Exhibit 10.2


 


	 	Line of Credit Note




 


 $5,000,000.00




Date: July 7,
2021


 


Promise to Pay.
On or before July 31, 2022, for value received, Charles & Colvard, Ltd (the "Borrower") promises to pay to JPMorgan Chase
Bank, N.A., whose address is 2000 Regency Pkwy, Floor 04, Cary, NC 27518-8506 (the "Bank") or order, in lawful money of the
United States of America, the sum of Five Million and 00/100 Dollars ($5,000,000.00) or so much thereof as may be advanced and outstanding,
plus interest on the unpaid principal balance computed on the basis of the actual number of days elapsed in a year of 360 days at the
 "Adjusted LIBOR Rate" (the "Note Rate") and at the rate of 3.00% Per Annum above the Note Rate, at the Bank's option,
upon the occurrence of any default under this Note, whether or not the Bank elects to accelerate the maturity of this Note, from the date
such increased rate is imposed by the Bank.


 


Definitions.
As used in this Note, the following terms have the following respective meanings:


 


"Adjusted
LIBOR Rate" means, with respect to the relevant Interest Period, the sum of (i) the Applicable Margin plus (ii) (a) the LIBOR
Rate applicable to such Interest Period multiplied by (b) the Statutory Reserve Rate.


 


"Applicable
Margin" means 1.25% Per Annum.


 


"Benchmark
Transition Event" means the occurrence of one or more of the following events with respect to LIBOR:


 


		(i)	a public statement or publication of information by or on behalf of the administrator
of LIBOR announcing that such administrator has ceased or will cease to provide LIBOR, permanently or indefinitely, provided that, at
the time of such statement or publication, there is no successor administrator that will continue to provide LIBOR; or



 


		(ii)	a public statement or publication of information by the regulatory supervisor for
the administrator of LIBOR, the U.S. Federal Reserve System, an insolvency official with jurisdiction over the administrator for LIBOR,
a resolution authority with jurisdiction over the administrator for LIBOR or a court or an entity with similar insolvency or resolution
authority over the administrator for LIBOR, which states that the administrator of LIBOR has ceased or will cease to provide LIBOR permanently
or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to
provide LIBOR; or



 


		(iii)	a public statement or publication of information by the regulatory supervisor for
the administrator of LIBOR announcing that LIBOR is no longer representative.



 


"Business
Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required
by law to remain closed; provided that the term "Business Day" shall also exclude any day on which banks are not open for general
business in London.


 


"Federal
Reserve Board" means the Board of Governors of the Federal Reserve System of the United States of America.


 


"Interest
Period" means each consecutive one month period, the first of which shall commence on the date of this Note, ending on the day
which corresponds numerically to such date one (1) month thereafter, provided, however, that if there is no such numerically corresponding
day in such first succeeding month, such Interest Period shall end on the last Business Day of such first succeeding month. If an Interest
Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided,
however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding
Business Day.


 


"LIBOR
Rate" means with respect to any LIBOR advance for any Interest Period, the London interbank offered rate
("LIBOR") as administered by ICE Benchmark Administration (or any other person that takes over the administration
of such rate for Dollars, the "IBA") for a period equal in length to such Interest Period as displayed on pages
LIBOR01 or LIBOR02 of the Reuters screen that displays such rate (or, in the event such rate does not appear on a Reuters page or
screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other
information service that publishes such rate from time to time as shall be selected by the Bank in its reasonable discretion; in
each case, the "LIBOR Screen Rate") at approximately 11:00 a.m., London time, two (2) Business Days prior to the
commencement of such Interest Period; provided that, if any LIBOR Screen Rate shall be less than zero, such rate shall be
deemed to be zero for the purposes of this Note. If no LIBOR Screen Rate is available to the Bank, the applicable LIBOR Rate for the
relevant Interest Period shall instead be the rate determined by the Bank to be the rate at which the Bank offers to place U.S.
dollar deposits having a maturity equal to such Interest Period with first-class banks in the London interbank market at
approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period.


 






     


     


    

 


LIBOR is intended
to represent the rate at which contributing banks may obtain short-term borrowings from each other in the London interbank market. In
July 2017, the U.K. Financial Conduct Authority announced that, after the end of 2021, it would no longer persuade or compel contributing
banks to make rate submissions to the IBA for purposes of the IBA setting LIBOR. As a result, it is possible that commencing in 2022,
LIBOR may no longer be available or deemed an appropriate reference rate upon which to determine the interest rate on LIBOR Rate advances.
In light of this eventuality, public and private sector industry initiatives are currently underway to identify new or alternative reference
rates to be used in place of LIBOR. In the event that a Benchmark Transition Event occurs, the "Alternate Rate of Interest"
provision below provides a mechanism for determining an alternative rate of interest. The Bank will notify the Borrower in advance of
any change to the reference rate upon which the interest rate on LIBOR Rate advances is based. However, the Bank does not warrant or accept
any responsibility for, and shall not have any liability with respect to, the administration, submission or any other matter related to
LIBOR or other rates in the definition of "LIBOR Rate" or with respect to any alternative, successor rate thereto, or replacement
rate thereof, including without limitation, whether the composition or characteristics of any such alternative, successor or replacement
reference rate will be similar to, or produce the same value or economic equivalence of, the LIBOR Rate or have the same volume or liquidity
as did LIBOR prior to its discontinuance or unavailability.


 


"Per Annum"
means for a year deemed to be comprised of 360 days.


 


"Prime
Rate" means the rate of interest last quoted by The Wall Street Journal as the "Prime Rate" in the U.S. or, if
The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in
Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the "bank prime loan" rate or, if such rate is
no longer quoted therein, any similar rate quoted therein (as determined by the Bank) or any similar release by the Federal Reserve
Board (as determined by the Bank). Each change in the Prime Rate shall be effective from and including the date such change is
publicly announced or quoted as being effective.


 


"Statutory
Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentage (including any marginal, special, emergency or supplemental reserves)
established by the Federal Reserve Board to which the Bank is subject with respect to the Adjusted LIBOR Rate, for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of the Federal Reserve Board). Such reserve percentages
shall include those imposed pursuant to such Regulation D of the Federal Reserve Board. LIBOR Rate advances shall be deemed to constitute
eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets
that may be available from time to time to the Bank under such Regulation D of the Federal Reserve Board or any comparable regulation.
The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.


 


Illegality/Temporary
Unavailability. If:


 


		(i)	any applicable domestic or foreign law, treaty, rule or regulation now or later
in effect (whether or not it now applies to the Bank) or the interpretation or administration thereof by a governmental authority charged
with such interpretation or administration, or compliance by the Bank with any guideline, request or directive of such an authority (whether
or not having the force of law), shall make it unlawful or impossible for the Bank to maintain or fund the advances evidenced by this
Note, or



 


		(ii)	the Bank determines that quotations of interest rates for the relevant deposits
referred to in the definition of Adjusted LIBOR Rate are not
being provided for purposes of determining the interest rate on the advances evidenced by this Note, or



  


		(iii)	the Bank determines that the relevant interest rates referred to in the definition
of Adjusted LIBOR Rate do not accurately cover the cost to the Bank of making funding or maintaining the advances evidenced by this Note,



 


then, upon notice
of such circumstances from the Bank to the Borrower: (a) the obligation of the Bank to make advances shall be suspended until the Bank
notifies the Borrower that the circumstances giving rise to the suspension no longer exists, and (b) subject to the terms and conditions
of this Note and the other Related Documents, the entire outstanding balance of any advance shall be replaced with an advance bearing
interest at the greater of (x) Prime Rate and (y) 2.50% (the "Interim Rate"), and the Borrower may request advances upon
this Note bearing interest at the Interim Rate.


 






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Alternate Rate
of Interest. If a Benchmark Transition Event occurs, Bank may, by notice to Borrower, select an alternate rate of interest for LIBOR
that gives due consideration to the then-evolving or prevailing market convention for determining a rate of interest for loans in US Dollars
at such time (the "Alternate Rate"); Borrower acknowledges that the Alternate Rate may include a mathematical adjustment
using any then-evolving or prevailing market convention or method for determining a spread adjustment for the replacement of LIBOR. For
avoidance of doubt, all references to LIBOR shall be deemed to be references to the Alternate Rate when the Alternate Rate becomes effective
in accordance with this section. In addition, the Bank will have the right, from time to time by notice to Borrower to make technical,
administrative or operational changes (including, without limitation, changes to the definition of "Interest Period", timing
and frequency of determining rates and making payments of interest and other administrative matters) that the Bank decides in its reasonable
discretion may be appropriate to reflect the adoption and implementation of the Alternate Rate. The Alternate Rate, together with all
such technical, administrative and operational changes as specified in any notice, shall become effective at the later of (i) the fifth
Business Day after the Bank has provided notice (including without limitation for this purpose, by electronic means) to the Borrower (the
 "Notice Date") and (ii) a date specified by the Bank in the notice, without any further action or consent of the Borrower,
so long as Bank has not received, by 5:00 pm Eastern time on the Notice Date, written notice of objection to the Alternate Rate from the
Borrower. Any determination, decision, or election that may be made by the Bank pursuant to this section, including any determination
with respect to a rate or adjustment or the occurrence or non-occurrence of an event, circumstance or date, and any decision to take or
refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its sole discretion and without
consent from the Borrower. Until an Alternate Rate shall be determined in accordance with this section, the interest rate shall be the
Interim Rate. In no event shall the Alternate Rate be less than zero.


 


Interest/Usury.
In no event shall the interest rate exceed the maximum rate allowed by law. Any interest payment that would for any reason be unlawful
under applicable law shall be applied to principal.


 


Interest will be
computed on the unpaid principal balance from the date of each borrowing.


 


Interest Payments.
Until maturity, the Borrower will pay consecutive monthly installments of interest only commencing July 31, 2021.


 


The Borrower shall
make all payments on this Note and the other Related Documents, without setoff, deduction, or counterclaim, to the Bank at the Bank's
address above or at such other place as the Bank may designate in writing. If any payment of principal or interest on this Note shall
become due on a day that is not a Business Day, the payment will be made on the next succeeding Business Day. Payments shall be allocated
among principal, interest and fees at the discretion of the Bank unless otherwise agreed or required by applicable law. Acceptance by
the Bank of any payment that is less than the payment due at that time shall not constitute a waiver of the Bank's right to receive payment
in full at that time or any other time.


 


Authorization
for Direct Payments (ACH Debits). To effectuate any payment due under this Note or under any other Related Documents, the Borrower
hereby authorizes the Bank to initiate debit entries to Account Number ______________________________ at the Bank and to debit the same
to such account. This authorization to initiate debit entries shall remain in full force and effect until the Bank has received written
notification of its termination in such time and in such manner as to afford the Bank a reasonable opportunity to act on it. The Borrower
represents that the Borrower is and will be the owner of all funds in such account. The Borrower acknowledges: (1) that such debit entries
may cause an overdraft of such account which may result in the Bank's refusal to honor items drawn on such account until adequate deposits
are made to such account; (2) that the Bank is under no duty or obligation to initiate any debit entry for any purpose; and (3) that if
a debit is not made because the abovereferenced account does not have a sufficient available balance, or otherwise, the payment may be
late or past due.


 


Late Fee.
Any principal or interest which is not paid within 10 days after its due date (whether as stated, by acceleration or otherwise) shall
be subject to a late payment charge of five percent (5.00%) of the total payment due, in addition to the payment of interest, up to the
maximum amount of One Thousand Five Hundred and 00/100 Dollars ($1,500.00) per late charge. The Borrower agrees to pay and stipulates
that five percent (5.00%) of the total payment due is a reasonable amount for a late payment charge. The Borrower shall pay the late payment
charge upon demand by the Bank or, if billed, within the time specified.


 


Purpose of Loan.
The Borrower acknowledges and agrees that this Note evidences a loan for a business, commercial, agricultural or similar commercial enterprise
purpose, and that no advance shall be used for any personal, family or household purpose. The proceeds of the loan shall be used only
for the Borrower's general corporate purposes.


 


Credit Facility.
The Bank has approved a credit facility to the Borrower in a principal amount not to exceed the face amount of this Note. The credit facility
is in the form of advances made from time to time by the Bank to the Borrower. This Note evidences the Borrower's obligation to repay
those advances. The aggregate principal amount of debt evidenced by this Note is the amount reflected from time to time in the records
of the Bank. Until the earliest to occur of maturity, any default, event of default, or any event that would constitute a default or event
of default but for the giving of notice, the lapse of time or both, the Borrower may borrow, pay down and reborrow under this Note subject
to the terms of the Related Documents.


 






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Miscellaneous.
This Note binds the Borrower and its successors, and benefits the Bank, its successors and assigns. Any reference to the Bank includes
any holder of this Note. This Note is subject to that certain Credit Agreement by and between the Borrower and the Bank, dated April 5,
2021, and all amendments, restatements and replacements thereof (the "Credit Agreement") to which reference is hereby made for
a more complete statement of the terms and conditions under which the loan evidenced hereby is made and is to be repaid. The terms and
provisions of the Credit Agreement are hereby incorporated and made a part hereof by this reference thereto with the same force and effect
as if set forth at length herein. No reference to the Credit Agreement and no provisions of this Note or the Credit Agreement shall alter
or impair the absolute and unconditional obligation of the Borrower to pay the principal and interest on this Note as herein prescribed.
Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. If any one or more
of the obligations of the Borrower under this Note or any provision hereof is held to be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining obligations of the Borrower and the remaining provisions shall not in any way
be affected or impaired; and the invalidity, illegality or unenforceability in one jurisdiction shall not affect the validity, legality
or enforceability of such obligations or provisions in any other jurisdiction.


Time is of the
essence under this Note and in the performance of every term, covenant and obligation contained herein.


 





	 	 	Borrower:
	Address:	170 Southport Dr 	Charles & Colvard, Ltd
	 	Morriesville, NC 27560	 
	 		By:	 /s/ Don O’Connell
	 	 	 	 
	 	 	 	Don O’Connell
	President & CEO
	 	 	 	Printed Name	Title






	 	 	 	 	 
	 	 	 	Date Signed:	 7/12/2021



 






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