Exhibit 10.2


 


INTERCREDITOR AGREEMENT


 


THIS INTERCREDITOR
AGREEMENT, dated as of December 12, 2014 (as amended, supplemented or otherwise modified from time to time, this “Agreement”),
is by and among CHARLES & COLVARD, LTD. (“C&C”), CHARLES & COLVARD DIRECT, LLC (“C&C
Direct”), MOISSANITE.COM, LLC (“Moissanite”; C&C, C&C Direct and Moissanite are sometimes
referred to herein individually as an “Obligor” and collectively as “Obligors”), CREE,
INC. (“Cree”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Wells Fargo”).


 


WITNESSETH:


 


WHEREAS, Cree sells
certain silicon carbide raw materials to C&C from time to time and provides trade credit to C&C in connection with such
sales; and


 


WHEREAS, C&C has
granted to Cree a security interest in the Collateral (as defined below) in order to secure the unpaid purchase price owing by
C&C to Cree for such raw materials; and


 


WHEREAS, Obligors and
Wells Fargo are parties to that certain Credit and Security Agreement dated as of June 25, 2014 (as amended, supplemented, modified
or restated from time to time, the “Wells Fargo Credit Agreement”), pursuant to which Wells Fargo has provided
and may continue to provide financing to Obligors; and


 


WHEREAS, the obligations
of Obligors to Wells Fargo under the Wells Fargo Credit Agreement are secured by the Collateral; and


 


WHEREAS, Cree has requested
that Wells Fargo subordinate its security interest in the Cree Priority Collateral (as defined below) to the security interest
of Cree therein; and


 


WHEREAS, Wells Fargo
is willing to do so on the terms and conditions set forth herein; and


 


WHEREAS, in order to
induce Wells Fargo to continue to provide financing to Obligors, Cree has agreed to subordinate its security interest in the Wells
Fargo Priority Collateral (as defined below) to the security interest of Wells Fargo therein.


 


NOW, THEREFORE, in
consideration of the premises, the parties hereto hereby agree as follows:


 


ARTICLE 1


DEFINITIONS


 


Section 1.1         For purposes of this
Agreement, (a) capitalized terms used herein without definition shall have the meanings ascribed to such terms in the UCC, and
(b) in addition to the terms defined elsewhere in this Agreement, the following terms shall have the following meanings:


 




    	 



    	 



    

 


“Bankruptcy
Code” means Title 11 of the United States Code (11 U.S.C. § 101 et seq.).


 


“Bankruptcy
Event” means, with respect to any Obligor, any voluntary or involuntary dissolution, winding-up, total or partial liquidation
or reorganization, or bankruptcy, insolvency, receivership or other statutory or common law proceedings or arrangements involving
any Obligor or the readjustment of its liabilities or any assignment for the benefit of creditors or any marshalling of its assets
or liabilities.


 


“Collateral”
means any and all of the assets now owned or hereafter acquired by any Obligor, together with all proceeds, products, accessions
and additions with respect to each of the foregoing from time to time, including, without limitation, any insurance proceeds.


 


“Contracts”
means, collectively, all rights of each Obligor under all leases, contracts and agreements to which such Obligor is now or hereafter
a party, together with any and all extensions, modifications, amendments and renewals of such leases, contracts and agreements
and all rights of such Obligor to receive moneys due or to become due thereunder or pursuant thereto and to amend, modify, terminate
or exercise rights under such leases, contracts and agreements.


 


“Creditor”
means each of Wells Fargo and Cree, subject to Section 3.1.


 


“Cree Debt”
means all amounts payable by C&C to Cree relating to the sale of raw materials by Cree to C&C from time to time.


 


“Cree Documents”
means all supply agreements, security agreements, guaranties and other agreements, documents and instruments executed in connection
with any trade credit or other financing provided by Cree to any Obligor.


 


“Cree Priority
Collateral” means (a) all raw materials in boule form purchased by C&C from Cree from time to time, and (b) SiC slabs
created by cutting such raw materials purchased by C&C from Cree. For the avoidance of doubt, all finished goods Inventory
of C&C, all Accounts, money and Deposit Accounts of C&C, all other proceeds of the items described in the foregoing clauses
(a) and (b) (except proceeds arising from Cree’s disposition of Cree Priority Collateral in accordance with this Agreement),
and all assets of each of C&C Direct and Moissanite (except assets specifically described in the preceding sentence that are
held by C&C Direct or Moissanite, and proceeds arising from Cree’s disposition of such assets in accordance with this
Agreement) shall constitute Wells Fargo Priority Collateral.


 


“Cree Repayment”
means the circumstance in which, subject to Section 2.4(g)(ii), the Cree Debt has been repaid in full in cash.


 




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“Lien”
means any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of such property, whether
such interest is based on the common law, statute or contract, and including a security interest, charge, claim or lien arising
from a mortgage, deed of trust, deed to secure debt, encumbrance, pledge, hypothecation, assignment, deposit arrangement, agreement,
security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes.


 


“Obligor”
has the meaning provided in the introductory paragraph of this Agreement and includes all successors in interest of each such Person,
including a trustee or debtor in possession in connection with a Bankruptcy Event.


 


“Permitted
Subordination” means a voluntary subordination by Wells Fargo of its Liens with respect to any or all Collateral, or
by Cree of its Liens with respect to any or all Collateral, in favor of depository banks, securities or commodities intermediaries,
landlords, warehouseman or other bailees, mortgagees, customs brokers, freight forwarders, carriers, factors, Persons that provide
post-petition financing to any Obligor following a Bankruptcy Event, and other Persons who provide goods or services to an Obligor
in the ordinary course of business.


 


“Person”
means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision thereof.


 


“UCC”
means the Uniform Commercial Code as in effect in the State of Georgia.


 


“Wells Fargo
Debt” means all liabilities of any Obligor to Wells Fargo from time to time outstanding (including, without limitation,
all principal, interest, fees, reimbursement obligations with respect to letters of credit, obligations with respect to credit
cards, swaps, hedge agreements, deposit accounts and other bank products, and all indemnities, fees, costs and expenses with respect
to any of the foregoing), whether arising under the Wells Fargo Documents or otherwise, and whether incurred prior to, on or after
the date of any filing by or against any Obligor of any petition or complaint initiating a Bankruptcy Event, regardless of whether
Wells Fargo’s claim therefor is allowed or allowable in any proceeding arising from such Bankruptcy Event, together with
all renewals, refundings, restructurings and other refinancings of all or any portion of the foregoing.


 


“Wells Fargo
Documents” means the Wells Fargo Credit Agreement and any note, guaranty, letter of credit agreement, deposit agreement
or other agreement, document or instrument executed and/or delivered in connection with the Wells Fargo Credit Agreement and/or
any Wells Fargo Debt from time to time.


 


“Wells Fargo
Priority Collateral” means all Collateral other than the Cree Priority Collateral. For the avoidance of doubt, “Wells
Fargo Priority Collateral” shall include, without limitation, all of each Obligor’s Accounts, Chattel Paper, Commercial
Tort Claims, Contracts, Deposit Accounts, Documents, Equipment, General Intangibles, finished goods Inventory, Investment Property,
Instruments, Letter-of-Credit Rights, Payment Intangibles, and Supporting Obligations, in each case wherever located and whether
now owned or existing or hereafter acquired or arising, and all Proceeds of the foregoing.


 




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“Wells Fargo
Repayment” means the circumstance in which (a) subject to Section 2.4(g)(i), the Wells Fargo Debt has been repaid
in full in cash, and (b) the commitment of Wells Fargo to make loans under the Wells Fargo Credit Agreement has been terminated.


 


ARTICLE 2


GENERAL INTERCREDITOR PROVISIONS


 


Section 2.1           Consent
to Liens; Agreement to Subordinate Liens.


 


(a)          Cree
consents to each Obligor’s grant of Liens in the Collateral in favor of Wells Fargo. Cree and Obligors hereby agree that,
to the extent and in the manner set forth in this Section 2.1, all Liens now or hereafter acquired by Wells Fargo in any
or all of the Wells Fargo Priority Collateral shall at all times be prior and superior to any Lien now held or hereafter acquired
by Cree in the Wells Fargo Priority Collateral. Said priority shall be applicable irrespective of the time or order of attachment
or perfection of any Lien or the time or order of filing of any financing statements, mortgages, or other documents, or any statutes,
rules or law, or court decisions to the contrary. In the event that Cree receives any of the Wells Fargo Priority Collateral or
any payment or distribution with respect thereto (other than cash payments made by C&C to Cree outside of a Bankruptcy Event
in satisfaction of amounts due and payable under the Cree Documents) prior to the Wells Fargo Repayment, Cree shall hold such Wells
Fargo Priority Collateral, payment or distribution in trust for the benefit of Wells Fargo and promptly forward the same to Wells
Fargo in the form received, appropriately endorsed if necessary. The Lien subordination provisions in this Agreement are for the
benefit of and shall be enforceable directly by Wells Fargo, and Wells Fargo shall be deemed to have extended the Wells Fargo Debt
in reliance upon this Agreement.


 


(b)         Wells
Fargo consents to each Obligor’s grant of Liens in the Collateral in favor of Cree. Wells Fargo and Obligors hereby agree
that, to the extent and in the manner set forth in this Section 2.1, all Liens now or hereafter acquired by Cree in any
or all of the Cree Priority Collateral shall at all times be prior and superior to any Lien now held or hereafter acquired by Wells
Fargo in the Cree Priority Collateral. Said priority shall be applicable irrespective of the time or order of attachment or perfection
of any Lien or the time or order of filing of any financing statements, mortgages, deeds of trust or other documents, or any statutes,
rules or law, or court decisions to the contrary. In the event that Wells Fargo receives any of the Cree Priority Collateral or
any payment or distribution with respect thereto prior to the Cree Repayment, Wells Fargo shall hold such Cree Priority Collateral,
payment or distribution in trust for the benefit of Cree and promptly forward the same to Cree in the form received, appropriately
endorsed if necessary. The Lien subordination provisions in this Agreement are for the benefit of and shall be enforceable directly
by Cree, and Cree shall be deemed to have extended the Cree Debt in reliance upon this Agreement.


 




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(c)          If
either Wells Fargo or Cree makes a Permitted Subordination in favor of any other Person with respect to any Collateral, the priority
of the Liens of the Creditor making such Permitted Subordination vis-à-vis the Liens therein of the other Creditor shall
not be affected, such that the provisions of Sections 2.1(a) and (b) shall continue to govern the relative priority
of Wells Fargo and Cree in such Collateral.


 


Section 2.2           Disposition
of Collateral and Other Remedial Actions by Wells Fargo.


 


(a)          Cree
hereby agrees that, until the Wells Fargo Repayment, Wells Fargo may dispose of, and exercise any other rights with respect to,
any or all of the Wells Fargo Priority Collateral, free of the Liens of Cree (it being agreed that Cree shall retain the right
to receive any excess proceeds from any such disposition of any Wells Fargo Priority Collateral after the occurrence of the Wells
Fargo Repayment). Upon any disposition of any of the Wells Fargo Priority Collateral by Wells Fargo or by any Obligor, Cree (i)
agrees, if requested by Wells Fargo, to execute and immediately deliver any and all releases or other documents or agreements which
Wells Fargo deems necessary to accomplish a disposition thereof free of the Liens of Cree, and (ii) authorizes Wells Fargo
to record, or cause to have recorded, any UCC financing statements which Wells Fargo deems necessary to accomplish a disposition
thereof free of the Liens of Cree (it being understood that Wells Fargo shall not be authorized to release any Lien of Cree with
respect to any Cree Priority Collateral).


 


(b)          Until
the Cree Repayment, Wells Fargo shall not exercise any rights or remedies with respect to the Cree Priority Collateral (other than
the use of the Cree Priority Collateral for the purposes described in Section 2.3(a)), including without limitation the
right to (i) enforce any Liens or sell, repossess or otherwise foreclose on any portion of the Cree Priority Collateral or (ii)
request any action, institute proceedings, give any instructions, or make any election with respect to any portion of the Cree
Priority Collateral.


 


(c)          Following
the Cree Repayment, Wells Fargo may exercise any rights or remedies with respect to the Cree Priority Collateral; provided,
however, that Wells Fargo shall not sell any Cree Priority Collateral consisting of silicon carbide raw materials in boule
form (“Boule Collateral”) without providing at least 15 days’ prior written notice to Cree of Wells Fargo’s
intention to offer such Boule Collateral for sale. During such 15-day period, Cree shall be obligated to either (i) repurchase
the Boule Collateral for cash in an amount equal to the price paid by Obligors to Cree for such Boule Collateral, or (ii) cooperate
with Obligors to have such Boule Collateral converted into SiC slabs, all at the expense of Cree (including labor costs and reasonably
allocated overhead costs). If Cree does not consummate such repurchase or such conversion for any reason during such 15-day period,
then Wells Fargo shall have the unrestricted right to sell or otherwise dispose of the Boule Collateral. For avoidance of doubt,
nothing herein shall be construed as requiring Cree to sell any raw materials following a Bankruptcy Event, and, without prejudice
to the other provisions of this Agreement (including Section 2.4), nothing in this paragraph shall be construed as a waiver
by Cree of any rights it may have under the Bankruptcy Code or in respect of any Bankruptcy Event. Except during any applicable
15-day period in which Cree has a repurchase or conversion obligation as contemplated hereby, nothing contained in this paragraph
shall be construed to limit the right of Wells Fargo or any Obligor to convert any Boule Collateral into finished goods Inventory
at any time.


 




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Section 2.3          Disposition
of Collateral and Other Remedial Actions by Cree.


 


(a)          Cree
hereby agrees that it shall not sell, lease, assign, transfer, remove or otherwise dispose of all or any portion of the Cree Priority
Collateral, in each case unless, while an event of default exists under the Cree Documents, Cree gives Wells Fargo at least 30
days’ prior written notice of Cree’s intention to take such remedial action; provided, however, that
if any Obligor or Wells Fargo shall cure the underlying events of default under the Cree Documents prior to the taking of such
remedial action by Cree, Cree will not take or continue any remedial action with respect to such event of default after the date
of such cure. Cree hereby agrees that, during such 30-day period, Wells Fargo may have access to and may use the Cree Priority
Collateral without charge for purposes of holding, processing, manufacturing, selling, using, storing, liquidating, completing,
realizing upon or otherwise disposing of the Wells Fargo Priority Collateral, and for related and incidental purposes (including,
without limitation, the conversion of the Cree Priority Collateral into finished goods Inventory, which shall cause such Collateral
to constitute Wells Fargo Priority Collateral). Wells Fargo shall not be liable to Cree for any diminution of value of the Cree
Priority Collateral during such period, but Wells Fargo shall pay to Cree the cost of repairing any damage to the Cree Priority
Collateral directly caused by Wells Fargo (ordinary wear and tear excepted). If any stay or other order prohibiting the exercise
of remedies with respect to the Wells Fargo Priority Collateral has been entered by a court of competent jurisdiction, such 30-day
period shall be tolled during the pendency of any such stay or other order.


 


(b)          Wells
Fargo hereby agrees that, following the expiration of the 30-day period contemplated by Section 2.3(a), until the Cree Repayment
has occurred, Cree may dispose of, and exercise any other rights with respect to, any or all of the Cree Priority Collateral (including
retention of the Cree Priority Collateral as a full satisfaction of the Cree Debt), free of the Liens of Wells Fargo (it being
agreed that Wells Fargo shall retain the right to receive, after the Cree Debt is repaid in full, any excess proceeds from any
disposition by Cree of any Cree Priority Collateral). Upon any disposition of any of the Cree Priority Collateral by Cree or by
any Obligor, Wells Fargo (i) agrees, if requested by Cree, to execute and immediately deliver any and all releases or other documents
or agreements which Cree deems necessary to accomplish a disposition thereof free of the Liens of Wells Fargo, and (ii) authorizes
Cree to record, or cause to have recorded, any UCC financing statements which Cree deems necessary to accomplish a disposition
thereof free of the Liens of Wells Fargo (it being understood that Cree shall not be authorized to release any Lien of Wells Fargo
with respect to any Wells Fargo Priority Collateral).


 


(c)          Cree
and Obligors agree that Wells Fargo shall have no obligation to effectuate any cure as contemplated by Section 2.3(a) and
that any such cure effectuated by Wells Fargo on any one occasion shall not obligate Wells Fargo to effectuate any such cure on
any other occasion. Obligors hereby authorize Wells Fargo to make such payments as Wells Fargo reasonably deems necessary or appropriate
in connection with the Cree Documents in order to protect Wells Fargo’s interests in the Collateral, and Obligors agree that
any funds advanced by Wells Fargo pursuant to this paragraph or otherwise in connection with the Cree Documents shall constitute
Obligations under and as defined in the Wells Fargo Credit Agreement.


 




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(d)          Until
the Wells Fargo Repayment, Cree shall not exercise any rights or remedies with respect to the Wells Fargo Priority Collateral,
including without limitation the right to (i) enforce any Liens or sell, repossess or otherwise foreclose on any portion of
the Wells Fargo Priority Collateral or (ii) request any action, institute proceedings, give any instructions, or make any election
with respect to any portion of the Wells Fargo Priority Collateral.


 


(e)          Nothing
in this Agreement shall be construed to limit or impair in any manner the right of (i) either Creditor otherwise having authority
under applicable law to do so, to bid for and purchase, for cash (in the case of a bid by Cree with respect to any Wells Fargo
Priority Collateral prior to the Wells Fargo Repayment, or in the case of a bid by Wells Fargo with respect to any Cree Priority
Collateral prior to the Cree Repayment), any Collateral at any private, public or judicial foreclosure or other sale initiated
by the other Creditor, (ii) either Creditor to seek to join (but not to control or unreasonably delay in any manner) any foreclosure
or other judicial Lien enforcement proceeding with respect to any of the Collateral initiated by the other Creditor if such joinder
is required under applicable law for such Creditor to be entitled to receive proceeds of Collateral to the extent allowed by this
Agreement, (iii) either Creditor to receive the proceeds of any authorized Lien enforcement action in respect of any Collateral
in accordance with the terms of this Agreement, or (iv) either Creditor to file any pleadings, objections or motions as provided
in Sections 2.4(h) and (i). Notwithstanding the foregoing, no Creditor shall be required at any time to initiate,
participate or join in any private, public or judicial foreclosure or other sale, or any foreclosure or other judicial Lien enforcement
proceeding at any time.


 


Section 2.4           Intercreditor Arrangements
in Bankruptcy.


 


(a)          This
Agreement shall remain in full force and effect and enforceable pursuant to its terms in accordance with Section 510(a) of
the Bankruptcy Code, and all references herein to any Obligor shall be deemed to apply to such Person as debtor in possession and
to any trustee in bankruptcy for the estate of such Person.


 


(b)          (i)
Except as otherwise specifically permitted in this Section 2.4, until the Wells Fargo Repayment, Cree shall not assert without
the written consent of Wells Fargo any claim, motion, objection, or argument in respect of any Wells Fargo Priority Collateral
in connection with any Bankruptcy Event which could otherwise be asserted or raised in connection with such Bankruptcy Event by
Cree as a secured creditor of any Obligor, including without limitation any claim, motion, objection or argument seeking adequate
protection or relief from the automatic stay in respect of any Wells Fargo Priority Collateral. (ii) Except as otherwise specifically
permitted in this Section 2.4, until the Cree Repayment, Wells Fargo shall not assert without the written consent of Cree
any claim, motion, objection, or argument in respect of any Cree Priority Collateral in connection with any Bankruptcy Event which
could otherwise be asserted or raised in connection with such Bankruptcy Event by Wells Fargo as a secured creditor of any Obligor,
including without limitation any claim, motion, objection or argument seeking adequate protection or relief from the automatic
stay in respect of any Cree Priority Collateral; provided, however, that Wells Fargo may assert and exercise the
use and access rights with respect to the Cree Priority Collateral contemplated by Section 2.3(a).


 




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(c)          Without
limiting the generality of the foregoing, Cree agrees that if a Bankruptcy Event occurs, (i) Wells Fargo may consent to the use
of cash collateral on such terms and conditions and in such amounts as Wells Fargo, in its sole discretion, may decide without
seeking or obtaining the consent of Cree; (ii) Wells Fargo may (A) provide post-petition financing to any Obligor or (B) consent
to the granting of a priming Lien to secure post-petition financing, in each case pursuant to Section 364 of the Bankruptcy Code
or other applicable law and on such terms and conditions and in such amounts as Wells Fargo, in its sole discretion, may decide
without seeking or obtaining the consent of Cree; (iii) Cree shall not oppose any Obligor’s use of cash collateral to the
extent that Wells Fargo has consented thereto; and (iv) Cree shall not oppose any sale or other disposition of any assets comprising
part of the Wells Fargo Priority Collateral (or the sale or bidding procedures with respect thereto) free and clear of Liens or
other claims of any party, including Cree, under Section 363 of the Bankruptcy Code if Wells Fargo has consented to such sale or
disposition of such assets. Cree shall not provide or participate in any post-petition financing to any Obligor.


 


(d)          Wells
Fargo shall not oppose any sale or other disposition of any assets comprising part of the Cree Priority Collateral free and clear
of Liens or other claims of any party, including Wells Fargo, under Section 363 of the Bankruptcy Code on the basis that Wells
Fargo’s interest in such Cree Priority Collateral is impaired by such sale or inadequately protected as a result of such
sale if Cree has consented to such sale or disposition of such assets; provided, however, that any such sale or other
disposition of any of the Cree Priority Collateral shall be subject to Wells Fargo’s use and access rights with respect to
the Cree Priority Collateral contemplated by Section 2.3(a).


 


(e)          Cree
agrees that it will not initiate, prosecute, encourage, or assist with any other Person to initiate or prosecute any claim, action
or other proceeding (i) challenging the validity or enforceability of this Agreement (whether before, during or after any Bankruptcy
Event), (ii) challenging the validity or enforceability of Wells Fargo’s claim in connection with any Bankruptcy Event, (iii)
challenging the perfection or enforceability of any of Wells Fargo’s Liens on any of the Collateral (subject to the relative
priorities and limitations on remedies set forth herein), or (iv) asserting any claims which any Obligor may hold with respect
to Wells Fargo or the Wells Fargo Debt, if any.


 


(f)          Wells
Fargo agrees that it will not initiate, prosecute, encourage, or assist with any other Person to initiate or prosecute any claim,
action or other proceeding (i) challenging the validity or enforceability of this Agreement (whether before, during or after any
Bankruptcy Event), (ii) challenging the validity or enforceability of Cree’s claim in connection with any Bankruptcy Event,
(iii) challenging the perfection or enforceability of any of Cree’s Liens on any of the Collateral (subject to the relative
priorities and limitations on remedies set forth herein), or (iv) asserting any claims which any Obligor may hold with respect
to Cree or the Cree Debt, if any.


 




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(g)          (i)
To the extent that Wells Fargo receives payments or transfers on the Wells Fargo Debt or proceeds of the Collateral which are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other
party under any bankruptcy law, state or federal law, common law, or equitable cause, then, to the extent of such payment or proceeds
received, the Wells Fargo Debt, or part thereof, intended to be satisfied shall be revived and continue in full force and effect
as if such payments or proceeds had not been received by Wells Fargo. (ii) To the extent that Cree receives payments or transfers
on the Cree Debt or proceeds of the Collateral which are subsequently invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common
law, or equitable cause, then, to the extent of such payment or proceeds received, the Cree Debt, or part thereof, intended to
be satisfied shall be revived and continue in full force and effect as if such payments or proceeds had not been received by Cree.


 


(h)          Notwithstanding
any other provision of this Section 2.4, (i) Cree shall be entitled to file any necessary responsive or defensive pleadings
in opposition to any motion, claim, adversary proceeding or other pleading made by any Person objecting to or otherwise seeking
the disallowance of the claims of Cree, including without limitation any claims secured by the Collateral, if any, and (ii) Cree
shall be entitled to file any pleadings, objections, motions or agreement which assert rights or interests available to unsecured
creditors of the applicable Obligor arising under either the Bankruptcy Code or applicable non-bankruptcy law.


 


(i)          Notwithstanding
any other provision of this Section 2.4, (i) Wells Fargo shall be entitled to file any necessary responsive or defensive
pleadings in opposition to any motion, claim, adversary proceeding or other pleading made by any Person objecting to or otherwise
seeking the disallowance of the claims of Wells Fargo, including without limitation any claims secured by the Collateral, if any,
and (ii) Wells Fargo shall be entitled to file any pleadings, objections, motions or agreement which assert rights or interests
available to unsecured creditors of the applicable Obligor arising under either the Bankruptcy Code or applicable non-bankruptcy
law.


 


Section 2.5           Relative Rights.


 


(a)          Nothing
contained in this Agreement is intended to or shall affect the relative rights of Wells Fargo or Cree, on the one hand, and other
creditors of any Obligor, on the other hand.


 


(b)          All
rights and interests of Wells Fargo and Cree hereunder, and all agreements and obligations of Cree and Wells Fargo hereunder, shall
remain in full force and effect irrespective of:


 




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(i)          any
lack of validity or enforceability of any Wells Fargo Document or any other agreement or instrument relating thereto, or of any
Cree Document or any other agreement or instrument relating thereto;


 


(ii)         any
change in the time, manner or place of, or in any other term of, all or any of the Wells Fargo Debt, or any amendment or waiver
of or any consent to departure from any provision of the Wells Fargo Credit Agreement or any other Wells Fargo Document;


 


(iii)        any
change in the time, manner or place of, or in any other term of, all or any of the Cree Debt, or any amendment or waiver of or
any consent to departure from any provision of any Cree Document;


 


(iv)      any
exchange, release, nonperfection, or unenforceability of any Lien on any Collateral, or any release or amendment or waiver of or
consent to departure from any guarantee, for all or any of the Wells Fargo Debt or the Cree Debt; or


 


(v)          any
other circumstances which might otherwise constitute a defense available to, or a discharge of, any Obligor in respect of the Wells
Fargo Debt, or of the Cree Debt, in respect of this Agreement.


 


Section 2.6           No Other Beneficiaries
of Lien Subordination. This Agreement and the subordination provisions contained herein are intended only for the benefit of
Wells Fargo and Cree, but not any Obligor or any other creditor of any Obligor.


 


Section 2.7           Waivers.


 


(a)          Neither
Wells Fargo nor Cree shall have any liability or duty of any kind, nature or origin to the other with respect to the subject matter
of this Agreement, express or implied, except as set forth in this Agreement.


 


(b)          Cree
hereby waives and releases any claim which Cree may now or hereafter have against Wells Fargo arising out of any and all actions
which Wells Fargo takes or omits to take with respect to any Obligor, any Collateral or any Wells Fargo Document (so long as such
action or inaction does not constitute a breach by Wells Fargo with respect to any of its obligations hereunder), including without
limitation, (i) actions with respect to the creation, perfection or continuation of Liens on the Collateral and other security
for the Wells Fargo Debt, (ii) actions with respect to the occurrence of any default or event of default by any Obligor under
the Wells Fargo Credit Agreement or the other Wells Fargo Documents, (iii) action with respect to the repossession of, foreclosure
upon, sale, release, or depreciation of, or failure to realize upon, any of the Wells Fargo Priority Collateral, (iv) actions with
respect to the collection of any claim for all or any part of the Wells Fargo Debt from any account debtor, guarantor or any other
party, (v) any other action with respect to the enforcement of the Wells Fargo Documents or the valuation, use, protection or disposition
of the Collateral or any other security for the Wells Fargo Debt and (vi) the election of Wells Fargo, in any proceeding instituted
under Chapter 11 of the Bankruptcy Code, for application of Section 1111(b) of the Bankruptcy Code.


 




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(c)          Wells
Fargo hereby waives and releases any claim which Wells Fargo may now or hereafter have against Cree arising out of any and all
actions which Cree takes or omits to take with respect to any Obligor, any Collateral or any Cree Document (so long as such action
or inaction does not constitute a breach by Cree with respect to any of its obligations hereunder), including without limitation,
(i) actions with respect to the creation, perfection or continuation of Liens on the Collateral and other security for the Cree
Debt, (ii) actions with respect to the occurrence of any default or event of default by any Obligor under the Cree Documents, (iii)
action with respect to the repossession of, foreclosure upon, sale, release, or depreciation of, or failure to realize upon, any
of the Cree Priority Collateral, (iv) actions with respect to the collection of any claim for all or any part of the Cree Debt
from any account debtor, guarantor or any other party, (v) any other action with respect to the enforcement of the Cree Documents
or the valuation, use, protection or disposition of the Collateral or any other security for the Cree Debt and (vi) the election
of Cree, in any proceeding instituted under Chapter 11 of the Bankruptcy Code, for application of Section 1111(b) of the Bankruptcy
Code.


 


Section 2.8           Remedies.


 


(a)           Rights
Cumulative. (i) The rights and remedies of Wells Fargo under this Agreement, the Wells Fargo Credit Agreement and the other
Wells Fargo Documents shall be cumulative and not exclusive of any rights or remedies which Wells Fargo would otherwise have. In
exercising such rights and remedies Wells Fargo may be selective and no failure or delay by Wells Fargo in exercising any right
shall operate as a waiver of such right, nor shall any partial or single exercise of any power or right preclude its other or further
exercise or the exercise of any other power or right. (ii) The rights and remedies of Cree under this Agreement and the Cree Documents
shall be cumulative and not exclusive of any rights or remedies which Cree would otherwise have. In exercising such rights and
remedies Cree may be selective and no failure or delay by Cree in exercising any right shall operate as a waiver of such right,
nor shall any partial or single exercise of any power or right preclude its other or further exercise or the exercise of any other
power or right.


 


(b)           Waiver
of Marshalling. Each of Wells Fargo and Cree hereby waives any right to require marshalling of assets by Wells Fargo or Cree
and any similar rights.


 


Section 2.9           Provisions Concerning
Insurance. Proceeds of Collateral include insurance and condemnation proceeds (including proceeds of business interruption
insurance), and therefore the priorities set forth in Section 2.1 govern the ultimate disposition of insurance and condemnation
proceeds. Proceeds of business interruption insurance shall be deemed for the purposes hereof to be Wells Fargo Priority Collateral.
Wells Fargo shall have the sole and exclusive right, as against Cree, to adjust settlement of insurance claims in the event of
any covered loss, theft or destruction of any Wells Fargo Priority Collateral and any insurance proceeds in respect of any business
interruption insurance. Cree shall have the sole and exclusive right, as against Wells Fargo, to adjust settlement of insurance
claims in the event of any covered loss, theft or destruction of any Cree Priority Collateral. Each of Wells Fargo and Cree shall
cooperate with the other Creditor to facilitate the payment of insurance and condemnation proceeds to the Creditor having priority
in such insurance and condemnation proceeds. Wells Fargo shall have the right, as against Cree, to determine whether insurance
proceeds which constitute Wells Fargo Priority Collateral or direct proceeds thereof may be used to replace any affected Wells
Fargo Priority Collateral. Cree shall have the right, as against Wells Fargo, to determine whether insurance proceeds which constitute
Cree Priority Collateral or direct proceeds thereof may be used to replace any affected Cree Priority Collateral.


 




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ARTICLE 3


MISCELLANEOUS


 


Section 3.1           Successors; Continuing
Effect. This Agreement is being entered into for the benefit of, and shall be binding upon, (a) Wells Fargo and its successors
and assigns, including subsequent holders of Wells Fargo Debt, and the term “Wells Fargo” shall include any
such subsequent or additional holder of Wells Fargo Debt, wherever the context permits, and (b) Cree and its successors and assigns,
including subsequent holders of the Cree Debt, and the term “Cree” shall include any such subsequent or additional
holder of Cree Debt, wherever the context permits. Cree shall not assign all or any portion of the Cree Debt or any Lien of the
Cree securing any Cree Debt unless the proposed assignee executes and delivers to Wells Fargo a written acknowledgment in form
and substance reasonably acceptable to Wells Fargo that such assignee is bound by the terms and conditions of this Agreement. Wells
Fargo shall not assign all or any portion of the Wells Fargo Debt or any Lien of Wells Fargo securing any Wells Fargo Debt unless
the proposed assignee executes and delivers to Cree a written acknowledgment in form and substance reasonably acceptable to Cree
that such assignee is bound by the terms and conditions of this Agreement.


 


Section 3.2           Further Assurances.
Each party hereto will, at any time and from time to time, promptly execute and/or authorize and deliver all further instruments
and documents, and take all further action, that any other party hereto may reasonably request in order to perfect or otherwise
protect any right or interest granted or purported to be granted hereby or to enable Wells Fargo or Cree to exercise and enforce
its rights and remedies hereunder, including, without limitation, appropriate amendments to financing statements authorized by
any Obligor in favor of Cree or Wells Fargo in order to refer to this Agreement (but this Agreement shall remain fully effective
notwithstanding any failure to execute any additional documents or instruments). Without limiting the generality of the foregoing,
in connection with any refinancing or replacement of all or any portion of the Wells Fargo Debt, Cree agrees, if requested by Wells
Fargo, to promptly execute an intercreditor and lien subordination agreement substantively similar to this Agreement in favor of
the new lender.


 


Section 3.3           Expenses. Obligors
shall pay to Wells Fargo, upon demand, the amount of any and all expenses, including, without limitation, the reasonable fees and
expenses of counsel for Wells Fargo, which Wells Fargo may incur in connection with the exercise or enforcement of any of its rights
or interests vis-à-vis any Obligor or Cree, and all such amounts shall constitute part of the Wells Fargo Debt. Obligors
shall pay to Cree, upon demand, the amount of any and all expenses, including, without limitation, the reasonable fees and expenses
of counsel for Cree, which Cree may incur in connection with the exercise or enforcement of any of its rights or interests vis-à-vis
any Obligor or Wells Fargo, and all such amounts shall constitute part of the Cree Debt.


 




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Section 3.4           Notices; Amendments,
Etc.


 


(a)          All
notices, requests and demands to or upon the parties to this Agreement to be effective shall be in writing and shall be deemed
to have been duly given or made (i) when delivered by hand or (ii) three business days after being deposited in the mail, postage
prepaid or (iii) one business day after being sent by priority overnight mail with an internationally recognized overnight delivery
carrier, at the address for the applicable party set forth below:


 


If to Wells Fargo at:


 


Wells Fargo Bank, National Association


1100 Abernathy Road, NE - Suite 1600


MAC Code: G0189-60


Atlanta, Georgia 30328


Attn: Portfolio Manager (Charles & Colvard)


 


If to Cree at:


 


Cree, Inc.


4600 Silicon Drive


Durham, North Carolina 27703


Attn.: General Counsel


 


If to one or more
Obligors at:


 


Charles & Colvard, Ltd.


170 Southport Drive


Morrisville, North Carolina 27560


Attn: Chief Financial Officer


 


The parties to this Agreement may change their addresses for
notices by providing written notice of such new address to the other parties hereto.


 


(b)          This
Agreement may be amended and the terms hereof may be waived only with the written consent of Cree and Wells Fargo, or their authorized
successors and assigns, and no consent of any Obligor shall be required in order to amend this Agreement except to the extent any
such amendment materially affects any rights or obligations of such Obligor under any Cree Documents or Wells Fargo Documents.


 


Section 3.5           Severability.
Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or invalidity without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.


 




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Section 3.6          GOVERNING
LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT HAS BEEN DELIVERED AND ACCEPTED IN AND SHALL BE DEEMED TO HAVE BEEN MADE IN ATLANTA,
GEORGIA AND SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE LAWS
AND DECISIONS OF THE STATE OF GEORGIA WITHOUT REGARD TO ITS CONFLICTS OF LAW RULES. WELLS FARGO, CREE AND OBLIGORS EACH CONSENT
TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED IN FULTON COUNTY, GEORGIA AND WAIVES TRIAL BY JURY AND WAIVES
ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREUNDER, AND FURTHER AGREES NOT TO ASSERT ANY DEFENSE BASED
ON LACK OF JURISDICTION OR VENUE.


 


Section 3.7           Entire Agreement.
This Agreement embodies the entire agreement and understanding of the parties hereto regarding the subject matter hereof.


 


Section 3.8          Counterparts.
This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument,
but all such counterparts together shall constitute one agreement.


 


[Signatures appear on following pages]


 




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IN WITNESS WHEREOF,
the undersigned have caused this Intercreditor Agreement to be duly executed and delivered by their respective duly authorized
officers on the date and year first above written.


 


	 	CHARLES & COLVARD, LTD.
	 	 	 
	 	By:	/s/ Kyle S. Macemore
	 	Kyle S. Macemore, Senior Vice President and Chief Financial Officer
	 	 	 
	 	CHARLES & COLVARD DIRECT, LLC
	 	 	 
	 	By:	/s/ Kyle S. Macemore
	 	Kyle S. Macemore, Manager
	 	 	 
	 	MOISSANITE.COM, LLC
	 	 	 
	 	By:	/s/ Kyle S. Macemore
	 	Kyle S. Macemore, Manager
	 	 	 
	 	CREE, INC.
	 	 	 
	 	By:	/s/ David T. Emerson
	 	Name: 	David T. Emerson
	 	Title:	Vice-President -LEDs
	 	 	 
	 	Wells Fargo BANK, NATIONAL ASSOCIATION
	 	 	 
	 	By:	/s/ Arthur R. Cordwell, Jr.
	 	Arthur R. Cordwell, Jr., Authorized Signatory