaction and extending an offer to
contract with Cree on such terms. If Cree does not accept such offer by written
notice given within thirty (30) days after receipt of C3's notice, C3 shall be
free at any time within the next six (6) months after expiration of the
thirty-day period to conclude the transaction with any third party, provided
the terms are no more favorable to the supplier than those described in C3's
notice to Cree. If Cree accepts any offer from C3 under this paragraph, then
notwithstanding anything to the contrary in such offer or herein, (i) all other
terms and provisions of this Agreement relating to the purchase of SiC material
for the production of gemstones not inconsistent with such offer shall apply to
the development, manufacture and sale of such material as provided in this
paragraph, and (ii) Cree shall have a perpetual, irrevocable, royalty-free,
exclusive (including exclusive of C3) license to use, manufacture, sell and
otherwise practice (including the right to sublicense) any process or other
work developed for C3 for all applications other than the manufacture of
gemstones. The foregoing shall not be construed as an assignment or other
transfer by Cree of any rights in any intellectual property. Development work
performed by Cree pursuant to the Development Agreement shall be governed by
the terms of such Development Agreement and not this Section 1.2.
1.3 C3 agrees to place orders that in the aggregate total a minimum
purchase price to C3 of $10,000 for SiC material to be shipped before December
31, 1995.
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REDACTED--OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
COMMISSION AND IS DENOTED HEREIN BY *****
1.4 C3 agrees that it will not, without Cree's written consent, use
any SiC material supplied by Cree as a seed for bulk crystal growth or for any
purpose other than fabricating gemstones from such material. C3 further agrees
that it will not, without Cree's written consent, resell or otherwise transfer
bulk SiC material supplied by Cree to any third party and that it will not,
without Cree's written consent, sell or otherwise transfer SiC gemstones
fabricated from material supplied by Cree to any third party that C3 knows or
has reason to believe intends to use the material as a seed for the growth of
SiC.
1.5 C3 grants Cree a perpetual, irrevocable, royalty-free, exclusive
(including exclusive of C3) license to use, manufacture, sell and otherwise
practice (including the right to sublicense), for electronic applications only,
any inventions developed by employees of C3 or acquired by C3 during the term
of this Agreement which relate to SiC or gallium nitride (GaN) material,
including without limitation inventions relating to bulk crystal growth,
cutting or polishing of SiC or GaN material.
1.6. For so long as Cree has more than ***** but less than *****
crystal growth systems in use for the production of SiC material under this
Agreement, if the order and delivery requirements from C3 exceed the capacity
of the crystal growth systems then being used by Cree for the production of SiC
material under this Agreement, then Cree shall notify C3. C3 may elect to
either (i) reduce the order size or extend the delivery schedule so as not to
require additional crystal growth systems or (ii) upon submission to Cree of a
written request and the binding commitment of C3 to purchase a minimum of six
(6) months' output from such crystal growth system(s) (and subject to the
condition that specifications for any processes under development have been
established), require Cree to provide the additional crystal growth system(s),
up to a total of ***** systems, needed to meet the order and delivery
requirements of C3. Any such additional crystal growth systems provided under
this Section 1.6 (up to a total of ***** systems) shall be provided by Cree at
its expense within four months after receipt of such written request from C3.
1.7 If the order and delivery requirements from C3 exceed the capacity
of ***** crystal growth systems, then Cree may, but shall not be obligated to,
notify C3 of a request for additional capital equipment to supply such
capacity.
(a) Cree shall provide written notice to C3 identifying
the particular system or systems to be constructed
for which funding is required and an estimate of the
cost for all work as set out in this Section 1.7.
(b) C3 may elect to either (i) reduce the order size or
extend the delivery schedule so as not to require
additional crystal growth systems or (ii) purchase
the designated system or systems from Cree at Cree's
cost. Systems purchased by C3 are referred to below
as the "Purchased Equipment" and shall be provided
by Cree within four months after receipt of C3's
election. C3 will loan the Purchased Equipment back
to Cree.
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(c) Cree will use the Purchased Equipment exclusively
for the production of SiC material for C3, except
that from time to time Cree may give 7 days prior
written notice to C3 of available production time
for the Purchased Equipment, and if C3 does not by
the end of such 7-day period demonstrate an
immediate need for use of the Purchased Equipment,
then Cree will be free to use the Purchased
Equipment for other purposes until the Purchased
Equipment is next required to meet C3's orders under
this Agreement.
(d) The price to be paid by C3 for the Purchased
Equipment will include all labor and material costs
incurred by Cree in the construction of the systems
purchased, plus reasonable overhead, and will
specifically include, without limitation, all costs
of piping, electrical and mechanical systems
required for the operation of the Purchased
Equipment. Cree will be responsible solely for costs
of providing light industrial shell space (i.e.,
space upfit with only lay-in lighting, drop ceiling,
sprinklers, tile floor and walls).
(e) Cree will invoice C3 on a monthly basis for all
costs to be paid by C3 during construction of a
system designated to be purchased by C3. Any costs
not previously billed will be invoiced to C3 once
the Purchased Equipment is placed in service.
Amounts invoiced under this paragraph will be due
within thirty (30) days from the date of invoice.
(f) Upon payment of C3 of all costs incurred in the
construction of Purchased Equipment, Cree will
execute and deliver to C3 an assignment transferring
title to such system to C3, subject to reservation
of a security interest in favor of Cree as provided
below.
(g) Purchased Equipment will at all times remain at
Cree's facilities. C3 shall not sell or otherwise
transfer to any third party any rights in or to any
Purchased Equipment and shall at all times keep such
Purchased Equipment free and clear of any claim,
lien or other encumbrance, other than the security
interest in favor of Cree. C3 acknowledges that the
Purchased Equipment embodies confidential and
proprietary information of Cree and shall at all
times remain in Cree's possession and control,
notwithstanding any ownership interest of C3.
(h) Cree hereby reserves, and C3 hereby grants to Cree,
a security interest in and to all Purchase
Equipment, including all accessions thereto and
replacements thereof and all parts and supplies
associated therewith. This security interest secures
the performance by C3 of the obligations owed to
Cree, arising under this Agreement. If C3 attempts
to sell or otherwise transfer to any third party any
rights in or to any such property, or fails to keep
the same free and clear of any claim, lien or other
encumbrance in favor of any third party, C3 shall be
deemed in
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default under this Agreement, and Cree shall have
all of the rights and remedies afforded a secured
party upon default by Chapter 25 of the North
Carolina General Statutes. C3 agrees to execute and
deliver to Cree, from time to time upon Cree's
request, appropriate financing statements for filing
in the public records to evidence Cree's security
interest hereunder.
(i) Cree will, at its expense, maintain the Purchased
Equipment in good operating condition. The Purchased
Equipment shall be conspicuously marked as property
of C3. Cree shall not sell or otherwise transfer to
any third party any rights in or to any Purchased
Equipment and shall at all times keep such Purchased
Equipment free and clear of any claim, lien or other
encumbrance in favor of any third party. Cree agrees
to execute and deliver to C3, from time to time,
upon C3's request, appropriate financing statements
for filing in the public records to evidence C3's
ownership of the Purchased Equipment. Cree shall
not, however, be obligated to repair or replace any
Purchased Equipment damaged as a result of fire,
lightning, flood or other casualty of any kind
unless C3 or its insurer agrees to pay the cost of
such repair or replacement.
(j) C3 will be responsible for and shall timely pay all
property taxes due with respect to Purchased
Equipment during the period of C3's ownership
thereof.
(k) C3 will transfer ownership of the Purchased
Equipment to Cree, without charge, when such
equipment is fully-depreciated. If ownership has not
been transferred prior to the termination of this
Agreement, (i) in the event this Agreement is
terminated through no fault of Cree, upon such
termination C3 shall transfer ownership of the
Purchased Equipment to Cree without charge, or (ii)
in the event this Agreement is terminated due to the
breach of this Agreement by Cree, C3 shall transfer
the Purchased Equipment to Cree and Cree shall pay
to C3 the book value of the Purchased Equipment.
1.8 C3 shall not and shall cause its shareholders to not accept any
payment, or enter into any contract or other arrangement, for the purpose of
discontinuing or substantially curtailing its business of producing and selling
gemstones other than in connection with a sale of its business (whether by
stock sale, asset sale, merger or otherwise), subject to Section 6.5.
1.9 For the purpose of determining whether C3 has purchased at least
50% of its SiC material as provided in Section 1.1, the dollar value of SiC
material required by C3 and not purchased from Cree shall be equal to:
(a) If the material is purchased from a person other
than Cree, the purchase price of such material paid
by C3; or
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REDACTED--OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
COMMISSION AND IS DENOTED HEREIN BY *****
(b) If such material is produced by C3, an amount
calculated using the price calculation as set forth
in the first sentence of Section 2.2, as then used
by Cree, using C3's loaded manufacturing cost.
1.10 Upon the request of Cree, which request shall occur no more than
twice per year, C3 shall, within two weeks of such request, provide non-binding
projections regarding SiC material to be ordered hereunder.
1.11 C3 will give Cree written notice upon the purchase from anyone
other than Cree, or producing for itself, any portion of its requirements of
SiC material for the production of gemstones. Thereafter Cree shall have the
right, at Cree's expense, to have an independent public accounting firm
reasonably acceptable to C3 audit C3's purchases of SiC material for the
production of gemstones and the calculation of dollar value under Section 1.9.
The audit shall be conducted during normal business hours and upon reasonable
prior notice. The accounting firm conducting the audit shall be required to
enter into a mutually acceptable nondisclosure agreement with C3 under which
such firm will be obligated not to disclose any information obtained during the
course of the audit, except that it may disclose to Cree its analysis of
whether C3 has complied with its obligations under Section 1.1. The audit right
under this paragraph may be exercised not more than once during any fiscal year
of C3 and only with respect to calendar quarters ended within one year
preceding the request for an audit. C3 shall provide reasonable assistance to
the public accounting firm including, but not limited to, providing a schedule
of purchases and the dollar value calculation under Section 1.9 (which shall
provide reasonable detail, but not divulge proprietary or confidential
information of C3, as to the calculation of loaded manufacturing costs),
supporting analyses and any supporting source documentation reasonably required
by the public accounting firm. Such accounting firm will audit and report to
Cree on the schedule of purchases and the dollar value calculation under
Section 1.9, but will not divulge to Cree any proprietary or confidential
information (including but not limited to supporting schedules and source
documentation) disclosed during the audit process.
2. Duties of Cree
2.1 Cree agrees to supply to C3, in accordance with C3's orders from
time to time submitted to and accepted by Cree in writing, such quantities of
SiC material ("material sales grade" and scrap) as C3 is obligated to purchase
from Cree under this Agreement for the purpose of developing and manufacturing
gemstones. Cree shall be obligated to supply SiC material from the production
capacity of ***** crystal growth systems and any growth systems purchased by
Cree or C3 pursuant to Section 1.6 or Section 1.7 of this Agreement. Without
limiting the foregoing, if Cree elects not to give notice under Section 1.7
above, Cree will obtain additional capacity to fill C3's orders under this
Agreement as promptly as commercially reasonable.
2.2 Cree agrees to provide "material sales grade" SiC material at its
"loaded manufacturing cost" plus ***** and to provide reject (scrap) material
at ***** per crystal. Cree also agrees to cut the SiC material for a price
equal to its loaded manufacturing cost plus *****, provided that the cutting
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utilizes Cree's standard equipment and processes. All "material sales grade"
material supplied by Cree under this Agreement shall be SiC crystals of the
quality and defect density that Cree supplies as standard products to its SiC
semiconductor wafer customers; provided, however, that transparent or nearly
transparent SiC material shall be considered "material sales grade" if it is of
the quality and defect density that results from either the process claimed in
U.S. Patent Application Serial No. 08/596,526 entitled 'Growth of Colorless
Silicon Carbide Crystals' as currently under development and as approved by C3
or by any other process using then standard Cree crystal growth equipment
capable of producing transparent SiC material, as those processes are developed
by Cree and as approved by C3. Cree will be obligated to supply SiC material
under this Agreement in cut form and in bulk crystal form, subject to
compliance by C3 with the terms of Section 1.4 and the other terms of this
Agreement.
2.3 For purposes of this Agreement,
(a) "Loaded manufacturing cost" shall be determined in accordance
with Cree's standard accounting practices using allocations,
conditions and calculations no less favorable than those
available to any other person or entity from Cree, and in all
events "loaded manufacturing cost" shall exclude any costs
and expenses related to capital equipment funding paid by C3
pursuant to Section 1.7 hereunder and costs related to the
production of crystals that do not meet "minimum
specifications," as provided herein, or elsewhere if mutually
agreed upon in writing by Cree and C3 in a document
referencing this Section 2.3. The "minimum specifications"
for colorless material shall be determined as set forth in
Section 2.4 below.
(b) The loaded manufacturing cost applicable to an order will be
Cree's average loaded manufacturing cost (as determined in
accordance with this Section 2.3) during the three (3)
calendar months preceding the month in which the order is
received by Cree.
(c) In manufacturing SiC material for sale to C3 under this
Agreement, Cree agrees to employ substantially the same
processes it employs in the manufacture of SiC material for
semiconductor applications for the purpose of maximizing
productivity and minimizing costs, except insofar as such
processes may be modified for the production of transparent
or nearly transparent SiC material or otherwise modified by
mutual agreement. Cree shall use its best commercially
reasonable efforts to incorporate into its production
processes those advances obtained from work pursuant to the
Development Agreement.
2.4 For the purposes of Section 2.3 above, "minimum
specifications" for colorless SiC material means:
(a) Prior to such date as Cree notifies C3 that it has
developed a "Repeatable Process," as defined in the
Development Agreement, for producing SiC boules that
meet the specifications for January 1, 1998 set
forth in the first row of the Specifications and
Timetable Chart in Section 1.3 of the Development
Agreement, no "minimum specifications" shall apply
unless otherwise mutually agreed by the parties as
provided in Section 2.3; and
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REDACTED--OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
COMMISSION AND IS DENOTED HEREIN BY *****
(b) When Cree notifies C3 that it has developed a
"Repeatable Process," as defined in the Development
Agreement, for producing SiC boules that meet the
specifications for January 1, 1998 set forth in the
first row of the Specifications and Timetable Chart
in Section 1.3 of the Development Agreement,
"minimum specifications" shall mean a ***** or
larger diameter crystal with at least a ***** slice
comprised of material in the color grade range of
GHIJ, with no less than ***** in the GH range, or
better, according to the standards generally
accepted by the diamond industry for color using
pregraded master color stones (it being understood
that while the minimum specifications do not require
the absence of inclusions, blemishes or other
defects affecting clarity, Cree shall use its best
commercially reasonable efforts to minimize such
defects since such defects can have an impact on the
color grade); and
(c) On the first day of the calendar month immediately
following each anniversary of the date Cree notifies
C3 it has achieved the specification as stated in
Subsection (b) above, the "minimum specifications"
shall be revised to require that each boule contain
a contiguous volume of material (with a minimum
height of *****) in the GHIJ range, with no less
than ***** in the GH range, or better, according to
the standards generally accepted by the diamond
industry for color using pregraded master color
stones, with such volume equal to at least ***** of
the average volume of such material contained in all
boules that met the minimum specifications over the
previous twelve months (the "Minimum Specifications
Adjustment") (it being understood that while the
minimum specifications do not require the absence of
inclusions, blemishes or other defects affecting
clarity, Cree shall use its best commercially
reasonable efforts to minimize such defects since
such defects can have an impact on the color grade).
However, the minimum specifications shall never
decrease from the previous period. A Minimum
Specifications Adjustment shall occur each year for
so long as C3 continues funding SiC material
development at Cree in an amount not less than C3
funded during the previous twelve month period. No
Minimum Specifications Adjustment will occur if such
funding requirement is not fulfilled.
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REDACTED--OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
COMMISSION AND IS DENOTED HEREIN BY *****
2.5 Should the price to C3 for production SiC boules calculated
pursuant to Section 2.2 become ***** per cubic millimeter for SiC boules having
a contiguous volume of material of at least ***** cubic millimeters of
colorless material with a minimum height of ***** in the comparable diamond
color grade range of GHIJ, with no less than ***** in the GH range, in each
case in accordance with the standards generally accepted by the diamond
industry for color using pregraded master color stones (it being understood
that while the minimum specifications do not require the absence of inclusions,
blemishes or other defects affecting clarity, Cree shall use its best
commercially reasonable efforts to minimize such defects since such defects can
have an impact on the color grade), notwithstanding the provisions of Section
2.2 hereof, the price to C3 for such boules shall not drop to less than *****
per cubic millimeter, except to the extent that such price yields to Cree an
amount in excess of Cree's loaded manufacturing cost plus *****.
2.6 Upon the request of C3, which request shall occur no more than
twice per year, Cree shall, within two weeks of such request, provide
non-binding updated projections regarding the cost of SiC material to be
supplied hereunder.
2.7 Cree is under no obligation to share any technical information
regarding crystal growth technology and/or crystal growth processes with any C3
personnel.
2.8 C3 shall have the right, at its expense, to have an independent
public accounting firm reasonably acceptable to Cree audit Cree's loaded
manufacturing cost determination and the price to be paid by C3 under Section
1.7 for the Purchased Equipment. The audit shall be conducted during normal
business hours and upon reasonable prior notice. The accounting firm conducting
the audit shall be required to enter into a mutually acceptable nondisclosure
agreement with Cree under which such firm will be obligated not to disclose any
information obtained during the course of the audit, except that it may
disclose to C3 its analysis of the correctness of the loaded manufacturing cost
as calculated by Cree. The audit right under this paragraph may be exercised
not more than once during any fiscal year of Cree and only with respect to
costs applicable to shipments made within one year preceding the request for an
audit. Cree shall provide reasonable assistance to the public accounting firm,
including but not limited to, providing a schedule of the loaded manufacturing
costs (which shall provide reasonable detail, but not divulge proprietary or
confidential information of Cree, as to the calculation of loaded manufacturing
costs), supporting analyses and any supporting source documentation reasonably
required by the public accounting firm. Such accounting firm will audit and
report to C3 on the schedule of loaded manufacturing costs, but will not
divulge to C3 any proprietary or confidential information (including but not
limited to supporting schedules and source documentation) disclosed during the
audit process.
2.9 During the term of this Agreement, Cree shall not sell SiC
material or crystals in any form to any customer other than C3 if Cree knows or
has reason to believe such customer intends to use such material for the
purpose of fabricating, distributing or selling gemstones.
2.10 Notwithstanding Section 2.9, if C3 has not placed orders to
purchase SiC material from Cree having a combined purchase price to C3 of at
least $100,000 by April 15, 1998, with shipment of
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such quantity to be made not later than July 15, 1998, this Agreement shall
become non-exclusive and Cree shall be free to sell SiC material to others for
use in the fabrication of gemstones.
3. Term and Termination
3.1 The term of this Agreement shall extend for ten (10) years
beginning July 15, 1995, unless sooner terminated in accordance with Section
3.3 or by written mutual consent of both parties.
3.2 If C3 submits and Cree accepts orders to purchase SiC material
having an aggregate purchase price in excess of $1,000,000 for delivery during
any thirty-six (36) consecutive months, then C3 and Cree shall each have an
option to extend this Agreement for one (1) additional term of ten (10) years.
Such option shall become exercisable at such time as the volume purchase
condition specified in the preceding sentence has been satisfied and may be
exercised by written notice given at any time thereafter prior to expiration of
the initial ten-year term.
3.3 In the event of a material breach by either party of any
obligation to the other party, whether arising under this Agreement or
otherwise, the other party may terminate this Agreement upon written notice if
the breach is not cured within thirty (30) days after giving written notice to
the party in breach setting out the nature of the breach in reasonable detail.
4. Terms and Conditions of Purchase
4.1 All orders under this Agreement shall be submitted to Cree in
writing. Cree will advise C3 in writing within ten (10 ) days after receipt of
each order whether Cree accepts the order. If not accepted within such 10-day
period the order will be deemed rejected.
4.2 C3 shall submit all orders at least thirty (30) days prior to the
requested shipping date. Subject to the foregoing, Cree shall use all
reasonable efforts to ship standard products on or before the date requested by
C3 in its order, but will not be obligated to make delivery under any order
earlier than forty-five (45) days after receipt of the order. Lead times for
non-standard products shall be subject to mutual agreement.
4.3 Cree shall invoice C3 upon shipment of each order. Payment of each
invoice is due within thirty (30) days after the invoice date. Any portion of
any invoice not paid when due will accrue interest until paid at the rate of
1.5% per month or, if less, the maximum rate permitted by law. Until receipt of
payment for each shipment Cree reserves a security interest in such shipment to
secure the purchase price and all taxes and shipping and other expenses
relating to such shipment. In the event of default in payment of any invoice,
C3 agrees to pay Cree's expenses, including reasonable attorney's fees and
expenses, incurred in enforcing payment thereof.
4.4 All applicable sales, use and other taxes with respect to
purchases under this Agreement (other than taxes on Cree's net income) will be
invoiced to and paid by C3.
4.5 All shipping expenses, including insurance against loss or damage
in transit, will be invoiced to and paid by C3.
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4.6 Material shall be shipped F.O.B. Cree's manufacturing facilities
to any U.S. location designated by C3. Subject to Cree's reserved security
interest, title and risk of loss shall pass to C3 upon delivery to the carrier
at the shipping point.
4.7 Cree shall not be liable for or be in default of this Agreement
for any delay in delivery or failure to perform due to strike, lockout, riot,
war, fire, act of God, accident, delays caused by any subcontractor or supplier
or by C3, technical difficulties, failure or breakdown of machinery or
components necessary to order completion, inability to obtain or substantial
rises in the price of labor or materials or manufacturing facilities,
curtailment of or failure to obtain sufficient electrical or other energy
supplies, or compliance with any law, regulation, order or direction, whether
valid or invalid, of any governmental authority or instrumentality thereof, or
due to any unforeseen circumstances or any causes beyond its control, whether
similar or dissimilar to the foregoing and whether or not foreseen. C3 agrees
that such delay in delivery or failure to deliver or perform any part of this
Agreement shall not be grounds to terminate or refuse to comply with any
provisions hereof and no penalty of any kind shall be effective against Cree
for delay or failure; provided, however, that if the delay or failure extends
beyond six (6) months from the originally scheduled date either party may, with
written notice to the other, terminate this Agreement without further
liability.
4.8 All standard "material sales grade" products supplied by Cree
under this Agreement shall conform to Cree's published specifications for such
products in effect at the time of shipment. Nonconforming products shall be
replaced by Cree upon return of the defective product, if such product is
returned within 90 days after shipment; such replacement shall be C3's sole
remedy for breach of the foregoing warranty. All scrap material and
non-standard products supplied under this Agreement will be supplied "AS IS."
EXCEPT AS PROVIDED ABOVE, CREE MAKES NO WARRANTY OF ANY KIND WITH RESPECT TO
ANY MATERIAL SUPPLIED HEREUNDER AND DISCLAIMS ANY IMPLIED WARRANTIES, INCLUDING
ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR
NONINFRINGEMENT OF PATENT OR SIMILAR RIGHTS.
4.9 In no event shall either party be liable to the other for
incidental, consequential or special loss or damages of any kind, however
caused, or any punitive damages.
5. Confidential Information; Joint Inventions and Nonsolicitation
5.1 "Confidential Information" for purposes of this Agreement means
any information, not generally known in the relevant trade or industry, which
was obtained from the other party or which falls within any of the following
categories:
(a) information constituting trade secrets, including
but not limited to internal costs and margins;
(b) information relating to existing or contemplated
products, services, technology, designs, processes,
formula, computer systems, computer software,
algorithms, media and research or development.
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(c) information relating to the business of the party,
including but not limited to, business plans, sales
or marketing methods, methods of doing business,
customer lists, customer usages and/or requirements,
and supplier information; or
(d) information marked "Confidential" or "Proprietary."
5.2 Each party agrees that the other shall not be liable hereunder
for disclosure or use of any information which it establishes, by legally
sufficient evidence:
(a) was already known to the receiving party at the time
of receipt; or
(b) was rightfully obtained from a third party without
similar restriction and through no wrongful act of
the receiving party; or
(c) was at the time of receipt generally available to
the public or thereafter becomes so available
without breach hereof; or
(d) was used or disclosed with the prior written
authorization of the owner; or
(e) was disclosed pursuant to the requirement or request
of a governmental agency, which disclosure cannot be
made in confidence, or the disclosure of which was
required by law or judicial order; provided that, in
such instance, the disclosing party shall first give
the other notice of such requirement or request.
5.3 Each party agrees to keep the Confidential Information of the
other in the strictest confidence, in the manner set forth below:
(a) The receiving party shall not, directly or
indirectly, disclose, divulge, reveal, report or
transfer the Confidential Information to any third
party or to any individual employee other than an
employee having a need to know.
(b) The receiving party shall not use any Confidential
Information or the concepts therein for its own
benefit or for the benefit of a third party or for
any purpose other than the purposes authorized in
writing by the disclosing party.
(c) Any tangible materials which are or which contain
any Confidential Information shall be kept
confidential in accordance with the terms hereof,
and all such materials shall be returned or
destroyed upon satisfaction of the purpose for which
such material was originally provided or upon the
earlier request of the disclosing party.
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(d) The receiving party agrees to use at least the same
degree of care to protect the other party's
Confidential Information as it uses to protect its
own Confidential Information.
5.4 Each party shall appropriately notify each employee, agent or
consultant to whom any disclosure of received Confidential Information is made
and shall obtain their agreement that they will maintain Confidential
Information in confidence in accordance with the provisions set forth herein.
Each party represents and warrants to the others that its employees, agents and
consultants to whom any disclosure of received Confidential Information is made
shall be subject to a valid, binding and enforceable agreement to maintain such
Confidential Information in confidence in accordance with the provisions set
forth herein.
5.5 Except as expressly provided herein or in other written
agreements between the parties, neither party shall have any obligation of
confidentiality with respect to information received from the other. The
obligations of confidentiality set forth in this Section 5 shall continue for
so long as the Confidential Information continues to come within the definition
thereof set forth in Section 5.1 and shall survive the expiration or any
termination of this Agreement.
5.6 Nothing in this Agreement is or shall be construed to require
either party to disclose proprietary or confidential information to the other.
The parties agree that the terms of this Agreement shall be treated as
Confidential Information of each other subject to Section 5; provided, however,
that either party may, upon notice to the other, make such public disclosures
regarding this Agreement as in the opinion of counsel for such party are
required by applicable securities laws or regulations or other applicable law.
5.7 The parties will mutually agree on patenting procedures for
any inventions made jointly by employees of both parties during the term of
this Agreement. The parties do not presently anticipate that any such joint
inventions will be made under either this Agreement or the Development
Agreement.
5.8 Notwithstanding the ultimate determination of ownership, the
invention known by the parties as the "post faceting process" and any
improvements made thereon by either party during the term of this Agreement
shall be licensed to the nonowning party as follows:
(a) If to C3, a perpetual, irrevocable, royalty-free,
exclusive (including exclusive of Cree, except Cree
shall have the right to use and practice the
invention to manufacture or process material for C3)
license to use, manufacture, sell and otherwise
practice (including the right to sublicense) the
invention and any improvement exclusively for
gemstones and gemological instrumentation; or
(b) If to Cree, a perpetual, irrevocable, royalty-free,
exclusive (including exclusive of C3) license to
use, manufacture, sell and otherwise practice
(including the right to sublicense) the invention
and any improvement exclusively for electronic
applications.
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For all other uses and application, each party shall have full rights to use,
manufacture, sell and otherwise practice the invention and any improvement, but
neither party may sublicense any such use, manufacture, sale or practice.
5.9 Each party agrees that during the term of this Agreement,
without the prior written consent of the other party, it will not employ or
otherwise engage the services (as a consultant or in any other capacity) of any
individual who within one (1) year prior to being so engaged served as an
employee of the other party, or as a consultant to the other party providing
services, in the case of Cree, relating to bulk growth of SiC or GaN material
or the processing of such material (including without limitation, wafering and
polishing), or, in the case of C3, relating to gemstones or gemological
instrumentation.
6. General
6.1 This Agreement (which includes any Exhibits referenced
herein), constitutes the complete and exclusive statement of the understanding
and agreement of the parties with respect to the subject matter hereof and
supersedes all prior written or oral agreements between the parties concerning
such subject matter (including without limitation the Exclusive Distribution
Agreement dated June 6, 1995 between Cree and C. Xxxx Xxxxxx, to which C3
succeeded by assignment). This Agreement shall not be amended, modified or
altered except pursuant to a document signed by both parties.
6.2 This Agreement is made in and shall be construed in
accordance with and governed by the laws of the State of North Carolina.
6.3 Neither party shall permit any "Affiliate" of such party (as
defined below) to act or fail to take action when such action or failure to
take action, if by the party, would be a breach of this Agreement. Pursuant to
but without limiting the foregoing, purchases of SiC material by Affiliates of
C3 will be considered purchases by C3 for purposes of Section 1 of this
Agreement and sale of SiC material by Affiliates of Cree shall be considered
sales by Cree for purposes of Section 2.9 of this Agreement. For purposes of
this Agreement, "Affiliate" of a designated party means any corporation,
partnership, limited liability company or other business entity which: (a)
controls, is controlled by, or is under common control with the designated
party, whether directly or through one or more intermediaries; and (b) is
sublicensed by either party under Section 5.8 of this Agreement, by Cree under
Section 1.5 of this Agreement, or by C3 under Section 4.2 of the Development
Agreement. For purposes of this definition "controlled" and "control" mean
ownership of more than fifty percent (50%) of the voting capital stock or other
interest having voting rights with respect to the election of the board of
directors or similar governing authority. This Agreement shall inure to the
benefit of and be binding upon the parties and their respective successors and
permitted assigns.
6.4 The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
6.5 Neither this Agreement nor any rights hereunder may be
assigned by either party without the other party's prior written consent, which
consent shall not be unreasonably withheld except that either party may, in its
sole discretion, withhold consent to assignment to any Prohibited Assignee (as
defined below). Any attempted assignment in violation of this Section 6.5 is
void and shall constitute a
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breach of this Agreement. "Prohibited Assignee" means (i) De Beers or any
corporation, partnership or other entity or individual which in the reasonable
belief of Cree is affiliated with the De Beers, and the Central Selling
Organization, (ii) any party whose primary business is the development,
manufacture, marketing or sale of diamond gemstones or (iii) any non-gemstone
and non-jewelry industry competitor of the non-assigning party. A grant by C3
to a Prohibited Assignee of exclusive rights to distribute or market moissanite
gemstones shall be an assignment for purposes of this Section 6.5.
The occurrence of any Change in Control (as defined below)
with respect to a transaction with a Prohibited Assignee involving a party
shall be deemed an "assignment" of this Agreement by such party, subject to the
provisions of this Section 6.5. A "Change in Control" shall be deemed to have
occurred with respect to a party if:
(a) any person or group (as that term is used in Section
13(d)(3) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended), together with all affiliates
of such person or group, becomes the beneficial
owner of more than 50% of the outstanding capital
stock of that party, and such person or group was
not, at June 15, 1996, the beneficial owner of more
than 50% of the outstanding capital stock of that
party and is not an employee benefit plan sponsored
or maintained by that party; or
(b) that party merges or consolidates with or into
another corporation, or sells or otherwise disposes
of all or substantially all of its assets, except as
part of a reorganization in which the shareholders
owning more than 50% of the outstanding capital
stock of that party immediately prior to the
effectiveness of the merger, consolidation or sale
own more than 50% of the outstanding capital stock
of the successor purchaser (as the case may be)
immediately after the effectiveness of such event.
6.6 Neither party shall issue any press release or otherwise make
any public announcement concerning this Agreement without the prior consent of
the other party, except as may be required by law. Neither party shall use the
name of the other party in any advertising, marketing or similar material
without the other party's prior written consent.
6.7 The parties acknowledge and agree that in the event of a
breach of the Agreement, in addition to any other rights and remedies available
to it at law or otherwise, the parties shall be entitled to seek equitable
relief in the form of a temporary restraining order ("TRO") from any court of
competent jurisdiction; provided however, that in the event a TRO is obtained,
the parties shall request that any hearing on the merits of the dispute shall
be stayed pending arbitration of the dispute as provided in this Section 6.7.
In the event a party seeks a TRO or in the event of any other controversy or
claim (including, without limitation, any claim based on negligence,
misrepresentation, strict liability or other basis) arising out of or relating
to this Agreement or its performance or breach, a party shall give the other
party notice of the dispute, setting out the circumstance in reasonable detail,
and requesting a meeting of the representatives of the parties to attempt to
resolve the dispute or to reduce the scope of the issues subject to dispute.
The chief executive officers of the parties, and such other representatives as
each may desire to have attend, shall meet at a mutually agreeable time within
five business days from the date the meeting request was received and shall
hold such meeting at the offices of the party not requesting the same, or
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at some mutually agreeable alternative location. In the event the parties do
not resolve the dispute at such meeting, or any mutually agreed upon
adjournment thereof, the dispute shall be settled exclusively by arbitration in
the City of Raleigh, North Carolina pursuant to the expedited procedures of the
Commercial Arbitration Rules of the American Arbitration Association (other
than notice requirements which shall be as provided in Section 6.8 below and
the expedited procedures for selection of arbitrators which shall be as
provided in Sections 14 and 15 of such Rules) . There shall be three
arbitrators, one selected by each of C3 and Cree and a third selected by the
arbitrators selected by the parties. The arbitrators shall in no event make any
damage award that contravenes Section 4.9 of this Agreement, but shall order
the losing party to pay all of the charges of the American Arbitration
Association for such arbitration and all of the prevailing party's costs of the
arbitration, including reasonable attorneys' fees. In the event of a breach of
this Agreement by a party, the arbitrators may award equitable relief against
such party to the extent the nonbreaching party is entitled to such relief
under applicable law. The decision in such arbitration shall be final and
binding and judgment on any award rendered therein may be entered in any court
having jurisdiction.
6.8 All notices under this Agreement shall be in writing and
addressed to the other party at the address shown below or to such other
address as the party may hereafter designate by notice under this Agreement.
All notices so addressed shall be deemed given five (5) days after mailing if
sent by certified mail, return receipt requested, postage prepaid, or when sent
via facsimile if receipt is acknowledged in writing or otherwise when actually
received.
IN WITNESS WHEREOF, the parties have executed this Agreement by and
through their duly authorized representatives.
CREE RESEARCH, INC. C3, INC.
By: /s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxxxx
----------------------------------- --------------------------------
Xxxxxxx X. Xxxxxxx, Vice President Xxxx X. Xxxxxx, President
and Chief Operating Officer
Address for Notices: Address for Notices:
Cree Research, Inc. C3, Inc.
0000 Xxxxxxxx Xxxxxxx, Xxxxx 000 P.O. Box 13533
Xxxxxx, Xxxxx Xxxxxxxx 00000 Research Xxxxxxxx Xxxx, XX 00000-0000
Attention: President Attention: President
Fax No. (000) 000-0000 Fax No.: (000) 000-0000
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