Exhibit 10.58

 

AMENDMENT TO SEVERANCE AND CONSULTING AGREEMENT

 

This AMENDMENT TO SEVERANCE AND CONSULTING AGREEMENT (the “Amendment”) is made
effective as of the 31st day of May, 2003 by and between Charles & Colvard, Ltd.
(the “Company”) and Jeff N. Hunter (the “Consultant”).

 

RECITALS:

 

The Company and the Consultant entered into a Severance and Consulting Agreement
effective as of the 15th day of May, 2000 (the “Agreement”) which shall
terminate pursuant to its terms as of the close of business on May 31, 2003. The
Company desires to continue retain the services of the Consultant and the
Consultant desires to continue to provide services pursuant to the terms of such
Agreement to the Company.

 

In consideration for the mutual agreements set forth herein and other valuable
consideration, the receipt of which the parties hereto acknowledge, the parties
agrees as follows:

 

1. Extension of Term. The Term of the Agreement shall be extended from the close
of business May 31, 2003 through and including the close of business on December
31, 2004 (which for all purposes shall be referenced as the “Term”). Prior to
the termination of the Term, the parties agree to negotiate for an additional
extension of the Agreement. In all other respects the Company and the Consultant
reaffirm the existence and validity of the Agreement, subject to this Amendment.

 

2. Cancellation of Certain Options: The Consultant hereby surrenders, cancels
and terminates the option to purchase 70,000 shares at $15.00 per share which
was granted pursuant to the Option Agreement between the Company and the
Consultant dated November 19, 1997, and all rights related to such grant. The
Consultant represents and warrants that he has full power and authority to
surrender for cancellation said grant of options and that said options are free
and clear of all security interests, liens, restrictions, charges, encumbrances,
conditional sales agreements or other obligations relating to the sale or
transfer thereof.

 

3. Continuation of Non-Disclosure and Non-Competition Agreement. The Company and
the Consultant reaffirm the existence and validity of the Non-Disclosure and
Non-Competition Agreement dated as of June 22, 2000 entered into pursuant to the
Agreement and the continuing agreement of the parties to be bound thereto
pursuant to its terms.

 

IN WITNESS WHEREOF, the parties hereto acknowledge their agreement to be bound
by the terms of this Amendment as of the date and year first above written.

 

COMPANY:

CHARLES & COLVARD, LTD.

By:

 

/s/ Robert S. Thomas

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Robert S. Thomas, President

CONSULTANT:

/s/ Jeff N. Hunter

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Jeff N. Hunter

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SEVERANCE AND CONSULTING AGREEMENT

 

THIS SEVERANCE AND CONSULTING AGREEMENT (the “Agreement”), made effective as of
the 15th day of May, 2000, by and between Charles & Colvard, Ltd. (the
“Company”), and Jeff N. Hunter (the “Consultant”).

 

RECITALS:

 

The Company is engaged in the business of designing, developing, manufacturing
and selling lab-created moissanite jewels (the “Business”). The Consultant
served as Chairman and Chief Executive Officer for the Company pursuant to an
Employment Agreement dated June 1, 1997, as amended (the “Employment
Agreement”). Consultant has resigned from such position effective May 15, 2000.
The Company and the Consultant desire to settle certain outstanding issues
between the parties related to the resignation of his employment. Additionally,
the Company wishes the Consultant to assist the Company by providing consulting
services for the Business related to the Consultant’s extensive knowledge of the
history and development of moissanite and the development of Charles & Colvard
created moissanite jewels and to manufacturing, marketing and sales for
moissanite jewels, and the Consultant desires to provide such services to the
Company on the terms and for the compensation set forth herein.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

  1.   SEVERANCE. The Company will provide Consultant with the following
severance compensation and benefits:

 

  a.   Salary. The Company agrees to pay Consultant’s current salary through May
31, 2001. Payments will be made on the Company’s regular payday and will be
subject to normal withholding for taxes.

 

  b.   Health Benefits. The Company will continue to provide health insurance
coverage to Consultant and his family until May 31, 2001 on the same terms as
were in effect prior to Consultant’s resignation from employment with the
Company or the same terms as may come into effect for other employees of Company
in the event that Company changes or modifies its plan. Consultant’s COBRA
rights to continuation of health insurance coverage shall commence effective
June 1, 2001.

 

  c.   Immediate Vesting of Existing Options. The Consultant has been previously
granted options to purchase an aggregate of 259,240 shares of the Company’s
Common Stock pursuant to the 1996 Stock Option Plan of C3, Inc. and the 1997
Omnibus Stock Plan of C3, Inc. Of such options, the Company acknowledges that
229,240 have fully vested prior to the date of this Agreement and the remaining
30,000 have future vesting dates and shall continue to be governed by the terms
of the applicable stock option agreement and plan.

 

  d.   Computer Equipment. Consultant will be entitled to ownership of the
computer equipment assigned to him by the Company as of May 14, 2000.

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  e.   Administrative Support. The Company agrees to provide Consultant with
reasonable administrative support services for 90 days following the execution
of this Agreement.

 

  2.   NONDISPARAGEMENT. The Company and Consultant agree not to disparage or
comment negatively about each other and further agree not to make any statements
that would reflect unfavorably or negatively on each other.

 

  3.   CONSULTING ENGAGEMENT. The Company hereby engages the Consultant as a
nonexclusive consultant to perform the Services (as defined below) subject to
the terms and conditions of this Agreement, and the Consultant hereby accepts
such engagement for and in consideration of the compensation hereinafter
provided in paragraph 9 and agrees to use his best efforts performing the
Services. The Consultant shall perform his obligations hereunder in compliance
with the terms of this Agreement and any and all applicable laws and
regulations. The Consultant acknowledges that this is a nonexclusive engagement
by the Company and that the Company retains the right to appoint additional
consultants as the Company, as in its sole and unrestricted judgment it may from
time to time determine to be in the best interests of the Company, without
liability or obligation to the Consultant.

 

  4.   SERVICES.

 

  a.   The Consultant agrees that, at the request of the Company, the Consultant
shall (i) provide consulting services related to the development of
manufacturing processes, marketing and sales related to the Consultant’s
extensive knowledge of the history and development of moissanite and the
development of Charles & Colvard created moissanite jewels and moissanite
gemstones for the Company and (ii) perform other duties related thereto as the
Company may determine from time to time (the “Services”). The Consultant
warrants to the Company that the Services will be performed in a professional,
timely and workmanlike manner.

 

  b.   The Consultant shall execute a Nondisclosure and Noncompetition Agreement
in substantially the form attached hereto as Exhibit A concurrent with the
execution of this Agreement (the “Nondisclosure and Noncompetition Agreement”).

 

  5.   LICENSES; TOOLS AND MATERIALS. The Consultant shall be responsible for
obtaining, at the Consultant’s own expense, all licenses, permits and bonds as
may be required by any federal, state or local law or regulation for the
performance of the Consultant’s duties hereunder. The Company shall be
responsible for supplying at its cost all necessary tools and materials to be
used by the Consultant.

 

  6.   LIMITATIONS. Nothing in this Agreement shall be construed to give the
Consultant authority to represent the Company before any court or governmental
or regulatory agency without the express prior written authorization of the
Company. In addition, all files, books, accounts, records and other information
of any nature, however recorded or stored, and related to the Company (the

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“Records”) shall at all times belong to the Company and to the extent possessed
by the Consultant hereunder, such possession shall be for the benefit of and as
agent for the Company. The Consultant’s possession of the Records is at the will
of the Company and is solely for the purpose of enabling the Consultant to
perform his obligations hereunder. The Records shall be readily separable from
the records of the Consultant.

 

  7.   TERM. The term of this Agreement shall commence on May 31, 2000 and shall
continue thereafter through and including the close of business on May 31, 2003
(the “Term”). Notwithstanding the foregoing, the Company may terminate this
Agreement for “cause,” as defined herein, by giving written notice at least 30
days in advance of its desire to terminate this Agreement for cause. The Company
shall be deemed to have cause for terminating the Consultant’s engagement in the
event the Consultant (i) demonstrates any dishonesty or engages in any act of
moral turpitude, (ii) improperly performs or fails to perform the Services
described herein, (iii) causes intentional damage to substantial property of the
Company, or (iv) is unable to perform the Services because of death or a
disability which renders him unable to perform the Services for 30 consecutive
calendar days.

 

  8.   MUTUAL RELEASE.

 

  a.   Release by Consultant. The Consultant (and any of his respective heirs,
agents or assigns) does hereby remise, release and forever discharge the Company
and its officers, directors, shareholders, predecessors, successors, agents,
counsel, trusts and assigns from any and all rights, actions, suits, debts, sums
of money, accounts, causes of action, claims (however and whenever arising and
whether in law or equity, and whether arising under statutory or common law of
the United States or any state thereof), demands or damages of any kind (whether
actual, punitive, compensatory, double, treble or nominal and whether known or
unknown) arising prior to the date of this Agreement and related in any way to
Consultant’s previous relationship with the Company, all to the end that any and
all matters and things which are or might have been claimed now or in the future
by the Consultant against the Company pursuant to any previous events that may
have occurred or may occur in connection with the subject matter of their
previous relationship or any prior contracts or agreements of any kind
whatsoever between the Consultant and the Company are forever barred and put to
rest. In addition and not in limitation of the foregoing, the Consultant does
hereby release and extinguish any and all claims the parties hereto may have
against the Company of any kind whatsoever prior to the execution of this
Agreement.

 

         The Consultant acknowledges that he has carefully read and reviewed
this Agreement (including this paragraph 8 entitled “Mutual Release”) and has
hereby been advised in writing to seek, and he has sought and received, the
advice of his attorney, Larry Robbins, or other counsel, and he has had a period
of 21 days within which to consult with and receive counsel from

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his attorney concerning the terms of this Agreement. The Consultant and the
Company understand and are satisfied with the terms and contents of this
Agreement and each has signed his or its name to the same as a free act and
deed, and each agrees that it shall be binding upon them and their agents,
attorneys, personal representatives, heirs and assigns. The Consultant has seven
(7) days following the date that he executes this Agreement (the “Revocation
Period”) to revoke it by notifying the Company in writing of his decision to
revoke. Payments will begin to be made to Consultant pursuant to this Agreement
within five (5) business days after the expiration of the Revocation Period.

 

  b.   Release by Company. The Company does hereby remise, release and forever
discharge the Consultant from any and all rights, actions, suits, debts, sums of
money, accounts, causes of action, claims (however and whenever arising and
whether in law or in equity, and whether arising under statutory or common law
of the United States or any state thereof), demands or damages or any kind
(whether actual, punitive, compensatory, double, treble or nominal, and whether
known or unknown) arising prior to the date of this Agreement and related in any
way to Consultant’s previous relationship with the Company, all to the end that
any and all matters and things which are or might have been claimed now or in
the future by the Company against the Consultant pursuant to any previous events
that may have occurred or may occur in connection with the subject matter of
their previous relationship or any prior contracts or agreements of any kind
whatsoever between the Consultant and the Company are forever barred and put to
rest. In addition and not in limitation of the foregoing, the Company does
hereby release and extinguish any and all claims the parties hereto may have
against the Consultant of any kind whatsoever prior to the execution of this
Agreement.

 

  9.   FEES. As compensation for the performance of the Services, concurrently
with the execution of this Agreement, the Company and the Consultant shall
execute the Nonqualified Stock Option Agreement dated May 15, 2000, attached
hereto as Exhibit B, which grants to Consultant the option to purchase 40,000
shares of common stock upon the terms and conditions set forth therein and in
the Company’s 1997 Omnibus Stock Plan. No amounts (including, without
limitation, social security, federal and state withholding taxes) shall be
withheld or otherwise subtracted from the compensation paid to the Consultant
pursuant to this Section 9 unless required by law. In addition, the Consultant
shall be reimbursed for all expenses incurred by the Consultant on behalf (and
with the prior written authorization) of the Company within 15 days from the
date the Consultant delivers an itemized report of such expenses, together with
receipts or other evidence of payment reasonably satisfactory to the Company and
its accountant.

 

  10.   INDEMNIFICATION. The Consultant shall defend, release, indemnify and
hold the Company and its directors, officers, shareholders, employees and agents
and the personal representatives and assigns of each, harmless from and against
any and all claims, suits, liability, costs and expenses, including, without
limitation,

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attorneys’ fees and expenses, in connection with any act or omission of the
Consultant, his employees and/or agents which arise from the provision of the
Services.

 

  11.   INSURANCE REPRESENTATIONS; WORKPLACE SAFETY. Consultant shall be solely
responsible for workplace safety, shall maintain the workplace in accordance
with industry standards and shall comply with all governmental (including
federal, state and local) regulations. If Consultant hires employees, then
Consultant agrees to maintain worker’s compensation insurance in such amount and
with such carrier as the Company may reasonably request.

 

  12.   NOTICES. All notices, demands, requests or other communications which
may be or are required to be given, served or sent by one party to the other
party pursuant to this Agreement shall be in writing and shall be hand delivered
or mailed by certified mail return receipt requested, postage prepaid, or sent
by telefax, addressed as follows:

 

If to the Company:

 

P.O. Box 13533

Research Triangle Park, NC 27709

Attention: Mark W. Hahn, Chief Financial Officer

Telecopy: (919) 468-5052

 

With a copy to:

 

Cyrus M. Johnson, Esq.

3300 One First Union Center

301 South College Street

Charlotte, NC 28202-6025

Telecopy: (704) 338-7809

 

If to the Consultant:

 

Jeff N. Hunter

1923 Myron Drive

Raleigh, NC 27607

Telecopy: (919) 510-5095

 

With a copy to:

 

Larry Robbins, Esq.

Wyrick Robbins Yates & Ponton LLP

4101 Lake Boone Trail, Suite 300

Raleigh, NC 27607

Telecopy: (919) 781-4865

 

Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be delivered, given or sent.
Documents delivered by hand shall be deemed to have been received upon delivery;
documents sent by telefax shall be deemed to have been received when the answer
back is received; and documents sent by mail shall be deemed to have

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been received upon their receipt or at such time as delivery is refused by the
addressee upon presentation.

 

  13.   SECURITY. The Consultant agrees that he will at all times comply with
all security regulations in effect from time to time at the Company’s premises
or applicable outside such premises to materials belonging to the Company. The
Consultant agrees not to use or disclose to any party any information, systems,
equipment, ideas, processor or methods of operation observed in connection with
the performance of his obligations hereunder, except as may be required by law.

 

  14.   INDEPENDENT CONTRACTOR.

 

  a.   Acknowledgment by the Consultant. The Consultant acknowledges and agrees
that the Consultant will be treated, vis-a-vis the Company, as an independent
contractor and not as an employee, agent or authorized representative of the
Company. The Consultant shall have no authority to bind the Company to any
contract, agreement or obligation whatsoever. The acts of the Consultant shall
in no way constitute the acts of the Company, and the Consultant shall not
represent to any third party that the Consultant has any express or implied
authority to bind the Company to any such contract, agreement or obligation.

 

  b.   Tax Matters. Because the Consultant is an independent contractor, the
Company will not withhold from any compensation paid to the Consultant any
amounts for federal or state income taxes, or social security (FICA) for the
Consultant, nor will the Company pay any social security or unemployment tax
with respect to the Consultant. Such taxes are the responsibility of the
Consultant. The Consultant agrees to indemnify and hold the Company (including
its employees, officers, directors, agents, subsidiaries or affiliates)
harmless, and hereby indemnifies and hold the Company harmless, from and against
any damage, claim, assessment, interest charge or penalty incurred by or charged
to the Company as a result of any claim, cause of action or assessment by any
federal or state government or agency for any nonpayment or late payment by the
Consultant of any tax or contribution based upon compensation paid hereunder or
because the Company did not withhold any taxes from compensation paid hereunder.

 

  c.   No insurance. Consistent with the Consultant’s status as an independent
contractor, the Company will not provide the Consultant with any company,
individual or group insurance policy or any other kind of insurance coverage
whatsoever in exchange for the Services.

 

  15.   ASSIGNMENT AND SUCCESSORS. Neither this Agreement or any interest herein
or any rights hereunder shall be sold or assigned by the Consultant, nor shall
any of the duties of the Consultant hereunder be delegated to any person, firm
or corporation, without prior notice to and consent of the Company. Subject to
the preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties.

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  16.   INTELLECTUAL PROPERTY. Consultant acknowledges the importance to the
Company of its intellectual property. Consultant agrees to cooperate with the
Company in any adversary proceeding challenging the scope or validity of the
Company’s intellectual property position. Consultant also acknowledges that
copyrightable works prepared by him within the scope of this Agreement are
“works for hire” under the Copyright Act and that the Company will be considered
the author of these works. Consultant agrees that all work product that (a) are
developed within the scope of this Agreement using equipment, supplies,
facilities or trade secrets of the Company, (b) result from work performed by
the Consultant for the Company within the scope of this Agreement, or (c) are
developed within the scope of this Agreement and relate to the Company’s
business or current or anticipated research and development, will be the sole
and exclusive property of the Company and are assigned by Consultant to the
Company by this Agreement.

 

The Company agrees that, in connection with any retail sales of Charles &
Colvard created moissanite jewels that Consultant may sell directly to consumers
after the execution of this Agreement and pursuant to the exclusion of the
noncompetition provisions of the Nondisclosure and Noncompetition Agreement,
Consultant may develop proprietary information including but not limited to
trademarks, trade secrets, and copyrighted materials, and that such proprietary
information shall be owned exclusively by Consultant; provided, however, that
for such proprietary information developed during the Term of this Agreement,
Company shall be granted a perpetual nonexclusive license to use and sublicense
any such proprietary information in consideration of the compensation paid to
Consultant pursuant to this Agreement.

 

  17.   STANDARD OF CARE. The Consultant warrants that he will exercise due
diligence to performance Services in a professional manner in compliance with
all applicable laws and regulations and the highest ethical standards. In
addition, the Consultant represents and warrants that any information which he
may supply the Company during the term of this Agreement (i) will have been
obtained by the Consultant lawfully and from publicly available sources and (ii)
will not be confidential or proprietary to any third person. Nothing in this
Agreement shall be construed as authorizing or encouraging the Consultant to
obtain information for the Company in violation of any third party’s rights to
copyright or trade secret protection.

 

  18.   MISCELLANEOUS.

 

  a.   The provisions of this Agreement may be waived, altered, amended or
repealed, in whole or in part, only on the written consent of the Company and
the Consultant.

 

  b.   Section headings and numbers used in this Agreement are included for
convenience of reference only, and, if there is any conflict between any such
numbers and headings and the text of this Agreement, the text shall control.
Each of the statements set forth in the premises of this Agreement is
incorporated into the Agreement as a valid and binding representation of the
party or parties to whom it relates.

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  c.   This Agreement shall be governed by and construed in accordance with the
laws of the State of North Carolina without reference to the choice of law
principles thereof. If any dispute arises hereunder, the parties hereto agree
that any suit brought by either party shall be heard in the courts of North
Carolina or any federal court sitting in North Carolina, and the parties hereto
consent to the jurisdiction of such courts.

 

  d.   This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

 

  e.   This Agreement, together with the Stock Option Agreement and the
Nondisclosure and Noncompetition Agreement herein referenced represent the
entire agreement of the parties with respect to the subject matter hereof and
supersede in their entirety any and all prior written or oral agreements with
respect thereto including but not limited to the Employment Agreement and the
Summary of Material Terms dated May 15, 2000.

 

  f.   Neither party shall have the right under this Agreement to use the name,
trademark or trade names of the other, unless prior written approval has been
obtained. Any such approval or authorization shall cease upon termination of
this Agreement.

 

IN WITNESS WHEREOF, the duly authorized representations of the parties have
executed this Severance and Consulting Agreement as of the date and year first
above written.

 

COMPANY

Charles & Colvard, Ltd.

By:

 

/s/ Mark W. Hahn

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Mark W. Hahn, Chief Financial Officer

CONSULTANT

/s/ Jeff N. Hunter

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Jeff N. Hunter