Document:

Exhibit 10.3

 Exhibit 10.3 
 AMENDMENT NO. 2 
 This AMENDMENT NO. 2, dated as of February 6, 2009 (this
“Amendment”), among WORLDSPACE, INC., a Delaware corporation, as a debtor and a debtor in possession, (“WorldSpace”), AFRISPACE, INC., a Maryland corporation, as a debtor and a debtor in possession
(“AfriSpace”), WORLDSPACE SYSTEMS CORPORATION, a Delaware corporation, as a debtor and a debtor in possession (“Systems,” and together with WorldSpace and AfriSpace, the “Borrowers”),
CITADEL ENERGY HOLDINGS LLC, a Cayman Islands limited liability company (“Citadel”), HIGHBRIGE INTERNATIONAL LLC, a Cayman Islands limited liability company (“Highbridge”), OZ MASTER FUND, LTD.,
a Cayman Islands limited liability company (“OZ”), and SILVER OAK CAPITAL LLC, a Delaware limited liability company (“Silver Oak”), amends that certain SENIOR SECURED SUPER PRIORITY PRIMING DEBTOR IN
POSSESSION CREDIT AGREEMENT dated as of November 5, 2008 (as amended, modified, supplemented or restated and in effect from time to time, the “DIP Credit Agreement”), among the Borrowers and Citadel, Highbridge, OZ and Silver
Oak (collectively, the “Lenders” and individually, a “Lender”). 
 WITNESSETH 
 WHEREAS, the Borrowers have requested that the Lenders agree to amend certain of the terms and provisions of the DIP Credit Agreement, as
specifically set forth in this Amendment; 
 WHEREAS, the Lenders have agreed to modify certain provisions of the DIP Credit Agreement
in accordance with the terms hereof; 
 NOW THEREFORE, in consideration of the mutual agreements contained in the DIP Credit Agreement
and herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 
 AGREEMENTS 
 §1. Defined Terms. Terms not otherwise defined herein which
are defined in the DIP Credit Agreement shall have the same respective meanings herein as therein. 
 §2. Amendments to
the DIP Credit Agreement. Subject to the satisfaction of the conditions set forth in Section 3 of this Amendment, the DIP Credit Agreement is hereby amended as follows: 
 (a) Amendment to Section 1.01 (Defined Terms). Section 1.01 of the DIP Credit Agreement is hereby amended by
inserting the following in the definition of “Budget” before the period at the end of the definition: “, as further amended by the Budget attached as Exhibit A to that certain Amendment No. 1 to this Credit Agreement, dated as
of February 6, 2009”. 
 (b) Amendment to Section 1.01 (Defined Terms). Section 1.01 of the
DIP Credit Agreement is hereby amended by inserting the following in the definition of “Credit Agreement” before the period at the end of the definition: “, as amended, modified, supplemented or restated and in effect from time to
time”. 
 (c) Amendment to Section 1.01 (Defined Terms). Section 1.01 of the DIP Credit Agreement
is hereby amended by deleting the definition of “Maturity Date” contained therein and substituting in lieu thereof the following new definition: 
 “Maturity Date. That date which is the earliest of (a) February 27, 2009, (b) the effective date of the Borrowers’ Reorganization Plan that has been confirmed by an order of the
Bankruptcy Court; and (c) the date on which the Borrowers have consummated, pursuant to Section 363 of the Bankruptcy Code and a final order of the Bankruptcy Court, a sale or sales of all or substantially all of the Borrowers’
assets. 

 (d) Amendment to Section 1.01 (Defined Terms). Section 1.01 of
the DIP Credit Agreement is hereby amended by inserting the following new definition of “Supplemental Date” in alphabetical order: 
 “Supplemental Date. See §2.1 hereof. 
 (e) Amendment to Section 1.01 (Defined Terms).
Section 1.01 of the DIP Credit Agreement is hereby amended by inserting the following new definition of “Supplemental Order” in alphabetical order: 
 “Supplemental Order. An order of the Bankruptcy Court in the Case authorizing and approving that certain Amendment No. 2 to this Credit Agreement, dated as of February 6,2009, in form and substance
satisfactory to the Lenders, the Lenders’ Special Counsel and the Borrowers and their counsel.” 
 (f) Amendment
to Section 1.01 (Defined Terms). Section 1.01 of the DIP Credit Agreement is hereby amended by deleting clause (b) in the definition of “Interest Period” and substituting in lieu thereof the following new clause
(b): 
 “, and (b) with respect to each Term Loan made on the Closing Date, the Final Funding Date or the Supplemental Date,
(i) initially, the period commencing on the date on which such Term Loan is made and ending 30 days thereafter, and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Term Loan
and ending 30 days thereafter;”. 
 (g) Amendment to Section 1.01 (Defined Terms). Section 1.01
of the DIP Credit Agreement is hereby amended by deleting clause (b) in the definition of “Term Loan Commitment” and substituting in lieu thereof the following new clause (b): “[Intentionally Omitted.]” . 
 (h) Amendment to Section 1.01 (Defined Terms). Section 1.01 of the DIP Credit Agreement is hereby amended by
deleting the definition of “Total Term Loan Commitment” contained therein and substituting in lieu thereof the following new definition: 
 “Total Term Loan Commitment. The sum of the Term Loan Commitments. On the Closing Date, the Total Term Loan Commitment shall be $6,500,000, on the date on which the Final Order is entered, the Total Term Loan Commitment shall be
$13,000,000, and on the date the Supplemental Order is entered, the Total Term Loan Commitment shall be $14,300,000, in each case, as set forth on Schedule I-A. 
 (i) Amendment to Section 2.1. Section 2.1 of the DIP Credit Agreement is hereby deleted and replaced with the
following new Section 2.1: 
 “2.1 Term Loans. Subject to and upon the terms and conditions herein set forth, each
Lender severally and not jointly agrees to make a loan or loans (each, a “Term Loan” and 

 collectively, the “Term Loans”) to the Administrative Borrower, for the benefit of the
Borrowers, which Term Loans (i) shall not exceed, for any such Lender, the Term Loan Commitment of such Lender, (ii) shall not exceed, in the aggregate, the lesser of (A), the Total Term Loan Commitment and (B) the amount approved to
be borrowed by way of Term Loans in the Interim Order, the Final Order, or, as the case may be, the Supplemental Order, (iii) shall include the Term Loans made pursuant to the Emergency Order and outstanding on the Closing Date, (iv) shall
be made on the Closing Date, the date on which the Final Order is entered (the “Final Funding Date”), or the date on which the Supplemental Order is entered (the “Supplemental Date”) and (v) may be repaid or
prepaid in accordance with the provisions hereof, but once repaid or prepaid may not be reborrowed.” 
 (j) Amendment
to Section 2.2. Section 2.2 of the DIP Credit Agreement is hereby amended by deleting the first sentence thereof and substituting in lieu thereof the following: 
 “Each Term Loan, at the request of the applicable Lender shall be evidenced by a Term Loan Note, dated as of the Closing Date, the date on which the
Final Order is entered, or, as the case may be, the date on which the Supplemental Order is entered, and completed with appropriate insertions.” 
 (k) Amendment to Section 2.4.2 Section 2.4.2 of the DIP Credit Agreement is hereby amended by deleting the first sentence thereof and substituting in lieu thereof the following: 
 “2.4.2 Funding Procedures. Each Lender shall make available all amounts it is to fund to the Administrative Borrower, for the benefit of the
Borrowers in respect of any Term Loan, on the Closing Date, the Final Funding Date and the Supplemental Date, in immediately available funds to the Administrative Borrower, by depositing such amounts in the Controlled Account at Bank of America
being Account No. 00191-842-8058 or such other account as the Lenders may agree to be the Controlled Account.” 
 (1) Amendment to Section 13.1(n). Section 13.1(n) of the DIP Credit Agreement is hereby amended by replacing the phrase “by February 6, 2009” with the phrase “by February 27, 2009”.

 (m) Amendment to Schedule 1-A. Schedule 1-A to the DIP Credit Agreement is hereby deleted and replaced with the new
Schedule 1-A attached as Exhibit A to this Amendment. 
 (n) Amendment to Exhibit A. The Budget attached as Exhibit B
to this Amendment is the amended Budget as agreed by the Borrowers and the Lenders to replace the Budget attached to that certain Amendment No. 1 to the DIP Credit Agreement, dated as of January 6, 2009. 
 §3. Conditions to Effectiveness. This Amendment shall become effective upon the Lenders’ receipt (i) of a
fully-executed counterpart hereof signed by the Borrowers and each Lender, (ii) of a fully-executed counterpart of a Ratification of Guaranty signed by each Guarantor, (iii) entry of the Supplemental Order of the Bankruptcy Court approving
this Amendment in form and substance satisfactory to the Lenders, (iv) delivery by the Borrowers to each Lender of original replacement promissory notes evidencing the increased principal amount of the Term Loan Notes of each Lender resulting
from this Amendment, and (v) delivery by each Lender to the Borrowers of the original Term Loan Notes previously delivered to such Lender by the Borrowers, marked cancelled. 

 §4. Representations and Warranties. The Borrowers hereby represent and
warrant to the Lenders as follows: 
 (a) Ratification, Etc. Except as expressly amended or waived hereby, the
DIP Credit Agreement, the other Loan Documents and all documents, instruments and agreements related thereto, are hereby ratified and confirmed in all respects and shall continue in full force and effect. The DIP Credit Agreement, together with this
Amendment, shall be read and construed as a single agreement. All references in the Loan Documents to the DIP Credit Agreement or any other Loan Document shall hereafter refer to the DIP Credit Agreement or any other Loan Document as amended hereby.

 (b) Authority, Etc. The execution and delivery by the Borrowers of this Amendment and the performance by the
Borrowers of all of its agreements and obligations under the DIP Credit Agreement and the other Loan Documents as amended hereby are within the corporate authority of the Borrowers and have been duly authorized by all necessary corporate action on
the part of the Borrowers. 
 (c) Enforceability of Obligations. This Amendment, the DIP Credit
Agreement, as amended hereby, and the other Loan Documents constitute the legal, valid and binding obligation of each of the Borrowers, enforceable against each of them in accordance with their terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. 
 (d) No Default. Other than with respect to any Default or Event of Default as to which the Debtors have informed the Lenders
in writing prior to the date hereof, no Default or Event of Default has occurred and is continuing. 
 (e) Event of
Default. By its signature below, the Borrowers agree that it shall constitute an Event of Default if any representation or warranty made herein should be false or misleading in any material respect when made. 
 §5. No Other Amendments. Except as expressly provided in this Amendment, all of the terms and conditions of the DIP
Credit Agreement and the other Loan Documents remain in full force and effect. Nothing contained in this Amendment shall in any way prejudice, impair or affect any rights or remedies of any Lender or the Borrowers under the DIP Credit Agreement or
the other Loan Documents. This Amendment shall constitute a Loan Document. 
 §6. Execution in Counterparts.
This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but which together shall constitute one instrument. 
 §7. Expenses. Pursuant to Section 16 of the DIP Credit Agreement, all reasonable, out of pocket fees, costs and expenses incurred or sustained by the Lenders in connection with this
Amendment, including the reasonable fees and disbursements of legal counsel for the Lenders in producing, reproducing and negotiating the Amendment, will be for the account of the Borrowers whether or not this Amendment is consummated. 

 

 §8. Miscellaneous. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. The captions in this Amendment are for convenience of reference only and shall not define or limit the provisions hereof. 
 [Remainder of page intentionally left blank.] 

 IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above
written. 
  

			
	THE BORROWERS:
	
	 WORLDSPACE, INC., as a Debtor and Debtor in
 Possession

		
	By:	 	 /s/ Sridhar Ganesan

	Name:	 	Sridhar Ganesan
	Title:	 	CFO
	
	 AFRISPACE, INC., as a Debtor and Debtor in
 Possession

		
	By:	 	 /s/ Sridhar Ganesan

	Name:	 	Sridhar Ganesan
	Title:	 	CFO
	
	 WORLDSPACE SYSTEMS CORPORATION,
 as a
Debtor and Debtor in Possession

		
	By:	 	 /s/ Donald J. Frickel

	Name:	 	Donald J. Frickel
	Title:	 	Secretary
	
	THE LENDERS:
	
	CITADEL ENERGY HOLDINGS LLC
	 BY: CITADEL LIMITED PARTNERSHIP,
 ITS MANAGER

		
	By:	 	 /s/ Christopher Ramsay

	Name:	 	Christopher Ramsay
	Title:	 	Authorized Signatory

			
	HIGHBRIDGE INTERNATIONAL LLC
	BY: HIGHBRIDGE CAPITAL MANAGEMENT, LLC,
	ITS TRADING MANAGER
		
	By:	 	 /s/ Adam J. Chill

	Name:	 	Adam J. Chill
	Title:	 	Managing Director
	
	OZ MASTER FUND, LTD.,
	OZ MANAGEMENT LP, ITS INVESTMENT MANAGER
	 BY: OCH-ZIFF HOLDING CORPORATION,
 ITS GENERAL PARTNER

		
	By:	 	 /s/ Joel Frank

	Name:	 	Joel Frank
	Title:	 	Chief Financial Officer
	
	SILVER OAK CAPITAL LLC
		
	By:	 	 /s/ Michael L. Gordon

	Name:	 	Michael L. Gordon
	Title:	 	Authorized Signatory

 RATIFICATION OF GUARANTY 
 Each of the undersigned Guarantors hereby (a) acknowledges and consents to the foregoing Amendment and the Borrowers’ execution thereof;
(b) ratifies and confirms all of its obligations and liabilities under the Loan Documents to which it is a part and ratifies and confirms that such obligations and liabilities extend to and continue in effect with respect to, and continue to
guarantee and secure, as applicable, the Obligations of the Borrowers under the DIP Credit Agreement; (c) acknowledges and confirms that the liens and security interests granted pursuant to the Loan Documents are and continue to be valid and
perfected first priority liens and security interests (subject only to Permitted Liens) that secure all of the Obligations on and after the date hereof; (d) acknowledges and agrees that such Guarantor does not have any claim or cause of action
against any Lender (or any of its respective directors, officers, employees, attorneys or agents); and (e) acknowledges, affirms and agrees that such Guarantor does not have any defense, claim, cause of action, counterclaim, offset or right of
recoupment of any kind or nature against any of their respective obligations, indebtedness or liabilities to any Lender. Terms not otherwise defined herein which are defined in the DIP Credit Agreement shall have the same respective meanings herein
as therein. 
  

			
	ASIASPACE LIMITED
		
	By:	 	 /s/ Donald J. Frickel

	Name:	 	Donald J. Frickel
	Title:	 	Attorney - in - Fact
	
	WORLDSPACE SATELLITE COMPANY LTD.
		
	By:	 	 /s/ Donald J. Frickel

	Name:	 	Donald J. Frickel
	Title:	 	Asst. Secretary

 EXHIBIT A 

																					
	 	 	Extended 15-Wk Period	 	Extended 4-Wk Period	 	 	 
	 	 	Thru 1/23(A)	 	1/30(P)	 	Total(P)	 	2/6/2009	 	2/13/2009	 	 	2/20/2009	 	2/27/2009	 	Total	 	 	Total 19
Wk Period
	 Global Satellite Operations
	 		 		 		 		 			 		 		 			 	
	 AfriSpace ROC
	 		 		 		 		 			 		 		 			 	
	 Satellite Insurance
	 		 		 		 	—  	 	—  	 	 	—  	 	—  	 	—  	 	 	
	 ASI ROC Employees
	 		 		 		 	—  	 	24,710	 	 	—  	 	24,710	 	49,421	 	 	
	 Contract Employees
	 		 		 		 	7,600	 	14,000	 	 	7,600	 	—  	 	29,200	 	 	
	 Astrium in Orbit Support
	 		 		 		 	17,967	 	—  	 	 	—  	 	—  	 	17,987	 	 	
	 Antrix
	 		 		 		 	26,000	 	—  	 	 	—  	 	26,000	 	52,000	 	 	
	 Mauritius Telecom
	 		 		 		 	12,500	 	—  	 	 	—  	 	—  	 	12,500	 	 	
	 Opex/Audit
	 		 		 		 	—  	 	—  	 	 	—  	 	5,643	 	5,643	 	 	
	 US E&O Employees
	 		 		 		 	—  	 	8,083	 	 	—  	 	8,083	 	16,166	 	 	
		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 AfriSpace ROC
	 		 		 		 	64,067	 	46,793	 	 	7,600	 	64,436	 	182,896	 	 	
										
	 AsiaSpace ROC
	 		 		 		 		 			 		 		 			 	
	 Satellite Insurance
	 		 		 		 	—  	 	—  	 	 	—  	 	—  	 	—  	 	 	
	 Mauritius Telecom
	 		 		 		 	12,500	 	—  	 	 	—  	 	—  	 	12,500	 	 	
	 ASI ROC Employees
	 		 		 		 	103,008	 	—  	 	 	—  	 	—  	 	103,008	 	 	
	 Rent
	 		 		 		 	55,396	 	—  	 	 	—  	 	—  	 	55,396	 	 	
	 Opex
	 		 		 		 	—  	 	20,000	 	 	—  	 	—  	 	20,000	 	 	
		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 AfriSpace ROC
	 		 		 		 	170,904	 	20,000	 	 	—  	 	—  	 	190,904	 	 	
										
	 Ground and Broadcast Systems Support
	 		 		 		 	—  	 	13,400	 	 	—  	 	—  	 	13,400	 	 	
										
	 F3 & F4 Satellite Storage
	 		 		 		 		 			 		 		 			 	
	 Astrium Satellite Storage
	 		 		 		 	222,688	 	—  	 	 	—  	 	—  	 	222,668	 	 	
	 F-3 & F-4 Insurance
	 		 		 		 	57,600	 	—  	 	 	—  	 	—  	 	57,600	 	 	
	 Thales Satellite Storage
	 		 		 		 	112,000	 	—  	 	 	—  	 	—  	 	112,000	 	 	
		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 F3/F4 Subtotal
	 		 		 		 	392,288	 	—  	 	 	—  	 	—  	 	392,268	 	 	
										
	 Singapore BOC
	 		 		 		 	—  	 	—  	 	 	—  	 	—  	 	—  	 	 	
	 Employees
	 		 		 		 	—  	 	24,286	 	 	—  	 	—  	 	24,286	 	 	
	 Statutory Audit/Tax Return
	 		 		 		 	13,000	 	—  	 	 	—  	 	—  	 	13,000	 	 	
	 Opex
	 		 		 		 	—  	 	—  	 	 	5,000	 	—  	 	5,000	 	 	
	 Rent
	 		 		 		 	42,400	 	—  	 	 	21,200	 	—  	 	63,600	 	 	
		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 Singapore BOC
	 		 		 		 	55,400	 	24,286	 	 	26,200	 	—  	 	105,886	 	 	
										
	 Johannesburg BOC
	 		 		 		 	—  	 	—  	 	 	—  	 	—  	 	—  	 	 	
	 Employees
	 		 		 		 	—  	 	23,325	 	 	—  	 	—  	 	23,325	 	 	
	 Statutory Audit/Tax Return
	 		 		 		 	13,000	 	—  	 	 	—  	 	—  	 	13,000	 	 	
	 Opex
	 		 		 		 	—  	 	—  	 	 	5,000	 	—  	 	5,000	 	 	
	 Rent
	 		 		 		 	18,960	 	—  	 	 	—  	 	—  	 	18,960	 	 	
		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 Johannesburg BOC
	 		 		 		 	31,960	 	23,325	 	 	5,000	 	—  	 	60,285	 	 	
										
	 Total Satellite Operations and BOC’s
	 		 		 		 	714,599	 	127,804	 	 	38,800	 	64,436	 	945,638	 	 	
										
	 W/S Europe
	 		 		 		 		 			 		 		 			 	
	 W/S Italia
	 		 		 		 	—  	 	100,000	 	 	—  	 	10,000	 	110,000	 	 	
	 W/S France – Operating Cost
	 		 		 		 	—  	 	28,393	 	 	—  	 	—  	 	28,393	 	 	
	 W/S France – Quarterly Tax and Remedy Cost
	 		 		 		 	—  	 	—  	 	 	—  	 	—  	 	—  	 	 	
	 W/S France Statutory Audit
	 		 		 		 	—  	 	—  	 	 	—  	 	—  	 	—  	 	 	
	 US E&O Support
	 		 		 		 	—  	 	18,013	 	 	—  	 	18,013	 	36,026	 	 	
	 US Sales Employees
	 		 		 		 	—  	 	11,547	 	 	—  	 	11,547	 	23,094	 	 	
	 Less Graham Bayley Included in Section 3
	 		 		 		 	—  	 	(13,400	)	 	—  	 	—  	 	(13,400	)	 	
		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 W/S Europe
	 		 		 		 	—  	 	144,553	 	 	—  	 	39,560	 	184,113	 	 	
										
	 Silver Spring Office
	 		 		 		 		 			 		 		 			 	
	 Facilities
	 		 		 		 	58,738	 	—  	 	 	—  	 	—  	 	58,738	 	 	
	 CRO
	 		 		 		 	—  	 	100,000	 	 	—  	 	50,000	 	150,000	 	 	
	 G&A Employees
	 		 		 		 	—  	 	38,829	 	 	—  	 	38,829	 	77,657	 	 	
	 IT Employees
	 		 		 		 	—  	 	26,386	 	 	—  	 	26,386	 	52,773	 	 	
	 Content Employees
	 		 		 		 	—  	 	6,004	 	 	—  	 	6,004	 	12,009	 	 	
	 E&O Employees
	 		 		 		 	—  	 	—  	 	 	—  	 	—  	 	—  	 	 	
	 Finance Employees
	 		 		 		 	—  	 	23,325	 	 	—  	 	23,325	 	46,650	 	 	
	 Legal & Regulatory Employees
	 		 		 		 	—  	 	28,867	 	 	—  	 	28,867	 	57,734	 	 	
	 Health Ins
	 		 		 		 	—  	 	—  	 	 	—  	 	72,000	 	72,000	 	 	
	 Taxes
	 		 		 		 	—  	 	—  	 	 	—  	 	—  	 	—  	 	 	
	 Insurance
	 		 		 		 	23,000	 	—  	 	 	—  	 	—  	 	23,000	 	 	
	 Former Employee Settlement (Singapore/SA)
	 		 		 		 		 			 		 	50,000	 	50,000	 	 	
	 Microsoft
	 		 		 		 	—  	 	—  	 	 	—  	 	—  	 	—  	 	 	
	 Net Magic
	 		 		 		 	—  	 	—  	 	 	—  	 	22,769	 	22,769	 	 	
	 Misc Corporate Expenses
	 		 		 		 	7,500	 	7,500	 	 	7,500	 	7,500	 	30,000	 	 	
		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 Silver Spring Office
	 		 		 		 	89,238	 	230,911	 	 	7,500	 	325,681	 	653,330	 	 	
		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Total Operating Cost
	 	8,221,201	 	653,897	 	8,875,098	 	803,836	 	503,268	 	 	46,300	 	429,677	 	1,783,081	 	 	10,658,179
		 		 		 		 		 			 		 		 			 	

																						
										
	 Professional Fees (Paid)
	 		 		 		 			 		 			 		 			 	
	 Debtor Legal Counsel
	 		 		 	939,565	 			 		 	800,000	 	 		 	800,000	 	 	1,739,565
	 Debtor Financial Advisors
	 		 		 	204,473	 			 		 	80,000	 	 		 	80,000	 	 	284,473
	 Unsecured Creditor Counsel/FA
	 		 		 	173,000	 			 		 	100,000	 	 		 	100,000	 	 	273,000
	 Claims Agent/Court Costs
	 		 		 	67,500	 			 		 	20,000	 	 		 	20,000	 	 	87,500
		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Total Professional Fees (Paid)
	 		 		 	1,384,538	 	—  	 	 	—  	 	1,000,000	 	 	—  	 	1,000,000	 	 	2,384,538
		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Total Cash Disbursements
	 	9,605,739	 	653,897	 	10,259,636	 	803,836	 	 	503,268	 	1,046,300	 	 	429,677	 	2,783,081	 	 	13,042,717
		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
										
	 Professional Fees (Accrued)
	 		 		 		 			 		 			 		 			 	
	 Debtor Legal Counsel
	 		 		 	810,436	 	43,750	 	 	43,750	 	(756,250	)	 	43,750	 	(625,000	)	 	185,435
	 Debtor Financial Advisors
	 		 		 	245,527	 	12,500	 	 	12,500	 	(67,500	)	 	12,500	 	(30,000	)	 	215,527
	 Unsecured Creditor Counsel/FA
	 		 		 	752,000	 	12,500	 	 	12,500	 	(87,500	)	 	12,500	 	(50,000	)	 	702,000
	 Claims Agent/Court Costs
	 		 		 	134,000	 	6,250	 	 	6,250	 	(13,750	)	 	6,250	 	5,000	 	 	139,000
		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Professional Fees (Accrued)
	 		 		 	1,941,962	 	75,000	 	 	75,000	 	(925,000	)	 	75,000	 	(700,000	)	 	1,241,962
	 DIP Size
	 		 		 	13,000,000	 	13,000,000	 	 	14,300,000	 	14,300,000	 	 	14,300,000	 	14,300,000	 	 	14,300,000
	 DIP Availability
	 		 		 	798,402	 	(80,434	)	 	641,298	 	519,998	 	 	15,321	 	15,321	 	 	15,321
	 Cash
	 		 		 	185,000	 	185,000	 	 	185,000	 	185,000	 	 	185,000	 	185,000	 	 	185,000
		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Total Liquidity
	 		 		 	983,402	 	104,566	 	 	826,298	 	704,998	 	 	200,321	 	200,321	 	 	200,321
										
	 Total Professional Fees (Accrued /Paid)
	 		 		 		 			 		 			 		 			 	
	 Debtor Legal Counsel
	 		 		 	1,750,000	 	43,750	 	 	43,750	 	43,750	 	 	43,750	 	175,000	 	 	1,925,000
	 Debtor Financial Advisors
	 		 		 	450,000	 	12,500	 	 	12,500	 	12,500	 	 	12,500	 	50,000	 	 	500,000
	 Unsecured Creditor Counsel/FA
	 		 		 	925,000	 	12,500	 	 	12,500	 	12,500	 	 	12,500	 	50,000	 	 	975,000
	 Claims Agent/Court Costs
	 		 		 	201,500	 	6,250	 	 	6,250	 	6,250	 	 	6,250	 	25,000	 	 	226,500
		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Total Professional Fees (Accrued / Paid)
	 		 		 	3,326,500	 	75,000	 	 	75,000	 	75,000	 	 	75,000	 	300,000	 	 	3,626,500Management Services Agreement

 Exhibit 10.128 
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 MANAGEMENT SERVICES AGREEMENT 
 MANAGEMENT SERVICES AGREEMENT (this “Agreement”), made and entered into this 3rd day of February, 2009, by and between Charles & Colvard, Ltd. (“C&C”), a North Carolina corporation, and Bird Capital Group,
Inc. (“BCG”), a Nevada corporation. 
 1. Services to be Provided. BCG agrees to provide to C&C management services
intended to initiate and lead a turnaround of C&C’s business, including the services of BCG personnel resources, whether as BCG employees or as consultants or as other third party resources, any and all of which will be provided by BCG at
its cost (other than the costs, expenses, Monthly Management Fees (hereinafter defined), bonuses and other remuneration which C&C is obligated to pay BCG or Bird pursuant to the terms of this Agreement) and as BCG, in its sole and absolute
discretion, may deem appropriate, but specifically including the management services of Richard A. Bird (“Bird”) to serve as non-employee CEO of C&C on a full-time basis during the term of this Agreement. 
 Bird’s duties as non-employee CEO of C&C will include all the normal CEO executive duties, including without limitation those set forth in
C&C’s bylaws and corporate governance policies, and providing leadership to C&C’s employees and to all aspects of C&C’s business, developing appropriate operational improvements to improve growth and profitability of
C&C’s business, implementing appropriate sound management procedures and practices, reporting to C&C’s Board of Directors (the “Board”) regularly, and providing other services as reasonably requested by the Board that are
customarily provided by a CEO, including without limitation the execution and filing of all documents and certifications required to be signed by C&C’s CEO or principal executive officer under all applicable securities laws and regulations.

 Subject to any direction to the contrary from the Board, C&C agrees that, during any term of this Agreement, only Bird as non-employee
CEO will be empowered by C&C to enter into contracts on behalf of C&C, which C&C shall assure by suitable affirmative disempowerment of any other officers of C&C. Bird may from time to time authorize other officers of C&C to
enter into contracts on behalf of C&C. 
 On or before April 15, 2009, BCG (in collaboration with consulting resources in the areas
of international business, global marketing and other areas as deemed appropriate by BCG and as engaged by BCG in its sole and absolute discretion and paid for by BCG) will provide C&C with a written report setting forth a detailed and specific
strategy for growth and competitive success to be the basis for structuring and aligning C&C’s worldwide positioning, marketing, organization and actions. Such strategy shall address the issues set forth on Exhibit A attached hereto and
incorporated herein by reference and such other issues as BCG may deem appropriate. Subject to the approval of the Board, Bird as non-employee CEO shall implement the elements of the strategy as approved and adopted by the Board and manage C&C
to achieve the goals to be accomplished thereby. 
 BCG shall endeavor to direct the services it provides toward the goals of increased sales
for C&C, reduced operational costs for C&C, improved marketing of C&C’s products, and increased shareholder value for C&C’s shareholders. 

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 2. Monthly Management Fee. C&C agrees to pay to BCG in cash a monthly fee (the
“Monthly Management Fee”) in advance on the first day of each month during the term of this Agreement. The initial Monthly Management Fee for the remainder of calendar year 2009 beginning on February 1, 2009 shall be $75,000.00.
Beginning January 1, 2010 and on January 1 in each succeeding year of the term hereof, the Monthly Management Fee shall be adjusted as hereinafter set forth. If four percent (4%) of C&C’s annual net sales (the “4%
Sales”) for any calendar year (or, with respect to the first and last years of the term of this Agreement, the portion of such calendar year) during the term of this Agreement, shall exceed the aggregate Monthly Management Fees paid hereunder
with respect to such calendar year (or portion thereof), C&C will immediately pay to BCG in cash the amount by which such 4% Sales exceeds such aggregate Monthly Management Fees paid with respect to such calendar year (or portion thereof). For
each successive calendar year of the term hereof beginning January 1, 2010, the Monthly Management Fee shall be adjusted to the greater of (i) one-twelfth of the 4% Sales for the prior calendar year (or prorated portion thereof), or
(ii) $75,000.00, as adjusted upward (but never downward) by any percentage increase in the Consumer Price Index for Urban Consumers in the Raleigh, North Carolina metropolitan area, as published by the Bureau of Labor Statistics of the U.S.
Department of Commerce (the “Index”), as of December of the prior calendar year over the Index for December in the calendar year immediately preceding such prior year. If the Monthly Management Fees paid during any calendar year (or, with
respect to the first and last years of the term of this Agreement, the portion of such calendar year during the term of this Agreement) shall exceed both (A) the 4% Sales for such calendar year (or portion thereof) and (B) $900,000.00 (or,
with respect to a partial calendar year, a pro rata portion thereof), as adjusted annually by the Index as set forth herein, then any such excess by which the Monthly Management Fees paid during such calendar year (or, with respect to the first and
last years of the term of this Agreement, the portion of such calendar year during the term of this Agreement) shall exceed the greater of (A) or (B) above for such calendar year (or portion thereof) shall be deducted from the next
installments of the Monthly Management Fees payable hereunder or any other amounts otherwise payable hereunder and, in any event, any amount thereof which has not been repaid by BCG to C&C as indicated in this sentence shall be paid in full by
BCG to C&C upon the termination of this Agreement. For purposes hereof, “annual net sales” shall be determined by reference to C&C’s audited financial statements for the applicable calendar year (or, for any partial year, by
reference to C&C’s financial statements for such partial year). Annual net sales for any partial year shall mean the net sales determined in accordance herewith for the actual portion of the year which has expired. 
 Bird shall be reimbursed promptly by C&C for any reasonable out-of-pocket expenses that are incurred by Bird in performing his duties as non-employee
CEO under this Agreement, including, without limitation, his reasonable travel expenses, such expenses to be reimbursed in accordance with C&C’s travel and expense reimbursement policy as approved by the Board. In no event shall such
expenses exceed $90,000.00 in any calendar year, prorated for any partial year, without the prior written approval of the Board. The out-of-pocket expenses of all other employees and consultants of BCG shall be paid by BCG. 
 Notwithstanding the foregoing provisions of this Section 2, the Monthly Management Fee shall be $175,000.00 per month for the first two months of
the term of this Agreement to compensate BCG for additional market assessment services and strategy formulation work. 
  

 2 

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 3. Short-term bonuses (first 12 months). In addition to the Monthly Management Fees to which
BCG is entitled under Section 2, C&C agrees to pay to BCG the following two short-term bonuses: 
 (a) a one-time bonus equal to ten
percent (10%) of any realized gross profit (i.e., the difference between net sales from the sale of finished goods inventory and the cost value of such inventory) which C&C collects in cash from the reduction, through net sales, of
C&C’s gross finished goods inventory (prior to any accounting reserves and including finished goods inventory on consignment) on C&C’s balance sheet on January 31, 2010, below C&C’s gross finished goods inventory
(prior to any accounting reserves and including finished goods inventory on consignment) on C&C’s balance sheet on January 31, 2009. For purposes of this calculation, (i) in determining the “gross profit” on any sales of
gross finished goods inventory, the “cost value” of such inventory shall mean the cost of goods sold related to such inventory determined in accordance with generally accepted accounting principles plus any applicable co-op
advertising allowances and/or marketing costs or expenses directly related to the sale of such inventory and (ii) any and all effects of any action by C&C to purchase (or accept return of) moissanite jewels and jewelry from Reeves Park
during the period from January 31, 2009 through January 31, 2010 shall be excluded from the calculation. The amount of this bonus, if any, will be calculated and paid in cash promptly after the later of (x) the date C&C files with
the Securities and Exchange Commission its Form 10-K for the calendar year ending December 31, 2009 or (y) the date C&C finalizes its unaudited financial statements for the month of January, 2010; provided, however, that any such bonus
shall be paid only on, as and when the applicable inventory net sales on which such bonus is payable are received by C&C in cash. Notwithstanding the foregoing, if the gross finished goods inventory on January 31, 2010 is lower than the
gross finished goods inventory on January 31, 2009 due, in whole or in part, to a Sale Transaction (as defined in Section 4(b)), then for purposes of calculating any bonus under this Section 3(a), the portion of the proceeds received
in such Sale Transaction which are allocated to the purchase price for the finished goods inventory shall be included in such calculation and the balance of such proceeds shall be used for purposes of determining any Termination Bonus under
Section 4(b). For the avoidance of any doubt, no bonus will be earned hereunder unless, as a result of net sales, C&C’s gross finished goods inventory on January 31, 2010 is less than C&C’s gross finished goods inventory
on January 31, 2009. An example of the computation of this bonus (using hypothetical numbers) is set forth on Exhibit B attached hereto and incorporated herein by this reference, and 
 (b) a ***** bonus equal to ***** which C&C receives from *****. 
 4. Long-term bonuses. In addition to the Monthly Management Fees to which BCG is entitled under Section 2 and the short-term bonuses to which BCG is entitled under Section 3, C&C agrees to pay to
BCG the following long-term bonuses: 
 (a) a bonus equal to twenty percent (20%) of C&C’s Adjusted Operating Income
(hereinafter defined) during the term of this Agreement, any such bonus to be paid to BCG by C&C in cash either (A) as payable annually for each calendar year during the term of this Agreement (but beginning with the shortened eleven month
period of calendar year 2009 from February 1, 2009 through December 31, 2009) within thirty (30) days after the calculation of C&C’s annual Adjusted Operating Income for the calendar year in question or the shortened 

  

 3 

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eleven-month period of calendar year 2009 (which calculation shall be made by reference to C&C’s audited financial statements for the applicable
year) or (B) as payable, upon any termination of this Agreement, for any applicable partial year period for the year in which such termination occurs and to be paid to BCG by C&C within the time period stated herein for payment of any
bonuses due to BCG upon any such termination and as calculated for the portion of the partial-year period from January 1 of such year of any such termination (or February 1, 2009 in the case of any such termination occurring in 2009)
through the date of any such termination. For purposes of this Agreement, “Adjusted Operating Income” shall mean C&C’s operating income before or excluding (as applicable) the following: (i) interest, income taxes,
depreciation and amortization; (ii) any charges or accruals for any potential bonuses payable to BCG under this Section 4(a); (iii) any charges or accruals for any potential bonus payable to BCG under Section 4(b); (iv) any
writedowns resulting from business conducted by Reeves Park, Inc. or C&C with J.C. Penney prior to February 1, 2009; (v) any financial impact/effect resulting from the settlement agreement with Reeves Park, Inc. dated January 15,
2009; (vi) any proceeds or recovery from, or legal costs related to, the Korean patent lawsuit and any class-action lawsuit or any lawsuit arising with respect to matters or occurrences prior to February 1, 2009; (vii) termination
costs of any current C&C employees (such exclusion of such termination costs not to exceed a total of $1,000,000 including all associated severance, benefits, and legal costs); and (viii) any effect of income tax refunds due and payable to
C&C applicable to tax years prior to 2009; and 
 (b) a one-time bonus (the “Termination Bonus”) equal to twenty percent
(20%) of the amount by which (i) C&C’s total market valuation on the earlier to occur of (A) the closing date of a sale or transfer (in one transaction or a series of related transactions) of all or substantially all of the
assets or capital stock of C&C, whether such sale or transfer is effected through a sale, merger, combination or consolidation, or otherwise (collectively, a “Sale Transaction”), or (B) the date that this Agreement is terminated,
exceeds (ii) C&C’s total market valuation at the closing market price on the last trading day prior to the date of this Agreement, which is $5,683,582.16 ($.31/share on 18,334,136 shares). If the Sale Transaction is a sale of all or
substantially all of the assets of C&C, the “total market valuation” on the closing date of the Sale Transaction shall be equal to C&C’s net after tax proceeds, or net after tax total economic consideration received, from such
sale, including in such proceeds the economic equivalent of any non-cash consideration received by C&C and the net present value economic equivalent of any deferred future income streams or payments accruing to C&C from such sale. In the
event the Sale Transaction is a merger or stock purchase, the “total market valuation” of C&C shall be the total acquisition value of C&C paid at closing by the buyer or other merger party. In all other instances, so long as
C&C’s common stock is then publicly traded on a national stock exchange or an automated quotation system, “total market valuation” shall be determined by multiplying (x) the average closing market price of a share of
C&C’s common stock on the days on which a sale of the stock occurred within the last thirty (30) days prior to the date in question (as reported on the national stock exchange or automated quotation system on which C&C’s
common stock so trades) by (y) the fully-diluted total outstanding number of shares of C&C’s common stock on the date in question (with the fully diluted total outstanding shares including only “in the money” options,
warrants or similar securities exercisable for or convertible into C&C common stock), and, if the common stock is not publicly traded and the parties are not able to agree upon the total market valuation, each of BCG and C&C shall select an
appraiser, the two appraisers so selected shall select a third appraiser, and the three appraisers shall determine the total market 

  

 4 

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valuation of C&C. If the three appraisers are unable to agree upon a valuation, the average of their appraised values shall be used. The appraisers shall
be impartial and independent and have experience in the valuation of similar companies. Any such bonus shall be paid in cash on the closing date of any Sale Transaction or within thirty (30) days of the date of any termination of this
Agreement, as applicable; provided, however that if this Agreement is terminated pursuant to Section 6 (i.e., a “Death or Incapacitation Termination”), then such bonus shall be paid in cash within sixty (60) days of such Death or
Incapacitation Termination. This Agreement shall be deemed to be terminated upon the payment of the Termination Bonus if not previously terminated by any other provision hereof. 
 5. Term and Nonperformance Termination. The initial term of this Agreement shall begin on the date of this Agreement and end on December 31,
2010, after which this Agreement will renew automatically annually for three successive one-year terms (“Extended Term or Terms”), except that C&C shall have the option to terminate this Agreement (a “Nonperformance
Termination”) at any time within thirty (30) days after receipt of the year-end audited financial statements for C&C for the calendar years 2010, 2011 or 2012 if and only if both C&C’s (i) annual sales (“Annual
Sales”), and (ii) Adjusted Operating Income are less than the following numbers for the applicable calendar year: 
  

					
	 Year
	  	Annual Sales
($Million)	  	Adjusted
Operating Income
($Million)
	 2010
	  	22.0	  	0.50
	 2011
	  	26.6	  	1.0
	 2012
	  	32.0	  	1.5

 If C&C, as determined by a vote of the Board, exercises its conditional option to terminate
this Agreement as above, then C&C shall pay to BCG, in cash within thirty (30) days of any such Nonperformance Termination, all moneys and bonuses due to BCG under this Agreement valued as of the date of such Nonperformance Termination.

 Notwithstanding any provision in this Agreement to the contrary, C&C shall have the right to terminate this Agreement at any time
“for cause” (a “Defined For Cause Termination”) only upon the occurrence of any of the following: 
 (i) BCG or Bird
shall fail to comply with this Agreement in any material respect, or to follow any reasonable directive of the Board as specifically related to Bird’s duties as non-employee CEO, and shall thereafter fail to cure such failure within thirty
(30) days after having received written notice thereof, which written notice shall specify in reasonable detail such failure as well as the steps required by C&C to be taken by BCG or Bird as applicable to cure such failure; 
 (ii) BCG or Bird shall be grossly negligent in the exercise of any duties hereunder, and shall thereafter fail to cure such gross negligence within
thirty (30) days after having received written notice thereof, which written notice shall specify in reasonable detail such gross 

  

 5 

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negligence as well as the steps required by C&C to be taken by BCG or Bird as applicable to cure such gross negligence; 
 (iii) Bird shall be convicted of or plead nolo contendere to (or otherwise not contest allegations of) any crime of moral turpitude or shall engage in
alcohol or prescription drug abuse or use any illegal drugs; or 
 (iv) BCG or Bird shall fail to be in material compliance with either the
Bylaws, Code of Business Conduct and Ethics or Corporate Governance Guidelines of C&C and shall fail to cure such failure within thirty (30) days after having received written notice thereof, which written notice shall specify in reasonable
detail such failure as well as the steps required by C&C to be taken by BCG or Bird as applicable to cure such failure. 
 Upon any such Defined For Cause Termination, C&C shall pay to BCG in cash within thirty
(30) days of any such Defined For Cause Termination all moneys and bonuses due to BCG under this Agreement except that C&C shall pay to BCG in cash the Termination Bonus within forty (40) days following the date of such Defined For
Cause Termination. In such event, the Termination Bonus shall be valued at the lower of its value as of the date of such Defined For Cause Termination or the thirtieth (30th) day following the date of any such Defined For Cause Termination. 
 6. Death or Incapacitation
Termination. If at any time during the term of this Agreement, Bird shall die or become physically incapacitated and physically unable to perform the duties of non-employee CEO of C&C for a period of twenty consecutive days, then C&C
shall have the right to terminate this Agreement (a “Death or Incapacitation Termination”) as of the date of Bird’s death or the date that Bird became physically unable to perform the duties, and C&C shall, within sixty
(60) days of any such Death or Incapacitation Termination, pay to BCG, in cash, all outstanding moneys and bonuses due under this Agreement, valued as of the date of such Death or Incapacitation Termination, except that C&C shall pay to BCG
within the sixty (60) day period only the amount of such outstanding moneys and bonuses due to BCG that can be paid and yet leave C&C with a cash (including cash equivalents) balance of a minimum of $3,000,000.00. Any such remaining balance
of such outstanding moneys and bonuses due to BCG, if not paid within the sixty (60) day period because of this C&C cash balance provision, shall be paid, together with accrued interest on any unpaid balance at an interest rate equal to the
concurrent U.S. commercial bank prime rate, by C&C within one year from the date of such Death and Incapacitation Termination. 
 C&C
shall have the right during (but not after) the term of this Agreement, but not the obligation, to obtain and maintain one or more policies of life insurance on the life of Bird and Bird agrees to cooperate fully and execute such reasonable
documents as C&C shall request in connection with such insurance; provided, however, that (a) the aggregate death-benefit amount of all such policies shall not exceed C&C’s estimated potential liability to BCG for payment of any
and all bonuses under this Agreement, (b) any and all proceeds paid to C&C upon Bird’s death shall first be used by C&C to promptly pay all moneys and bonuses then due to BCG under this Agreement, and (c) only C&C may be a
named beneficiary of any such policies. 
  

 6 

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 7. Expiration Termination. This Agreement will terminate (an “Expiration
Termination”) upon the latest date of the expiration of any Extended Term or Terms of this Agreement if no earlier Termination, as provided herein, has occurred. Upon any such Expiration Termination, C&C shall pay to BCG, in cash within
thirty (30) days of any such Expiration Termination, all moneys and bonuses due to BCG under this Agreement, valued as of the date of such Expiration Termination. 
 8. Change of Control Termination. If at any time prior to February 1, 2014, any person or entity of which BCG or Bird is not a partner, member, shareholder, officer, director or employee acquires or gains
ownership or control of, directly or indirectly, more than 50% of the outstanding voting ownership interests of C&C (a “Change of Control”), then BCG shall have the right, at its sole discretion and option, to terminate this Agreement
within thirty (30) days following such Change of Control (a “Change of Control Termination”), whereupon C&C shall pay to BCG, in cash within thirty (30) days of such Change of Control Termination, all moneys and bonuses due
to BCG under this Agreement, valued as of the date of such Change of Control Termination, plus an additional early termination payment equal to $1,400,000 if such Change of Control occurs before February 1, 2011, or $900,000 if such Change of
Control occurs on or after February 1, 2011; provided that, for any such Change of Control occurring on or after February 1, 2011, the additional early termination payment will be made only if either C&C’s Annual Sales or Adjusted
Operating Income has been greater than the performance number listed in Section 5 above for the calendar year immediately preceding the calendar year during which the Change of Control occurs. 
 In the event that Bird is a member of the Board at the time of any Board vote to determine acceptance or Board approval of any such Change of Control as
above, then Bird shall recuse himself from any such Board vote. 
 9. Board of Directors and Director Termination. Bird will continue
to be a member of the Board during the term of this Agreement as elected by the shareholders of C&C. C&C and/or the Board and/or the Nominating and Governance Committee of the Board shall nominate Bird as a member of the Board, and shall
recommend and fully support Bird’s election as a member of the Board, upon any occasion for nomination and/or election of members of the Board that may occur during any term of this Agreement. During the term of this Agreement, Bird will
receive Director compensation from C&C only as in accordance with C&C’s Director compensation policies (treating Bird for this purpose only as an employee director), provided however that C&C agrees and warrants that Bird will, in
any case, (a) be paid all Director fee payments owed to Bird prior to the date of this Agreement, and (b) maintain ownership of any and all rights to the Director Restricted Stock Award granted Bird on May 30, 2008 and vesting on
May 30, 2009. 
 If at any time during the term of this Agreement, Bird agrees to serve on the Board and is not elected to the Board, or
by any way other than his failure to stand for election or his resignation is not a member of the Board, then BCG shall have the right, at its sole discretion and option, to terminate this Agreement (a “Director Termination”), whereupon
C&C shall pay to BCG, in cash within sixty (60) days of any such Director Termination, all moneys and bonuses due to BCG under this Agreement, valued as of the date of such Director Termination. 
  

 7 

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 10. Clarification Disclosure and Acknowledgment of Conflict of Interest Procedures.

 The parties acknowledge and agree that Bird is both a member of the Board and the President of BCG. Each of C&C and BCG, by signing
below, acknowledges and agrees that each has dutifully initiated, responded to, considered, negotiated, and agreed to this Agreement, as the case may be for each, only in strict adherence and accordance with C&C’s Corporate Governance
Guidelines and C&C’s Code of Business Conduct and Ethics, particularly in regard to any actual or perceived conflicts of interest between C&C and Bird or BCG. 
 In particular, C&C hereby acknowledges and agrees that it requested from Bird and BCG a proposal for possible provision of management services. BCG
hereby acknowledges and agrees that it presented to C&C for possible consideration by the Board a proposal for management services to be delivered as in this Agreement and that Bird recused himself from any participation as a member of the Board
in any consideration of that proposal by the Board. 
 C&C acknowledges and agrees that, in considering BCG’s proposal (both by a
Special Committee of the Board formed for this special purpose and by the Board) and in negotiating this Agreement, Bird was excluded from participation in the Special Committee’s discussions and from participation in the Board’s
discussion and voting regarding this Agreement. C&C represents and warrants to BCG that (a) after consultation with its legal counsel, C&C has determined this Agreement to be in legal compliance with all known applicable laws and with
C&C’s Bylaws, Corporate Governance Guidelines, and Code of Business Conduct and Ethics, (b) the Audit Committee of the Board has approved this Agreement and recommended Board approval, and (c) the Board has voted to approve this
Agreement and to approve C&C’s execution of this Agreement. 
 11. Indemnification and D&O Insurance. C&C agrees that
the Indemnification Agreement effective as of May 27, 2008 between C&C and Bird shall continue in effect in accordance with its terms. In addition, subject to the proviso in the following paragraph, to the fullest extent permitted by
C&C’s Bylaws and the North Carolina Business Corporation Act, C&C agrees to indemnify and hold harmless BCG and Bird from and against any and all losses, claims, suits, actions, judgments, damages, costs, liabilities, and reasonable
expenses (including legal and other expenses reasonably incurred by BCG or Bird in connection with investigating or defending against any such loss, claim, damage, or liability) (collectively, “Losses”) as and when incurred arising out of
or based upon: (a) BCG’s proposal leading to this Agreement, and/or (b) this Agreement, and/or (c) BCG’s and/or Bird’s activities or services under this Agreement. In addition, at all times during which Bird is a member
of the Board and/or acting as non-employee CEO of C&C, C&C shall cause Bird to be covered by a D&O insurance policy issued by a reputable D&O insurance carrier with coverages and terms no less favorable than those contained in
C&C’s current D&O insurance policy. Notwithstanding the foregoing, if at any time C&C shall be unable, after exercising commercially reasonable efforts, to obtain D&O insurance coverage or the costs thereof are deemed by the
Board to be unreasonably high, then C&C may terminate its D&O insurance coverage or not obtain D&O insurance coverage, and in such event, BCG shall have the right to terminate this Agreement, whereupon C&C shall pay to BCG, in cash
within thirty (30) days of any such termination, all moneys and bonuses due to BCG under this Agreement, valued as of the date of such termination. 
  

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 C&C shall not be liable, however, in any such case to the extent that any such Loss is found in a
final judgment by a court of competent jurisdiction to have resulted primarily from bad faith, willful misconduct or gross negligence on the part of BCG or any affiliate of BCG or to the extent such Losses relate to BCG’s, Bird’s or their
affiliate’s activities which were at the time taken known or believed by BCG , Bird or their affiliates to be clearly in conflict with the best interests of C&C. This indemnity will survive any termination of this Agreement. In addition,
neither BCG nor any of its affiliates (including Bird) shall be liable to C&C or any third party for any special, consequential or exemplary damages (including lost or anticipated revenues or profits relating to the same) arising from any claim
relating to this Agreement or any of the services provided hereunder, whether such claim is based on warranty, contract, tort (including negligence or strict liability) or otherwise, even if an authorized representative of C&C is advised of the
possibility or likelihood of the same. 
 12. Covenant not to Compete. During the term of this Agreement and for a period of eighteen
(18) months following the termination hereof (provided that C&C shall not have failed to make any payment due hereunder and to cure such failure within ten (10) days after written notice thereof), and within the Territory as defined
herein, BCG and Bird (the “Covenanting Parties”) shall not knowingly, either directly or indirectly, invest in, own, manage, operate, or control or participate in the ownership, management, operation or control of, as employee, consultant
or otherwise, any business or entity engaged in, planning to become engaged in and/or otherwise generally conducting the business of manufacturing, distributing or selling silicon carbide jewels or silicon carbide jewelry. For purposes hereof
“Territory” shall mean the entire world, including without limitation the United States of America, Canada, Mexico, the North American continent, the South American continent, India, China, Japan, England, Ireland, the continents of
Europe, Asia, Africa, Antarctica and Australia, New Zealand, Bermuda, the Caribbean islands, the islands of the South Pacific, the Channel Islands and Iceland. The Covenanting Parties acknowledge that C&C conducts a world-wide business and that
the covenant herein is a reasonable restriction with respect to time, scope and territory and is entered into for a valuable consideration. C&C may enforce this covenant by injunction and exercise such other remedies as are available at law and
in equity. 
 13. Releases. C&C hereby releases BCG and its affiliates (including Bird) from any and all liability regarding any
actual or potential conflict of interest claims relating to this Agreement. 
 14. Governing Law. This Agreement shall be governed by
the laws of the State of North Carolina. 
 15. Notices. All notices hereunder shall be in writing and shall be delivered personally
or sent by recognized overnight courier (such as Federal Express) for next business day delivery, postage prepaid, by certified U.S. Mail, return receipt requested and postage prepaid, or by facsimile with electronic confirmation of
receipt, to the parties at the following addresses: to BCG to 1330 Post Oak Boulevard, Suite 1600, Houston, Texas, 77056, attn: Richard A. Bird, Telephone No. 713-302-3312, with copy to Warren W. Garden, Esq., Block & Garden, LLP,
Sterling Plaza, 5949 Sherry Lane, Suite 900, Dallas Texas 75225, telephone 214-866-0993, Fax No. 214-866-0991; and to Charles & Colvard, Ltd., 20 South Hampshire Court, Wilmington, Delaware 19807, attn: George R. Cattermole, Facsimile

  

 9 

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24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND IS DENOTED HEREIN BY ***** 
  

 
No.: 302- 636- 0559 with copy to Womble Carlyle Sandridge & Rice, PLLC, One Wachovia Center, Suite 3500, 301 South College Street, Charlotte, NC
28202-6037, attn.: Cyrus M. Johnson, Jr., Facsimile No.: 704-338-7809. A notice shall be deemed to be given only upon the confirmation of delivery by receipt by the party or refusal of acceptance of delivery. In the case of notice to BCG, delivery
shall be sufficient when it is made upon BCG or its counsel, Warren W. Garden by one of the designated methods. For purposes hereof, a business day shall be Monday through Friday, excluding days on which banks in Raleigh, North Carolina are
closed, and a notice shall be deemed to be delivered personally to BCG only when actually delivered to Richard A Bird or to BCG’s counsel, Warren W. Garden, or delivery is refused by such person. 
 Either party may change the address to which notice is given by giving notice of such change of address in accordance herewith. 
 16. Relationship of Parties. Except as specifically provided herein, none of the parties shall act or represent or hold itself out as having
authority to act as an agent or partner of any other party, or in any way bind or commit any other party to any obligations. Nothing contained in this Agreement shall be construed as creating a partnership, joint venture, agency, trust or other
association of any kind, each party being individually responsible only for its obligations as set forth in this Agreement. Neither party shall be responsible for the compensation, the withholding of taxes, workers compensation, or any other
employer liability for the employees and agents of the other party. Without limiting the generality of the foregoing, the parties acknowledge and agree that BCG is an independent contractor and that neither Bird nor BCG is an employee of C&C.
BCG shall timely withhold and pay all taxes and file all reports required by applicable law to be withheld, paid and filed for its employees, including without limitation Bird, and shall provide such worker’s compensation insurance coverage for
its employees as is required by law. 
 17. Joinder of Bird. Richard A. Bird joins herein solely to acknowledge and agree to the terms
hereof relating specifically to him and to specifically acknowledge and agree that he is not an employee of C&C and is not eligible for and has no right to receive any compensation or benefits from C&C or to participate in any employee
benefits plans or programs available to the employees of C&C, including without limitation welfare and retirement benefits. 
 18.
Audited Financial Statements. At all times during the term of this Agreement, C&C shall obtain year-end audited financial statements. 
 (Signatures are on the following page.) 
  

 10 

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24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND IS DENOTED HEREIN BY ***** 
  

 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement to be effective as of the
date first above written. 
  

									
	Charles & Colvard, Ltd.	 		 	BIRD CAPITAL GROUP, INC.
					
	By:	 	/s/ Frederick A. Russ	 		 	By	 	/s/ Richard A. Bird
		 	Frederick A. Russ	 		 		 	Richard A. Bird, President
		 	Interim Chairman	 		 		 	
				
		 		 		 	/s/ Richard A. Bird
		 		 		 	Richard A. Bird, individually and solely for the purposes specified in Section 17 above

  

 11 

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24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND IS DENOTED HEREIN BY ***** 
  

 EXHIBIT A 
 Strategy 
 The strategy or strategic plan developed by BCG shall include and/or address the following:

  

	 	•	 	 The company’s business model including marketing and sales strategies, approach to supply of SiC, vertical integration, product development and plan for patent
expiry as well as short term issues including reduction in on-hand inventory and returning the company to profitability. The plan must also address organizational issues and succession planning. 

  

	 	•	 	 A marketing and sales strategy to address 1) marketing mix including price, channel, positioning and product offerings, 2) clarification of the customer value
proposition and 3) approaches/messaging to the consumer. It also should address market penetration in attractive worldwide markets. 

  

	 	•	 	 A plan for possible differentiation of product offerings including the potential for multi-quality offerings, and evaluation of the possibility of building high-end
differentiated brands for larger, higher quality jewels as well as the mid-and mass-market brands for offerings of smaller, very good quality jewels through lower end channels. 

  

	 	•	 	 Evaluation of raw material supply agreements to determine needed renegotiation and development of alternative approaches to supply agreements including potential of
partnerships or mergers with current providers. 

  

	 	•	 	 Evaluation of manufacturing, consignment and licensing agreements and recommendations for any need to re-negotiate such agreements. 

  

	 	•	 	 Organization plan recommendations to support the strategy, addressing: cost reductions and efficiencies throughout the organization in order to be competitive while
maintaining/developing core competencies in sales, marketing, manufacturing and finance; need for new talent in the organization; and preparation of the company to operate profitably once the business plan has been developed and successfully
implemented. 

  

	 	•	 	 The plan shall be developed for accomplishment over a two to three year period. 

  

 A-1 

 REDACTED – OMITTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION PURSUANT TO RULE
24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND IS DENOTED HEREIN BY ***** 
  

 EXHIBIT B 
 Example of Computation of Bonus under Section 3(a) 
 (See attachment.)

  

 B-1 

 Attachment to Exhibit B 
 Section 3 (a) of Management Services Agreement 
  

															
		  			 			 	Determination of Net Margin for Calculating Inventory Bonus	  			 	% of Sales	 
	 Finished goods inventory at 1/31/09
	  	34,000,000	 	 			 	Net sales for the period 2/1/09-1/31/10	  	18,000,000	 	 		
	 Finished goods inventory on consignment at 1/31/09
	  	1,300,000	 	 			 		  			 		
		  	 	 	 			 		  			 		
	 Total finished goods inventory at 1/31/09
	  	35,300,000	 	 			 	Cost of goods sold for period 2/1/09 through 1/31/10 cost of goods (jewels and jewelry, net of returns for 2/1/09-1/31/10)	  	(7,200,000	)	 	-40.00	%
	 Finished goods Inventory at 1/31/10
	  	32,000,000	 	 			 	reserves and writeoffs of damaged jewels returned from sales transactions completed prior to 1/31/09	  	(500,000	)	 	-2.78	%
	 Less Reeves Park finished goods inventory returned during the period 2/1/09-1/31/10
	  	(2,000,000	)	 			 	reserves and writeoffs of damaged jewels from Reeves Park settlement attributable to sales transactions prior to 1/31/09	  	(1,000,000	)	 	-5.56	%
		  			 			 	writeoffs of inventory for damaged jewels, returned goods, etc. for sales and consignment transactions after 1/31/09	  	(750,000	)	 	-4.17	%
		  			 			 		  	 	 	 	 	 
	 Finished goods inventory on consignment at 1/31/10
	  	1,000,000	 	 			 	Total cost of goods sold for period 2/1/09 through 1/31/10 as reported	  	(9,450,000	)	 	-52.50	%
		  	 	 	 			 		  			 		
	 Total finished goods inventory at 1/31/10
	  	31,000,000	 	 			 	Adjusted cost of goods sold eliminating activity related to prior to 2/1/09	  	(7,950,000	)	 	-44.17	%
		  			 			 	Adjusted gross margin 2/1/09-1/31/10	  	10,050,000	 	 	55.83	%
	 Finished goods inventory reduction
	  	4,300,000	 	 			 	Total coop advertising and direct marketing funds expensed to support customers for period 2/1/09-1/31/10	  	(1,800,000	)	 	-10.00	%
		  			 			 		  	 	 	 	 	 
	 Implied Net Sales related to inventory reduction
 using net realized gross profit %
	  	7,938,462	 	 	45.83	%	 	Net realized gross profit used for calculating inventory bonus	  	8,250,000	 	 	45.83	%
		  	 	 	 			 		  			 		
	 Bonus base - realized gross profit on sale of finished goods inventory
	  	3,638,462	 	 			 		  			 		
	 Bonus         10.00%
	  	363,846	 	 			 		  			 		

 NOTE: 
 The amounts
included in the above calculation are provided as an example only and do not represent the amounts recorded in the financial statements of Charles & Colvard at the dates specified above.

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