Document:

Employment Agreement

 Exhibit 10.110 
 EMPLOYMENT AGREEMENT 
 THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into
effective as of December 5, 2007 by and between Charles & Colvard, Ltd., a North Carolina company with its principal office at 300 Perimeter Park Drive, Suite A, Morrisville, North Carolina, 27560 (the “Company”), and Steven
L. Abate, an individual currently residing at 200 Coatbridge Circle, Cary, North Carolina, 27511 (“Employee”). 
 Statement of
Purpose 
 The Company wishes to obtain the services of Employee on the terms and conditions and with the benefits set forth in this
Agreement. Employee desires to be employed by the Company on such terms and conditions and to receive such additional consideration as set out herein. 
 Therefore, in consideration of the mutual covenants contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Employee
agree as follows: 
 1. Employment. The Company hereby agrees to employ Employee, and Employee hereby accepts such employment, on the
terms and conditions set forth in this Agreement. 
 2. Term of Employment. The term of Employee’s employment under this
Agreement shall commence as of the date of this Agreement and shall continue for one year. Termination of employment shall be governed by Paragraph 7 of this Agreement, and unless terminated by either party as provided in Paragraph 7, this Agreement
shall automatically, at the expiration of each then existing term, renew for successive additional one year terms (such annual period being hereinafter referred to as the “Term”). 
 3. Position and Duties. Employee shall serve as Vice President of Manufacturing of the Company. Employee will, under the direction of the Chief
Executive Officer of the Company, faithfully and to the best of his ability perform the duties as set as may be reasonably assigned by the CEO or the Board of Directors of the Company. Employee agrees to devote his entire working time, energy and
skills to the Company while so employed. 
 4. Compensation and Benefits. Employee shall receive compensation and benefits for the
services performed for the Company under this Agreement as follows: 
 (a) Base Salary. Employee shall receive an
initial base salary of $130,000, payable in regular and equal semi-monthly installments (“Base Salary”). 
 (b)
Employee Benefits. Employee shall receive such benefits as are made available to the other employees of the Company, including, but not limited to, life, medical and disability insurance, retirement benefits, and such vacation as is provided
to the other employees of the Company (the “Employee Benefits”). Employer reserves the right to reduce, eliminate or change such Employee Benefits, in its sole discretion, subject to any applicable legal and regulatory requirements.

 (c) Incentive Compensation. Employee shall participate in such incentive plans as
may be approved by the Board of Directors from time-to-time. 
 5. Reimbursement of Expenses. The Company shall reimburse Employee for
all reasonable out-of-pocket expenses incurred by Employee specifically and directly related to the performance by Employee of the services under this Agreement. 
 6. Withholding. The Company may withhold from any payments or benefits under this Agreement all federal, state or local taxes or other amounts as may be required pursuant to applicable law, government
regulation or ruling. 
 7. Termination of Employment. 
 (a) Death of Employee. If Employee shall die during the Term, this Agreement and the employment relationship hereunder will
automatically terminate on the date of death. 
 (b) Termination by the Company for Just Cause. The Company shall have
the right to terminate Employee’s employment under this Agreement at any time for Just Cause, which termination shall be effective immediately. Termination for “Just Cause” shall include termination for Employee’s personal
dishonesty, gross incompetence, willful misconduct, breach of a fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, regulation (other than traffic violations or similar
offenses), written Company policy or final cease-and-desist order, conviction of a felony or of a misdemeanor involving moral turpitude, unethical business practices in connection with the Company’s business, misappropriation of the
Company’s assets (determined on a reasonable basis), disability or material breach of any other provision of this Agreement. The determination of whether “Just Cause” exists for termination shall be made by the Board of Directors of
the Company in its sole discretion. For purposes of this subsection, the term “disability” means the inability of Employee, due to the condition of his physical, mental or emotional health, to satisfactorily perform the duties of his
employment hereunder for a continuous three month period; provided further that if the Company furnishes long term disability insurance for Employee, the term “disability” shall mean that continuous period sufficient to allow for the long
term disability payments to commence pursuant to the Company’s long term disability insurance policy. In the event Employee’s employment under this Agreement is terminated for Just Cause, Employee shall have no right to receive
compensation or other benefits under this Agreement for any period after such termination. 
 (c) Termination by the
Company Without Cause. The Company may terminate Employee’s employment other than for “Just Cause,” as described in Subsection (b) above, at any time upon written notice to Employee, which termination shall be effective
immediately. In the event the Company terminates Employee pursuant to this Subsection (c), Employee will continue to receive his Base Salary at time of termination for a one (1) year period from such termination (the “Termination 

  

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Compensation”), so long as Employee complies with Section 8, 9 and 10 of the Agreement. Such amounts shall be payable at the times such amounts
would have been paid in accordance with Section 4. In addition, Employee shall continue to participate in the same group hospitalization plan, health care plan, dental care plan, life or other insurance or death benefit plan, and any other
present or future similar group employee benefit plan or program for which officers of the Company generally are eligible, on the same terms as were in effect prior to Employee’s termination, either under the Company’s plans or comparable
coverage, for all periods Employee receives Termination Compensation. Notwithstanding anything in this Agreement to the contrary, if Employee breaches Sections 8, 9 or 10 of this Agreement, Employee will not be entitled to receive any further
compensation or benefits pursuant to this Section 7(c). 
 (d) Change of Control Situations. In the event of a
Change of Control of the Company at any time after the date hereof, Employee may voluntarily terminate employment with Company up until one (1) year after the Change of Control for “Good Reason” (as defined below) and, subject to
Section 7(f), (y) be entitled to receive in a lump sum (i) any compensation due but not yet paid through the date of termination and (ii) in lieu of any further salary payments from the date of termination to the end of the then
existing term, an amount equal to the Termination Compensation times 2.99 within two (2) months of the consummation of the Change of Control, and (z) shall continue to participate in the same group hospitalization plan, health care plan,
dental care plan, life or other insurance or death benefit plan, and any other present or future similar group employee benefit plan or program for which officers of the Company generally are eligible, or comparable plans or coverage, for a period
of two years following termination of employment by Employee, on the same terms as were in effect either (A) at the date of such termination, or (B) if such plans and programs in effect prior to the Change of Control of Company are,
considered together as a whole, materially more generous to the officers of Company, then at the date of the Change of Control. Any equity based incentive compensation (including but not limited to stock options, SARs, etc.) shall fully vest and be
immediately exercisable in full upon a Change of Control, not withstanding any provision in any applicable plan. Any such benefits shall be paid by the Company to the same extent as they were so paid prior to the termination or the Change of Control
of Company. 
 “Good Reason” shall mean the occurrence of any of the following events without Employee’s
express written consent: 
 (i) the assignment to Employee of duties materially inconsistent with the position and status of
Employee with the Company immediately prior to the Change of Control; 
 (ii) a material reduction by the Company in
Employee’s pay grade or base salary as then in effect, or the exclusion of Employee from participation in Company’s benefit plans in which he previously participated as in effect at the date hereof or as the same may be increased from time
to time during the Term; 
  

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 (iii) an involuntary relocation of Employee more than 50 miles from the location where
Employee worked immediately prior to the Change of Control or the breach by the Company of any material provision of this Agreement; or 
 (iv) any purported termination of the employment of Employee by Company which is not effected in accordance with this Agreement. 
 A “Change of Control” shall be deemed to have occurred if (i) any person or group of persons (as defined in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934) together with its affiliates, excluding employee benefit plans of Company, becomes, directly or indirectly, the “beneficial owner” (as defined in Rule 13d-3 promulgated
under the Securities Exchange Act of 1934) of securities of Company representing 20% or more of the combined voting power of Company’s then outstanding securities; or (ii) during the then existing term of the Agreement, as a result of a
tender offer or exchange offer for the purchase of securities of Company (other than such an offer by the Company for its own securities), or as a result of a proxy contest, merger, consolidation or sale of assets, or as a result of any combination
of the foregoing, individuals who at the beginning of any year period during such term constitute the Company’s Board of Directors, plus new directors whose election by Company’s shareholders is approved by a vote of at least two-thirds of
the outstanding voting shares of the Company, cease for any reason during such year period to constitute at least two-thirds of the members of such Board of Directors; or (iii) the shareholders of the Company approve a merger or consolidation
of the Company with any other corporation or entity regardless of which entity is the survivor, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or being converted into voting securities of the surviving entity) at least 60% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation; or (iv) the shareholders of the Company approve a plan of complete liquidation or winding-up of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the
Company’s assets; or (v) any event which the Company’s Board of Directors determines should constitute a Change of Control. 
 (e) Employee’s Right to Payments. In receiving any payments pursuant to this Section 7, Employee shall not be obligated to seek other employment or take any other action by way of mitigation of the
amounts payable to Employee hereunder, and such amounts shall not be reduced or terminated whether or not Employee obtains other employment. 
 (f) Reduction in Agreement Payments. Notwithstanding anything in this Agreement to the contrary, if any of the payments provided for under this Agreement (the “Agreement Payments”), together with any
other payments that Employee has the right to receive (such other payments together with the Agreement Payments are referred to as the “Total Payments”), would constitute a “parachute payment” as defined in
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the “Code”) (a 

  

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“Parachute Payment”), the Agreement Payments shall be reduced by the smallest amount necessary so that no portion of such Total Payments would be
Parachute Payments. In the event the Company shall make an Agreement Payment to Employee that would constitute a Parachute Payment, Employee shall return such payment to the Company (together with interest at the rate set forth in
Section 1274(b)(2)(B) of the Code). For purposes of determining whether and the extent to which the Total Payments constitute Parachute Payments, no portion of the Total Payments the receipt of which Employee has effectively waived in writing
shall be taken into account. 
 8. Covenant Not to Compete. Employee agrees that during his employment with the Company and for a
period of one (1) year following the termination of his employment with the Company, for whatever reason: 
 (a) Employee
shall not, directly or indirectly, own any interest in, manage, operate, control, be employed by, render advisory services to, or participate in the management or control of any business that operates in the same business as the Company, which
Employee and the Company specifically agree as the business of fabricating (wafering, preforming and faceting), marketing and distributing moissanite gemstones or other diamond simulants to the gem and jewelry industry (the “Business”),
unless Employee’s duties, responsibilities and activities for and on behalf of such other business are not related in any way to such other business’s products which are in competition with the Company’s products. For purposes of this
section, “competition with the Company” shall mean competition for customers in the United States and in any country in which the Company is selling the Company’s products at the time of termination. Employee’s ownership of less
than one percent of the issued and outstanding stock of a corporation engaged in the Business shall not by itself be deemed to be a violation of this Agreement. Employee recognizes that the possible restriction on his activities which may occur
as a result of his performance of his obligations under Paragraph 8(a) are substantial, but that such restriction is required for the reasonable protection of the Company. 
 (b) Employee shall not, directly or indirectly, influence or attempt to influence any customer of the Company to discontinue its purchase
of any product of the Company which is manufactured or sold by the Company at the time of termination of Employee’s employment or to divert such purchases to any other person, firm or employer. 
 (c) Employee shall not, directly or indirectly, interfere with, disrupt or attempt to disrupt the relationship, contractual or otherwise,
between the Company and any of its suppliers. 
 (d) Employee shall not, directly or indirectly, solicit any employee of the
Company to work for any other person, firm or employer. 
 9. Confidentiality. In the course of his employment with the Company,
Employee will have access to confidential information, records, data, customer lists, lists of product sources, specifications, trade secrets and other information which is not generally available to the 

  

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public and which the Company and Employee hereby agree is proprietary information of the Company (“Confidential Information”). During and after his
employment by the Company, Employee shall not, directly or indirectly, disclose the Confidential Information to any person or use any Confidential Information, except as is required in the course of his employment under this Agreement. All
Confidential Information as well as records, files, memoranda, reports, plans, drawings, documents, models, equipment and the like, including copies thereof, relating to the Company’s business, which Employee shall prepare or use or come into
contact with during the course of his employment, shall be and remain the Company’s sole property, and upon termination of Employee’s employment with the Company, Employee shall return all such materials to the Company. 
 10. Proprietary Information. Employee shall assign to the Company, its successors or assigns, all of Employee’s rights to copyrightable works
and inventions which, during the period of Employee’s employment by the Company or its successors in business, Employee makes or conceives, either solely or jointly with others, relating to any subject matter with which Employee’s work for
the Company is or may be concerned (“Proprietary Information”). Employee shall promptly disclose in writing to the Company such copyrightable works and inventions and, without charge to the Company, to execute, acknowledge and deliver all
such further papers, including applications for copyrights and patents for such copyrightable works and inventions, if any, in all countries and to vest title thereto in the Company, its successors, assigns or nominees. Upon termination of
Employee’s employment hereunder, Employee shall return to the Company or its successors or assigns, as the case may be, any Proprietary Information. The obligation of Employee to assign the rights to such copyrightable works and inventions
shall survive the discontinuance or termination of this Agreement for any reason. 
 11. Entire Agreement. This Agreement contains the
entire agreement of the parties with respect to Employee’s employment by the Company and supersedes any prior agreements between them, whether written or oral. 
 12. Waiver. The failure of either party to insist in any one or more instance, upon performance of the terms and conditions of this Agreement, shall not be construed as a waiver or a relinquishment of any right
granted hereunder or of the future performance of any such term or condition. 
 13. Notices. Any notice to be given under this
Agreement shall be deemed sufficient if addressed in writing and delivered personally, by telefax with receipt acknowledged, or by registered or certified U.S. mail to the address first above appearing, or to such other address as a party may
designate by notice from time to time. 
 14. Severability. In the event that any provision of any paragraph of this Agreement shall
be deemed to be invalid or unenforceable for any reason whatsoever, it is agreed such invalidity or unenforceability shall not affect any other provision of such paragraph or of this Agreement, and the remaining terms, covenants, restrictions or
provisions in such paragraph and in this Agreement shall remain in full force and effect and any court of competent jurisdiction may so modify the objectionable provision as to make it valid, reasonable and enforceable. 
  

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 15. Amendment. This Agreement may be amended only by an agreement in writing signed by each of the
parties hereto. 
 16. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or breach thereof, shall be
settled by arbitration in Raleigh, North Carolina in accordance with the expedited procedures of the Rules of the American Arbitration Association, and judgment upon the award may be rendered by the arbitrator and may be entered in any court having
jurisdiction thereof. 
 17. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of
North Carolina. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts located in North Carolina for the purposes of any suit, action or other proceeding contemplated hereby or any transaction contemplated hereby.

 18. Benefit. This Agreement shall be binding upon and inure to the benefit of and shall be enforceable by and against the Company,
its successors and assigns, and Employee, his heirs, beneficiaries and legal representatives. It is agreed that the rights and obligations of Employee may not be delegated or assigned except as may be specifically agreed to by the parties hereto.

 19. Compliance with Section 409A. The parties hereto intend that this Agreement comply with Section 409A of the Internal
Revenue Code of 1986, as amended (including any applicable regulations, proposed regulations, guidance or other interpretive authority thereunder (for purposes of this section, collectively, “Section 409A”)), to the extent applicable. The
parties hereby agree that this Agreement shall be construed in a manner to comply with Section 409A and that should any provision be found not in compliance with Section 409A, the parties are hereby contractually obligated to execute any
and all amendments to this Agreement deemed necessary and recommended by legal counsel for the Company to achieve compliance with Section 409A. By execution and delivery of this Agreement, the Company and Employee each irrevocably waive any
objections it or he may have to the amendments required or necessitated, in the reasonable opinion of the Company, by Section 409A. 
 <signature page follows> 
  

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 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above
written. 
  

			
	CHARLES & COLVARD, LTD.
		
	By:	 	 /s/ Robert S. Thomas

		 	Robert S. Thomas, CEO
	
	EMPLOYEE
		
	By:	 	 /s/ Steven L. Abate

		 	Steven L. Abate

  

 8Class A(2008-2) Terms Document

 Exhibit 4.1 
  
  
 DISCOVER CARD EXECUTION NOTE TRUST 
 Issuer 
 and 
 U.S. BANK NATIONAL ASSOCIATION 
 Indenture
Trustee 
 CLASS A(2008-2) TERMS DOCUMENT 
 Dated as of March 11, 2008 
 to 
 INDENTURE SUPPLEMENT 
 Dated as of July 26, 2007 
 for the DiscoverSeries Notes 
 to 

INDENTURE 
 Dated as of July 26, 2007

  
  

 TABLE OF CONTENTS 
  

					
	 	  	 	  	Page
	ARTICLE I
	
	Definitions and Other Provisions of General Application
			
	Section 1.01	  	Definitions	  	1
	Section 1.02	  	Representations and Warranties of Issuer	  	6
	Section 1.03	  	Representations and Warranties of Indenture Trustee	  	7
	Section 1.04	  	Limitations on Liability	  	7
	Section 1.05	  	Governing Law	  	8
	Section 1.06	  	Counterparts	  	8
	Section 1.07	  	Ratification of Indenture and Indenture Supplement	  	8
	
	ARTICLE II
	
	The Class A(2008-2) Notes
			
	Section 2.01	  	Creation and Designation	  	8
	Section 2.02	  	Adjustments to Required Subordinated Percentages and Amount	  	8
	Section 2.03	  	Interest Payment	  	9
	Section 2.04	  	Notification of LIBOR	  	9
	Section 2.05	  	Payments of Interest and Principal	  	9
	Section 2.06	  	Form of Delivery of Class A(2008-2) Notes; Depository; Denominations	  	10
	Section 2.07	  	Delivery and Payment for the Class A(2008-2) Notes	  	10
	Section 2.08	  	Targeted Deposits to the Accumulation Reserve Account	  	10
	Section 2.09	  	Additional Issuances of Notes	  	10

  

			
	Exhibit
		
	Exhibit A	  	Form of Class A Note

 THIS CLASS A(2008-2) TERMS DOCUMENT (this “Terms Document”), by and between DISCOVER
CARD EXECUTION NOTE TRUST, a statutory trust created under the laws of the State of Delaware (the “Issuer”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United
States of America, as Indenture Trustee (the “Indenture Trustee”), is made and entered into as of March 11, 2008. 
 Pursuant to this Terms Document, the Issuer shall create a new Tranche of Class A Notes of the DiscoverSeries and shall specify the principal terms thereof. 
 ARTICLE I 
 Definitions and Other Provisions of General Application 
 Section 1.01 Definitions. For all purposes of this Terms Document, except as otherwise expressly provided or unless the context otherwise
requires: 
 (1) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the
singular; 
 (2) all other terms used herein which are defined in the Indenture Supplement or the Indenture, either directly or by reference
therein, have the meanings assigned to them therein; 
 (3) all accounting terms not otherwise defined herein have the meanings assigned to
them in accordance with generally accepted accounting principles and, except as otherwise herein expressly provided, the term “generally accepted accounting principles” with respect to any computation required or permitted hereunder means
such accounting principles as are generally accepted in the United States of America at the date of such computation; 
 (4) all references
in this Terms Document to designated “Articles,” “Sections” and other subdivisions are to the designated Articles, Sections and other subdivisions of this Terms Document; The words “herein,” “hereof” and
“hereunder” and other words of similar import refer to this Terms Document as a whole and not to any particular Article, Section or other subdivision; 
 (5) in the event that any term or provision contained herein shall conflict with or be inconsistent with any term or provision contained in the Indenture Supplement or the Indenture, the terms and provisions of this
Terms Document shall be controlling, but solely with respect to the Class A(2008-2) Notes; 
 (6) each capitalized term defined herein shall
relate only to the Class A(2008-2) Notes and no other Tranche of Notes issued by the Issuer; 
 (7) “including” and words of
similar import will be deemed to be followed by “without limitation”; and 
 (8) for purposes of determining any amount or making
any calculation hereunder, such amount or calculation, (x) if specified to be as of the first day of any Due Period, shall (a)

 
include any Notes issued during such Due Period as if such Notes had been outstanding on the first day of such Due Period and (b) give effect to any
payments, deposits or other allocations made on the Distribution Date related to the prior Due Period, and (y) if specified to be as of the close of business on the last day of any Due Period shall give effect to any payments, deposits or other
allocations made on the related Distribution Date. 
 “Accumulation Amount” means $83,333,333.34; provided,
however, if the commencement of the Accumulation Period is delayed in accordance with Section 4.02 of the Indenture Supplement, the Accumulation Amount shall be determined in accordance with the definition of “Accumulation
Amount” in the Indenture Supplement. 
 “Accumulation Commencement Date” means March 1, 2009, or such later date
as the Calculation Agent on behalf of the Issuer determines in accordance with Section 4.02 of the Indenture Supplement. 
 “Accumulation Period” has the meaning set forth in the Indenture Supplement. 
 “Accumulation Period
Length” means 12 months; provided, however, if the commencement of the Accumulation Period is delayed in accordance with Section 4.02 of the Indenture Supplement, the Accumulation Period Length shall be determined in
accordance with the definition of “Accumulation Period Length” in the Indenture Supplement. 
 “Accumulation Reserve
Funding Period” shall not apply if the Calculation Agent on behalf of the Issuer notifies the Indenture Trustee that it expects the Accumulation Period Length to be adjusted to one (1) month, and otherwise shall mean a period
commencing on the first Distribution Date on which a condition in the right column of the following table was in effect on the immediately preceding Distribution Date, if the Distribution Date is a Distribution Date described in the corresponding
left column of the following table, and ending on the Distribution Date immediately preceding the earlier to occur of: 
 (x) the Expected
Maturity Date for the Class A(2008-2) Notes and 
 (y) the Principal Payment Date on which the Outstanding Dollar Principal Amount of the
Class A(2008-2) Notes is paid in full. 
  

			
	 Distribution Date:
	  	 Condition:

	(a) The Distribution Date occurring three (3) calendar months prior to the first scheduled Distribution Date of the Accumulation Period (as adjusted in accordance with Section 4.02 of
the Indenture Supplement) and any following Distribution Date	  	No condition.
		
	(b) The Distribution Date occurring four (4) calendar months prior to the first scheduled Distribution Date of the Accumulation Period (as adjusted in accordance with Section 4.02 of
the Indenture Supplement) and any following Distribution Date	  	The three-month rolling average Excess Spread Percentage is less than 4%.

  

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	(c) The Distribution Date occurring six (6) calendar months prior to the first scheduled Distribution Date of the Accumulation Period (as adjusted in accordance with Section 4.02 of the
Indenture Supplement) and any following Distribution Date	  	The three-month rolling average Excess Spread Percentage is less than 3%.
		
	(d) The Distribution Date occurring twelve (12) calendar months prior to the first scheduled Distribution Date of the Accumulation Period (as adjusted in accordance with Section 4.02
of the Indenture Supplement) and any following Distribution Date	  	The three-month rolling average Excess Spread Percentage is less than 2%.

 “Class A(2008-2) Adverse Event” means the occurrence of any of the following:
(a) an Early Redemption Event with respect to the Class A(2008-2) Notes or (b) an Event of Default and acceleration of the Class A(2008-2) Notes; provided, however, that if the only such event to have occurred is an Excess
Spread Early Redemption Event for which an Excess Spread Early Redemption Cure has occurred, a Class A(2008-2) Adverse Event shall not be treated as continuing from and after the date of such cure. 
 “Class A(2008-2) Note” means any Note, in the form set forth in Exhibit A hereto, designated therein as a Class A(2008-2) Note and duly
executed and authenticated in accordance with the Indenture. 
 “Class A(2008-2) Noteholder” means a Person in whose name a
Class A(2008-2) Note is registered in the Note Register. 
 “Class A(2008-2) Termination Date” means the earliest to occur
of (a) the Principal Payment Date on which the Outstanding Dollar Principal Amount of the Class A(2008-2) Notes is paid in full, (b) the Legal Maturity Date and (c) the date on which the Indenture is discharged and satisfied pursuant
to Article VI thereof. 
 “Excess Spread Percentage” for any Distribution Date means a fraction, the numerator of which is
the Excess Spread Amount for such Distribution Date multiplied by 12 and the denominator of which is the sum of the Nominal Liquidation Amounts of all Tranches of DiscoverSeries Notes as of the first day of the related Due Period. 

“Expected Maturity Date” means March 15, 2010. 
 “Indenture” means the Indenture dated as of July 26, 2007 between the Issuer and Indenture Trustee, as the same may be amended, supplemented, restated, amended and restated, replaced or otherwise
modified from time to time. 
  

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 “Indenture Supplement” means the Indenture Supplement dated as of July 26, 2007 for
the DiscoverSeries Notes, by and between the Issuer and the Indenture Trustee, as the same may be amended, supplemented, restated, amended and restated, replaced or otherwise modified from time to time. 
 “Initial Dollar Principal Amount” means $1,000,000,000, or such higher amount as is specified in any Notice of Additional Issuance under
Section 2.09. 
 “Interest Accrual Period” means, with respect to any Interest Payment Date, the period from and
including the previous Interest Payment Date (or, in the case of the first Interest Payment Date for any Class A(2008-2) Note, from and including the applicable Issuance Date) to but excluding such Interest Payment Date. 
 “Interest Payment Date” means the fifteenth day of each month commencing in April 2008, or if such fifteenth day is not a Business Day,
the next succeeding Business Day. 
 “Issuance Date” means March 11, 2008 with respect to all Class A(2008-2) Notes
issued on the date hereof and, with respect to any additional Class A(2008-2) Notes issued pursuant to Section 2.09, any Issuance Date specified in the Notice of Additional Issuance delivered thereunder. 
 “Legal Maturity Date” means September 17, 2012. 
 “LIBOR” means, with respect to any LIBOR Determination Date, the rate for deposits in United States dollars with a duration comparable to the relevant Interest Accrual Period which appears on Reuters
Screen LIBOR01 as of 11:00 a.m., London time, on such day. If such rate does not appear on Reuters Screen LIBOR01, the rate will be determined by the Indenture Trustee on the basis of the rates at which deposits in United States dollars are offered
by major banks in the London interbank market, selected by the Indenture Trustee, at approximately 11:00 a.m., London time, on such day to prime banks in the London interbank market with a duration comparable to the relevant Interest Accrual Period
commencing on that day. The Indenture Trustee will request the principal London office of at least four banks to provide a quotation of its rate. If at least two such quotations are provided, the rate will be the arithmetic mean of the quotations.
If fewer than two quotations are provided as requested, the rate for that day will be the arithmetic mean of the rates quoted by four major banks in New York City, selected by the Trustee, at approximately 11:00 a.m., New York City time, on that day
for loans in United States dollars to leading European banks with a duration comparable to the relevant Interest Accrual Period commencing on that day. If LIBOR with respect to a LIBOR Determination Date is not determined pursuant to the foregoing,
LIBOR with respect to such LIBOR Determination Date will be LIBOR with respect to the immediately prior LIBOR Determination Date. 
 “LIBOR Determination Date” means the second LIBOR Business Day immediately preceding the commencement of an Interest Accrual Period. 
 “LIBOR Business Day,” if applicable, shall mean a day other than a Saturday or a Sunday on which banking institutions in both the City of London, England and in New York, New York are not required or
authorized by law to be closed. 
  

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 “Note Interest Rate” means LIBOR + 1.00% per annum, calculated on the basis of the
actual number of days elapsed and a 360-day year. 
 “Notice of Additional Issuance” has the meaning set forth in
Section 2.09. 
 “Required Daily Deposit Target Finance Charge Amount” means, for any day in a Due Period, an amount
equal to the Class A Tranche Interest Allocation for the related Distribution Date; provided, however, that for purposes of determining the Required Daily Deposit Target Finance Charge Amount on any day on which the Class A Tranche
Interest Allocation cannot be determined because the LIBOR Determination Date for the applicable Interest Accrual Period has not yet occurred, the Required Daily Deposit Target Finance Charge Amount shall be the Class A Tranche Interest
Allocation determined based on a pro forma calculation made on the assumption that LIBOR will be LIBOR for the applicable period determined on the first day of such calendar month, multiplied by 1.25. 
 “Required Daily Deposit Target Principal Amount” means, for any day in a Due Period, (i) if such Due Period is in the Accumulation
Period for the Class A(2008-2) Notes, the Accumulation Amount, (ii) if such day is on or after the occurrence and during the continuance of a Class A(2008-2) Adverse Event, the Nominal Liquidation Amount of the Class A(2008-2) Notes, and
(iii) in all other circumstances, zero. 
 “Required Subordinated Amount of Class B Notes” means, for the Class
A(2008-2) Notes for any date of determination, an amount equal to the product of 
 (a) the Required Subordinated Percentage of Class B Notes
for such Class A(2008-2) Notes on such date of determination and 
 (b) the Nominal Liquidation Amount of such Class A(2008-2) Notes on such
date of determination; 
 provided however, that for any date of determination on or after the occurrence and during the continuation of a Class
A(2008-2) Adverse Event, the Required Subordinated Amount of Class B Notes for the Class A(2008-2) Notes will be the greater of 
 (x) the
amount determined above for such date of determination and 
 (y) the amount determined above for the date immediately prior to the date on
which such Class A(2008-2) Adverse Event shall have occurred. 
 “Required Subordinated Amount of Class C Notes” means, for
the Class A(2008-2) Notes for any date of determination, an amount equal to the product of 
 (a) the Required Subordinated Percentage of
Class C Notes for such Class A(2008-2) Notes on such date of determination and 
 (b) the Nominal Liquidation Amount of such Class A(2008-2)
Notes on such date of determination; 
  

 5 

 provided, however, that for any date of determination on or after the occurrence and during the
continuation of a Class A(2008-2) Adverse Event, the Required Subordinated Amount of Class C Notes for the Class A(2008-2) Notes will be the greater of 
 (x) the amount determined above for such date of determination and 
 (y) the amount determined above for the
date immediately prior to the date on which such Class A(2008-2) Adverse Event shall have occurred. 
 “Required Subordinated Amount
of Class D Notes” means, for the Class A(2008-2) Notes for any date of determination, zero, subject to adjustment in accordance with Section 2.02. 
 “Required Subordinated Percentage of Class B Notes” means, for the Class A(2008-2) Notes, 6.285714%, subject to adjustment in accordance with Section 2.02. 
 “Required Subordinated Percentage of Class C Notes” means, for the Class A(2008-2) Notes, 8.000000%, subject to adjustment in accordance
with Section 2.02. 
 “Reuters Screen LIBOR01” means the display page currently so designated on the Reuters Screen (or
such other page as may replace that page on that service for the purpose of displaying comparable rates or prices). 
 “Specified
Rating” means, for the Class A(2008-2) Notes, AAA with respect to Standard & Poors, Aaa with respect to Moody’s and AAA with respect to Fitch. 
 “Stated Principal Amount” means $1,000,000,000 or such higher amount as is specified in any Notice of Additional Issuance under Section 2.09. 
 “Targeted Accumulation Reserve Subaccount Deposit” means, with respect to any Distribution Date during the Accumulation Reserve Funding
Period, an amount equal to (i) 0.5% of the Outstanding Dollar Principal Amount of the Class A(2008-2) Notes as of the close of business on the last day of the related Due Period or (ii) any other amount designated by the Calculation Agent
on behalf of the Issuer; provided, however, that if such designation is of a lesser amount, the applicable Note Rating Agencies shall have provided prior written confirmation that a Ratings Effect will not occur with respect to such
change. 
 Section 1.02 Representations and Warranties of Issuer. The Issuer represents and warrants that: 
 (a) the Issuer has been duly formed and is validly existing as a statutory trust in good standing under the laws of the State of Delaware, and has full
power and authority to execute and deliver this Terms Document and to perform the terms and provisions hereof; 
 (b) the execution, delivery
and performance of this Terms Document by the Issuer have been duly authorized by all necessary corporate and statutory trust proceedings of any Beneficiary and the Owner Trustee, do not require any approval or consent of any governmental agency or
authority, and do not and will not conflict with any material provision of the Certificate of Trust or the Trust Agreement of the Issuer; 
  

 6 

 (c) this Terms Document is the valid, binding and enforceable obligations of the Issuer, except as the
same may be limited by receivership, insolvency, reorganization, moratorium or other laws relating to the enforcement of creditors’ rights generally or by general equity principles; 
 (d) to the best of the Issuer’s knowledge, this Terms Document will not conflict with any law or governmental regulation or court decree applicable
to it; 
 (e) the Issuer is not required to be registered under the Investment Company Act; 
 (f) all information heretofore furnished by the Issuer in writing to the Indenture Trustee for purposes of or in connection with this Terms Document or
any transaction contemplated hereby is, and all such information hereafter furnished by the Issuer in writing to the Indenture Trustee will be, true and accurate in every material respect or based on reasonable estimates on the date as of which such
information is stated or certified; and 
 (g) to the best knowledge of the Issuer, there are no proceedings or investigations pending
against the Issuer before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality having jurisdiction over the Issuer (A) asserting the invalidity of this Terms Document, (B) seeking to prevent
the consummation of any of the transactions contemplated by this Terms Document or (C) seeking any determination or ruling which in the Issuer’s judgment would materially and adversely affect the performance by the Issuer of its
obligations under this Terms Document or the validity or enforceability of this Terms Document. 
 Section 1.03 Representations and
Warranties of Indenture Trustee. The Indenture Trustee represents and warrants and any successor trustee shall represent and warrant that: 
 (a) The Indenture Trustee is organized, existing and in good standing under the laws of the United States of America; 
 (b) The
Indenture Trustee has full power, authority and right to execute, deliver and perform this Indenture, and has taken all necessary action to authorize the execution, delivery and performance by it of this Terms Document; and 
 (c) This Terms Document has been duly executed and delivered by the Indenture Trustee. 
 Section 1.04 Limitations on Liability. 
 (a) It is expressly understood and agreed by the parties hereto that (i) this Terms Document is executed and delivered by the Owner Trustee not individually or personally but solely as Owner Trustee under the Trust Agreement, in the
exercise of the powers and authority conferred and vested in it, (ii) each of the representations, undertakings and agreements herein made on the part of the Issuer is made and intended not as a personal representation, undertaking or agreement
by the Owner Trustee but is made and intended for the purpose of binding only the Issuer, (iii) nothing herein contained will be construed as creating any liability on the Owner Trustee individually or personally, to perform any covenant of the
Issuer either expressed or 

  

 7 

 
implied herein, all such liability, if any, being expressly waived by the parties to this Terms Document and by any Person claiming by, through or under them
and (iv) under no circumstances will the Owner Trustee be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or
undertaken by the Issuer under this Terms Document or any related documents. 
 (b) None of the Indenture Trustee, the Owner Trustee, the
Calculation Agent, any Beneficiary, the Depositor, any Master Servicer or any Servicer or any of their respective officers, directors, employees, incorporators or agents will have any liability with respect to this Terms Document, and recourse may
be had solely to the Collateral pledged to secure these Class A(2008-2) Notes under the Indenture, the Indenture Supplement and this Terms Document. 
 Section 1.05 Governing Law. THIS TERMS DOCUMENT WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATION LAW, WITHOUT REFERENCE
TO ANY CONFLICT OF LAW PROVISIONS THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANY OTHER STATE. 
 Section 1.06 Counterparts.
This Terms Document may be executed in any number of counterparts, each of which when so executed will be deemed to be an original, but all such counterparts will together constitute but one and the same instrument. 
 Section 1.07 Ratification of Indenture and Indenture Supplement. As supplemented by this Terms Document, each of the Indenture and the Indenture
Supplement is in all respects ratified and confirmed and the Indenture as supplemented by the Indenture Supplement and this Terms Document shall be read, taken and construed as one and the same instrument. 
 ARTICLE II 
 The Class A(2008-2) Notes

 Section 2.01 Creation and Designation. There is hereby created a Tranche of Class A Notes to be issued pursuant to the
Indenture and the Indenture Supplement to be known as the “DiscoverSeries Class A(2008-2) Notes.” 
 Section 2.02 Adjustments to
Required Subordinated Percentages and Amount. 
 (a) On any date, the Issuer may, at the direction of the Beneficiary, change the Required
Subordinated Percentage of Class B Notes or the Required Subordinated Percentage of Class C Notes, in each case for the Class A(2008-2) Notes without the consent of any Noteholders; provided that the Issuer has received written confirmation
from each applicable Note Rating Agency that the change in such percentage will not result in a Ratings Effect for any Tranche of Outstanding DiscoverSeries Notes. On any date, the Issuer may, at the direction of the Beneficiary, change the Required
Subordinated Amount of Class D Notes for the Class A(2008-2) Notes (though not below zero) and may add such definitions and other terms and make such additional amendments to this Terms Document as shall be necessary to determine such Required
Subordinated Amount of Class D Notes without the consent of any Noteholders; 

  

 8 

 
provided that the Issuer has received written confirmation from each applicable Note Rating Agency that the change in such percentage and such other
amendments will not result in a Ratings Effect for any Tranche of Outstanding DiscoverSeries Notes; provided, however, that at any time the Class D Notes are or will be held by Discover Bank or any of its affiliates, the Required Subordinated
Amount of Class D Notes for these Class A(2008-2) Notes may not be increased above zero. 
 (b) On any date, the Issuer may, at the direction
of the Beneficiary, replace all or a portion of the Required Subordinated Amount of Class B Notes, the Required Subordinated Amount of Class C Notes or the Required Subordinated Amount of Class D Notes, in each case for the Class A(2008-2) Notes
with a different form of credit enhancement (including, without limitation, a cash collateral account, a letter of credit, a reserve account, a surety bond, an insurance policy or a collateral interest, or any combination thereof) and may add such
definitions and other terms and make such additional amendments to this Terms Document as shall be necessary for such replacement without the consent of any Noteholders, provided that the Issuer has received written confirmation from each
applicable Note Rating Agency that such replacement and such other amendments will not result in a Ratings Effect for any Tranche of Outstanding DiscoverSeries Notes. 
 Section 2.03 Interest Payment. For each Interest Payment Date, the amount of interest due with respect to the Class A(2008-2) Notes shall be an amount equal to 
  

	 	(i)	(A) a fraction, the numerator of which is the actual number of days in the related Interest Accrual Period and the denominator of which is 360, times

 (B) the Note Interest Rate in effect with respect to such related Interest Accrual Period, times 
  

	 	(ii)	the Outstanding Dollar Principal Amount of the Class A(2008-2) Notes determined as of the first date of such related Interest Accrual Period, plus 

any Class A Tranche Interest Allocation Shortfall for such Class A(2008-2) Notes for the immediately preceding Distribution Date, together with interest thereon
at the Note Interest Rate in effect with respect to such related Interest Accrual Period, calculated on the basis of the actual number of days in the related Interest Accrual Period and a 360-day year. 
 Section 2.04 Notification of LIBOR. On each LIBOR Determination Date, the Indenture Trustee shall send to the Issuer, the Beneficiary, each
applicable Master Servicer and any stock exchange on which the Class A(2008-2) Notes are then listed (if the rules of such exchange so require), by facsimile transmission or electronic transmission, notification of LIBOR for the following Interest
Accrual Period. 
 Section 2.05 Payments of Interest and Principal. 
 (a) The Issuer will cause interest to be paid on each Interest Payment Date and principal to be paid on the Expected Maturity Date; provided,
however, that it shall not be an Event of 

  

 9 

 
Default if principal is not paid in full on such Expected Maturity Date unless funds for such payment have been allocated in accordance with
Section 3.01 of the Indenture Supplement; and provided, further, that if a Class A(2008-2) Adverse Event has occurred and is continuing, principal will instead be payable in monthly installments on each Principal Payment Date for
the Class A(2008-2) Notes in accordance with Sections 3.01 and 3.05 of the Indenture Supplement. All payments of interest and principal on the Class A(2008-2) Notes shall be made as set forth in Section 1101 of the Indenture. 
 (b) The right of the Class A(2008-2) Noteholders to receive payments from the Issuer will terminate on the Class A(2008-2) Termination Date. 

(c) All payments of principal, interest or other amounts to the Class A(2008-2) Noteholders will be made pro rata based on the Stated Principal
Amount of their Class A(2008-2) Notes. 
 Section 2.06 Form of Delivery of Class A(2008-2) Notes; Depository; Denominations.

 (a) The Class A(2008-2) Notes shall be delivered in the form of a Global Note which shall be a Registered Note as provided in
Section 204 of the Indenture. The form of the Class A(2008-2) Notes is attached hereto as Exhibit A. 
 (b) The Depository for the Class
A(2008-2) Notes shall be The Depository Trust Company, and the Class A(2008-2) Notes shall initially be registered in the name of Cede & Co., its nominee. 
 (c) The Class A(2008-2) Notes will be issued in minimum denominations of $100,000 and integral multiples of $1,000 in excess of that amount. 
 Section 2.07 Delivery and Payment for the Class A(2008-2) Notes. The Issuer shall execute and deliver the Class A(2008-2) Notes to the Indenture
Trustee for authentication, and the Indenture Trustee shall deliver the Class A(2008-2) Notes when authenticated, each in accordance with Sections 203 and 303 of the Indenture. 
 Section 2.08 Targeted Deposits to the Accumulation Reserve Account. The deposit targeted to be made to the Accumulation Reserve Subaccount for the
Class A(2008-2) Notes for any Due Period during the Accumulation Reserve Funding Period will be an amount equal to the Targeted Accumulation Reserve Subaccount Deposit minus any amount on deposit in the Accumulation Reserve Subaccount for the
Class A(2008-2) Notes. 
 Section 2.09 Additional Issuances of Notes. Subject to clauses (ii), (iii), (iv) and (v) of
Sections 2.02 and Section 2.03 of the Indenture Supplement, the Issuer may issue additional Class A(2008-2) Notes, so long as the following conditions precedent are satisfied: 
 (a) the Issuer shall have given the Indenture Trustee written notice of such issuance of additional Class A(2008-2) Notes (the “Notice of
Additional Issuance”) at least one (1) Business Day in advance of the Issuance Date thereof, which notice shall include: 
  

	 	(i)	the Issuance Date of such additional Class A(2008-2) Notes; 

  

 10 

	 	(ii)	the amount of such additional Class A(2008-2) Notes being offered and the resulting Initial Dollar Principal Amount and Stated Principal Amount of Class A(2008-2) Notes;

  

	 	(iii)	the date from which interest on such additional Class A(2008-2) Notes will accrue (which may be a date prior to the date of issuance thereof); 

  

	 	(iv)	the first Interest Payment Date on which interest will be paid on such additional Class A(2008-2) Notes; and 

  

	 	(v)	any other terms that the Issuer set forth in such notice of issuance of additional Class A(2008-2) Notes to clarify the rights of Holders of such additional Class A(2008-2) Notes or
the effect of such issuance of additional Class A(2008-2) Notes on any calculations to be made with respect to the Class A(2008-2) Notes, Class A, or the Issuer. 

 All such terms shall be incorporated into and form a part of this Terms Document on and after the effective date of such Class A(2008-2) Notes; and 
 (b) no Class A(2008-2) Adverse Event has occurred and is continuing. 
 The Issuer shall not have to satisfy the conditions set forth in Section 310 of the Indenture in connection with an issuance of additional Class A(2008-2) Notes so long as such conditions were satisfied or waived
in connection with the initial issuance of Class A(2008-2) Notes. 
 [Remainder of page intentionally blank; signature page follows] 

  

 11 

 IN WITNESS WHEREOF, the parties hereto have caused this Terms Document to be duly executed, all as of the day and year
first above written. 
  

			
	DISCOVER CARD EXECUTION NOTE TRUST,
	  as Issuer
		
	By:	 	Wilmington Trust Company,
		 	  not in its individual capacity but solely
		 	  as Owner Trustee
		
	By:	 	 /s/ Jennifer A. Luce

	Name:	 	Jennifer A. Luce
	Title:	 	Sr. Financial Services Officer
	
	 U.S. BANK NATIONAL ASSOCIATION,
   as Indenture Trustee

		
	By:	 	 /s/ Patricia M. Child

	Name:	 	Patricia M. Child
	Title:	 	Vice President

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