Document:

Exhibit 10.1

 

SEPARATION OF EMPLOYMENT AGREEMENT

 

This
SEPARATION OF EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into by Randall N. McCullough (“McCullough”)
and Charles & Colvard, Ltd. (the “Company”).

 

McCullough
is currently employed by the Company as its President and Chief Executive Officer pursuant to an employment agreement between McCullough
and the Company dated November 5, 2009 (the “Employment Agreement”). The employment relationship between the Company
and McCullough is being terminated as of the Effective Termination Date defined herein.

 

The
Company is willing to provide McCullough the severance benefits described herein in exchange for his entering into this Agreement,
and the parties desire to terminate their employment relationship on mutually agreeable terms and avoid all litigation relating
to the employment relationship and its termination.

 

McCullough
represents that he has carefully read this entire Agreement, understands its consequences, and voluntarily enters into it.

 

In
consideration of the above and the mutual promises set forth below, McCullough and the Company agree as follows:

 

1.   
       TERMINATION/Continuing Obligations under
Employment Agreement. McCullough’s employment with the Company shall terminate on March 17, 2015
(“Effective Termination Date”). As of the Effective Termination Date, McCullough shall resign as a member of
the Board of Directors of the Company and cease serving as an officer of the Company.

 

By signing this Agreement,
McCullough represents that he has been fully paid for all time worked and received all salary and all other amounts of any kind
due to him from the Company with the sole exception of (a) his final paycheck for work during his final payroll period and for
any accrued but unused vacation/paid time off which will be paid on the next regularly scheduled payroll date following the Effective
Termination Date, (b) any previously submitted, but not yet paid, expense reimbursements or any expense reimbursements submitted
within 10 days of the date of this Agreement and consistent with the terms of Company policy for such reimbursements, (c) the payments
payable under this Agreement, (d) the consulting fees payable under any consulting agreement between McCullough and the Company
and (e) any accrued and vested benefits payable pursuant to the Company’s employee benefit plans.

 

As
of the Effective Termination Date, the Employment Agreement dated November 5, 2009 and renewed annually thereafter shall terminate
and neither party shall have any further obligations thereunder except that McCullough specifically acknowledges and agrees that
his obligations under Sections 10 (Confidentiality) and 11 (Proprietary Information) of the Employment Agreement shall continue
after the termination of that Employment Agreement in accordance with their terms.

 

    	 

    	 

    

 

2.     
     SEVERANCE BENEFITS.

 

A.           Severance
Pay. The Company will pay McCullough severance pay in an amount equal to one year of his
current annual salary (less applicable taxes and withholdings), payable in substantially equal installments. The installments
will be paid on the same payroll schedule that was applicable to McCullough immediately prior to his separation from service, provided
that no further severance shall be paid if McCullough fails to execute or executes but later revokes this Agreement in accordance
with paragraph 5 below.

 

B.           COBRA
Premium Assistance. If McCullough timely and properly elects continuation coverage under the Company’s group health plan
pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), then the Company will pay the COBRA premiums
for coverage for him and his eligible dependents during the 12-month period immediately following the Effective Termination Date.

 

Payments
under this subparagraph 2B shall be made on a monthly basis, but in no event later than the last day of the calendar year following
the year in which the expenses were incurred. Under no circumstances will McCullough be entitled to a cash payment or other benefit
in lieu of the payment of the actual COBRA premium cost. The amount of expenses eligible for payment during any calendar year shall
not be affected by the amount of expenses eligible for payment in any other calendar year.

 

Nothing
in this Agreement shall constitute a guarantee of COBRA continuation coverage or benefits. McCullough shall be solely responsible
for all obligations in electing COBRA continuation coverage and taking all steps necessary to qualify for such coverage.

 

C.           Equity
Award Acceleration. The Company has agreed to accelerate vesting as to 3,297 options granted under the Company’s 2008
Stock Incentive Plan. Those options and all options granted during McCullough’s employment and currently held by McCullough
shall be exercisable as set forth in the applicable option agreement, except that any options whose exercise price is greater than
the fair market value of the Company’s stock as of March 23, 2015 shall be exercisable through March 17, 2017. McCullough
understands that, as a result of such extension, any options not exercised by McCullough on or before June 15, 2015 may no longer
qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. The Company
has also agreed that the restrictions on 34,000 shares of restricted stock granted under the Company’s 2008 Stock Incentive
Plan shall lapse effective March 17, 2015.

 

The
severance and other benefits afforded under this Agreement are in lieu of any other compensation
or benefits, excluding accrued but unused vacation/paid time off (PTO) and vested retirement benefits, to which McCullough otherwise
might be entitled, and payment of the severance and other benefits is conditioned upon McCullough’s compliance with the terms
of this Agreement.

 

    	 

    	 

    

 

3.      
    RELEASE.

 

A.           In
consideration of the benefits conferred by this Agreement, MCCULLOUGH (ON BEHALF OF HIMSELF
AND HIS ASSIGNS, HEIRS AND OTHER REPRESENTATIVES) RELEASES THE COMPANY AND ITS RELATED PARTIES (DEFINED BELOW) (“RELEASEES”)
FROM ALL CLAIMS AND WAIVES ALL RIGHTS KNOWN OR UNKNOWN, HE MAY HAVE OR CLAIM TO HAVE AGAINST THE COMPANY, ITS PREDECESSORS,
SUBSIDIARIES OR AFFILIATES arising from or relating to his employment with the Company and separation therefrom, to
the fullest extent permitted by law, including but not limited to claims:

 

(i)
for discrimination, harassment or retaliation arising under federal, state or local laws prohibiting
age (including but not limited to claims under the Age Discrimination in Employment
Act of 1967 (“ADEA”), as amended), sex, national origin, race, religion, disability, veteran status or other
protected class discrimination, harassment or retaliation for protected activity;

 

(ii)
for compensation and benefits (including but not limited to claims under the Employee Retirement Income Security Act of 1974 (“ERISA”),
Fair Labor Standards Act of 1938 (“FLSA”), Family and Medical Leave Act of 1993
(“FMLA”), all as amended, and similar federal, state, and local laws and claims under any other Company policy,
plan or program, including the Charles & Colvard, Ltd. 2008 Stock Incentive Plan and the incentive plans and programs thereunder;

 

(iii)
under federal, state or local law of any nature whatsoever (including but not limited to constitutional, statutory, tort,
express or implied contract or other common law); and

 

(iv) for attorneys’ fees.

 

Provided, however, the release
of claims set forth in this Agreement does NOT:

 

(v) apply to claims for workers’
compensation benefits, vested retirement benefits or unemployment benefits filed with the applicable state agencies or where otherwise
prohibited by law;

 

(vi) bar a challenge under the
Older Workers Benefit Protection Act of 1990 (OWBPA) to the enforceability of the waiver and release of ADEA claims set forth in
this Agreement; or

 

(vii) prohibit McCullough from
filing a charge with or participating in an investigation by the U.S. Equal Employment Opportunity Commission or other governmental
agency with jurisdiction concerning the terms, conditions and privileges of employment or jurisdiction over the Company’s
business or assisting with an investigation conducted internally by the Company; provided, however, that by signing this Agreement,
McCullough waives the right to, and shall not seek or accept, any monetary or other relief of any nature whatsoever in connection
with any such charges, investigations or proceedings.

 

    	 

    	 

    

 

B.           McCullough
will not sue the Releasees on any matters relating to his employment or separation therefrom arising before the execution of this
Agreement (with the sole exception of claims and challenges set forth in subparagraph A (v) through (vi) above), or join as a party
with others who may sue on any such claims, or opt-in to an action brought by others asserting such claims, and in the event that
McCullough is made a member of any class asserting such claims without his knowledge or consent, McCullough shall opt out of such
action at the first opportunity.

 

C.           The
Releasees which McCullough is releasing by signing this Agreement include: the Company and its predecessors, successors, and assigns
and its and/or their past, present and future owners, parents, subsidiaries, affiliates, predecessors, successors, assigns, officers,
directors, employees, employee benefit plans (together with all plan administrators, trustees, fiduciaries and insurers) and agents.

 

4.      
    COMPANY INFORMATION AND PROPERTY. McCullough shall not at any time after his employment
terminates disclose, use or aid third parties in obtaining or using any confidential or proprietary Company
information nor access or attempt to access any Company computer systems, networks or any resources or data that
resides thereon, except as may be required to perform consulting services under any then existing consulting agreement
between himself and the Company and, only then, as authorized by the Company. Confidential or proprietary information is
information relating to the Company or any aspect of its business which is not generally available to the public, the
Company’s competitors, or other third parties, or ascertainable through common sense or general business or technical
knowledge. Nothing in this Agreement shall relieve him from any obligations under any previously executed
confidentiality, proprietary information or secrecy agreements.

 

All
records, files or other materials maintained by or under the control, custody or possession of the Company or its agents in
their capacity as such shall be and remain the Company’s property. By signing this Agreement, McCullough represents
that, with the sole exception of the property identified on Exhibit A (if any), he: (i) has returned all Company property (including,
but not limited to, credit cards; keys;  cellular telephone; air card; access cards; thumb drive(s), laptop(s), personal digital
devices and all other computer hardware and software; records, files, documents, manuals, and other documents in whatever form
they exist, whether electronic, hard copy or otherwise and all copies, notes or summaries thereof) and turned over all Company
passwords or access codes which he created, received or otherwise obtained in connection with his employment; (ii) has not
deleted any emails, files or other information from any Company computer or device prior to his return of the property and has
permanently deleted any Company information that may reside on his personal computer(s), other devices or accounts; (iii)
has submitted all personal computers, phones and other devices which he used for Company business, and identified all personal
accounts on which Company information has been placed and related passwords, to a third party vendor, as may be designated by the
Company, for inspection and removal of any Company-related information; and (iv) will fully cooperate with the Company in winding
up his work and transferring that work to those individuals designated.

 

    	 

    	 

    

 

5.   
       RIGHT TO REVIEW AND REVOKE. The Company delivered this Agreement to
McCullough on March 17, 2015 by hand-delivery and desires that he have adequate time and opportunity to review and understand
the consequences of entering into it. Accordingly, the Company advises him to consult with his attorney prior to executing it
and that he has twenty-one (21) days within which to consider it. Additionally, he may not execute this Agreement prior to
the Effective Termination Date. In the event that McCullough does not return an executed copy of this Agreement to H.
Marvin Beasley at Charles & Colvard, Ltd., 170 Southport Drive, Morrisville, North Carolina 27560 by no later than the
twenty-second (22nd) calendar day after receiving it, this Agreement and the obligations of the Company herein
shall become null and void and McCullough’s employment shall terminate on the Effective Termination Date and he will
receive base salary, less applicable taxes and withholdings, through the Effective Termination Date and nothing more.
McCullough may revoke this Agreement during the seven (7) day period immediately following his execution of it. The
Agreement will not become effective or enforceable until the revocation period has expired. To revoke the Agreement, a
written notice of revocation must be delivered to H. Marvin Beasley at the above address.

 

6.       
   NONDISPARAGEMENT. McCullough represents and warrants that since receiving this Agreement, he (i) has
not made, and going forward will not make, disparaging, defaming, or derogatory remarks about the Company or its products,
services, business practices, directors, officers, managers, or employees to anyone; nor (ii) taken, and going forward will
not take, any action that may impair the relations between the Company and its vendors, customers, employees, or agents or
that may be detrimental to or interfere with, the Company or its business.

 

7.   
       COOPERATION. The parties agree that certain matters in which McCullough has
been involved during his employment may necessitate his cooperation with the Company in the future. Accordingly, to the
extent reasonably requested by the Company, McCullough shall cooperate with the Company in connection with such matters. The
Company shall reimburse McCullough for reasonable expenses incurred in connection with such cooperation. Such reimbursement
shall be made as soon as administratively feasible after substantiation of the expenses, which normally occurs within sixty
(60) days of receipt, but in no event later than the last day of the calendar year following the year in which the expenses
were incurred. Under no circumstances will McCullough be entitled to any payment or other benefit in lieu of such
reimbursement. The amount of expenses eligible for reimbursement during any calendar year shall not be affected by the amount
of expenses eligible for reimbursement in any other calendar year.

 

8.    
      OTHER. Except as expressly provided in this Agreement, (a) this Agreement
supersedes all other understandings and agreements, oral or written, between the parties and constitutes the sole agreement
between the parties with respect to its subject matter, (b) no representations, inducements, promises or agreements, oral or
written, have been made by any party or by anyone acting on behalf of any party, which
are not embodied in this Agreement, and (c) no agreement, statement or promise not contained in the Agreement shall be
valid or binding on the parties. No change or modification of this Agreement shall be valid or binding on the parties unless
such change or modification is in writing and is signed by the parties. McCullough’s or the Company’s waiver of
any breach of a provision of this Agreement shall not waive any subsequent breach by
the other party. If a court of competent jurisdiction holds that any provision or sub-part thereof contained in this
Agreement is invalid, illegal or unenforceable, that invalidity, illegality or
unenforceability shall not affect any other provision in this Agreement.

 

    	 

    	 

    

  

This
Agreement is intended to avoid all litigation relating to McCullough’s employment with the Company and his separation therefrom;
therefore, it is not to be construed as the Company’s admission of any liability to him, liability which the Company denies.

 

This
Agreement shall apply to, be binding upon and inure to the benefit of the parties’ successors, assigns, heirs and other representatives
and be governed by North Carolina law (without regard to its conflicts of laws provisions) and the applicable provisions of federal
law, including but not limited to ADEA.

 

9.     
     SECTION 409A OF THE INTERNAL REVENUE CODE.

 

A.           Parties’
Intent. The parties intend that the provisions of this Agreement comply with, or meet an exemption from, Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”), and the regulations thereunder (collectively, “Section
409A”) and all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding
taxes or penalties under Section 409A. Notwithstanding the foregoing, if McCullough becomes subject to any additional taxes, interest
or penalties pursuant to Section 409A with respect to any payments or benefits under this Agreement (“Additional 409A Taxes”),
then McCullough will be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that,
after payment by McCullough of all taxes, including any Additional 409A Taxes imposed upon the Gross-Up Payment itself, McCullough
retains an amount of the Gross-Up Payment equal to fifty percent (50%) of the Additional 409A Taxes imposed on him. The Gross-Up
Payment must be made by the end of McCullough’s taxable year next following the taxable year in which he remits the related
taxes. Any right to reimbursement incurred due to a tax audit or litigation addressing the existence or amount of a tax liability
must be made by the end of McCullough’s taxable year following the taxable year in which the taxes that are the subject of
the audit or litigation are remitted to the taxing authorities or, where no such taxes are remitted, the end of McCullough’s
taxable year following the year in which the audit is completed or there is a final and non-appealable settlement or resolution
of the litigation.

 

B.           Separation
from Service. A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement
providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination also
constitutes a “Separation from Service” within the meaning of Section 409A and, for purposes of any such provision
of this Agreement, references to a “termination,” “termination of employment,” “separation from service”
or like terms shall mean Separation from Service.

 

[Signature
Page Follows]

 

[Signature
Page to Separation of Employment Agreement]

 

    	 

    	 

    

 

 

IN
WITNESS WHEREOF, the parties have entered into this Agreement on the day and year written below.

 

MCCULLOUGH
REPRESENTS THAT HE HAS CAREFULLY READ THE ENTIRE AGREEMENT, UNDERSTANDS ITS CONSEQUENCES, AND VOLUNTARILY ENTERS INTO IT.

 

	 	/s/ Randall N. McCullough	 	3/23/15
	 	Randall N. McCullough	 	Date
	 	 	 	 	 
	 	CHARLES & COLVARD, LTD.	 	 
	 	By:	/s/ Neal I. Goldman	 	3/23/15
	 	Name: 	Neal I. Goldman	 	Date
	 	Title:	Executive Chairman of the Board of DirectorsExhibit 10.2

 

CONSULTING AGREEMENT

 

This CONSULTING
AGREEMENT (“Agreement”) is made and entered into by Randall N. McCullough (“McCullough”) and Charles
& Colvard, Ltd. (the “Company”).

 

The Company seeks to
retain McCullough, and McCullough desires to accept retention, to provide certain consulting services to the Company as set forth
in this Agreement.

 

In consideration
of the above and the mutual promises set forth below, McCullough and the Company agree as follows:

 

1.          CONSULTING
SERVICES. Commencing on the date that this Agreement becomes effective and continuing for a two (2) year period (“Consulting
Period”), McCullough shall provide such consulting services, including participation in meetings at the Company’s offices
and elsewhere, as may be reasonably requested by the Company Chief Executive Officer (or such other person(s) expressly authorized
by the Board of Directors of the Company) upon reasonable notice to him; provided, however, that (i) the parties intend that during
the first three (3) months of the Consulting Period the number of consulting hours shall not exceed thirty-two (32) hours in any
one month period and (ii) the parties intend that during the final twenty-one (21) months of the Consulting Period the number of
consulting hours shall not exceed twenty (20) hours in any one month period. The parties reasonably anticipate that as of March
17, 2015, the level of services to be provided by McCullough to the Company and any related entity shall not exceed 20 percent
of the average level of bona fide services he performed for the Company and any related entity over the immediately preceding 36-month
period, such that McCullough experienced a “separation from service” (as defined in Section 409A of the Internal Revenue
Code of 1986, as amended (“Section 409A”) as of March 17, 2015.

 

2.          CONSULTING
FEE. The Company shall pay McCullough a total consulting fee in the amount of One Hundred Thousand Dollars ($100,000), payable
in two equal installments of $50,000, the first payable within ten (10) days of the effective date of this Agreement, and the
second payable between March 1 and March 15, 2016, subject to his compliance with the terms of this Agreement and all other written
agreements, or surviving provisions thereof, between him and the Company. Each installment is intended to be a separate payment
for purposes of Section 409A. Each installment is intended to comply with, or meet an exception from, Section 409A and this Agreement
shall be interpreted consistent with such intent.

 

3.          INDEPENDENT
CONTRACTOR STATUS. The parties hereby acknowledge and agree that McCullough’s consulting services for the Company shall
be provided strictly as an independent contractor. Nothing in this Agreement shall be construed to render him an employee, co-venturer,
agent, or other representative of the Company. McCullough understands that he must comply with all tax laws applicable to a self-employed
individual, including the filing of any necessary tax returns and the payment of all income and self-employment taxes. The Company
shall not be required to withhold from payment of the consulting fee any state or federal income taxes or to make payments for
Social Security (FICA) tax, unemployment insurance, or any other payroll taxes. The Company shall not be responsible for, and shall
not obtain, worker’s compensation insurance, disability benefits insurance, or unemployment security insurance coverage for
McCullough. McCullough shall not be eligible for, nor entitled to, and shall not participate in, any of the Company’s compensation,
pension, health, or other benefit plans, if any such plans exist; provided, however, that nothing in this Agreement will preclude
him from eligibility for post-termination continuation coverage or conversion rights arising from his prior participation in such
plans.

 

    	 

    	 

    

  

4.          DEFINITIONS.
For purposes of this Agreement, the following terms shall have the following meanings:

 

(a)          “Competing
Business” shall mean any corporation, partnership, person, or other entity that is researching, developing, manufacturing,
marketing, distributing, or selling any product, service, or technology that is competitive with the Company’s Business as
that term is defined below.

 

(b)          “Company’s
Business” shall mean the development, manufacture, marketing, distribution, or sale of, including research directed to, any
product, service, or technology in the Moissanite jewelry industry or the direct sales fashion jewelry industry. As of the date
of this Agreement, Company’s Business includes: (i) marketing and distributing Moissanite jewelry, and Moissanite gemstones,
(ii) fabricating (including wafering, pre-forming, and faceting), marketing, and distributing Moissanite gemstones to the gem and
jewelry industry, and (iii) direct selling of fashion jewelry.

 

(c)          “Territory”
shall mean the following severable geographic areas: (i) throughout the world, (ii) within any country in which the Company, or
a Competing Business is engaged in business, (iii) within any country in which the Company is engaged in business, (iv) within
the United States, (v) within any state, including the District of Columbia, in which the Company or a Competing Business is engaged
in business, (vi) within any state, including the District of Columbia, in which the Company is engaged in business, (vii) within
a 100 mile radius of McCullough’s principal place of service for the Company, (viii) the state of North Carolina, and (ix)
within a 100 mile radius of the Company’s corporate headquarters.

 

(d)          “Confidential
Information” shall mean: (i) any and all non-public or otherwise confidential proprietary knowledge, material, or information
of the Company, including any and all knowledge, material, or information that is designated as Confidential Information by the
Company and any and all confidential knowledge, material, or information that becomes generally known to the public as a result
of a disclosure by McCullough, or any other person or entity who is obligated to treat such knowledge, material, or information
confidentially, and (ii) any and all non-public or otherwise confidential proprietary knowledge, material, or information of others
who disclose that knowledge, material, or information to the Company, including any and all knowledge, material, or information
designated as Confidential Information by the Company, or those others and any and all confidential knowledge, material, or information
that becomes generally known to the public as a result of a disclosure by McCullough, or any other person or entity who is obligated
to treat such knowledge, material, or information confidentially. Confidential Information includes, but is not limited to, the
following types of knowledge, material, or information (whether or not reduced to writing): trade secrets; concepts; designs; discoveries;
ideas; know-how; processes; techniques; inventions; drawings; specifications; models; data; software in various stages of development;
source and object code; documentation; diagrams; flow charts; research; procedures; marketing and development techniques, materials,
plans, and information; business methods, procedures, and policies; current and prospective customers names and lists and other
information related to current and prospective customers; prices, including price lists, policies, and formulas; profit margins,
data, and formulas; financial information; training manuals and methodologies; and employee files and information.

 

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(e)          “Intellectual
Property Rights” shall mean all patent, trademark, and copyright rights, moral rights, rights of attribution or integrity,
trade secret rights, or other proprietary or intellectual property rights.

 

5.          RESTRICTIVE
COVENANTS. McCullough was employed by the Company as President and Chief Executive Officer, pursuant to an Employment Agreement
dated November 5, 2009 (the “Prior Employment Agreement”), through the date of his resignation on March 17, 2015. As
a result of McCullough’s services to the Company: (i) McCullough had access to trade secrets and Confidential Information
of the Company, including, but not limited to, valuable information about its intellectual property, business operations and methods,
and the persons with which it does business in various locations throughout the world, that is not generally known to or readily
ascertainable by a Competing Business, (ii) McCullough developed relationships with the Company’s customers and others with
which the Company does business, and these relationships are among the Company’s most important assets, and (iii) McCullough
received specialized knowledge of and specialized training in the Company’s Business. Accordingly, the Prior Employment Agreement
contains non-compete and other restrictive covenants applicable to McCullough’s post-employment activities, including restrictions
set forth in Paragraph 9 of the Prior Employment Agreement.

 

McCullough will provide
consulting services to the Company under this Consulting Agreement. As a result of McCullough’s consulting services to the
Company: (i) McCullough could continue to have access to trade secrets and Confidential Information of the Company, including,
but not limited to, valuable information about its intellectual property, business operations and methods, and the persons with
which it does business in various locations throughout the world, that is not generally known to or readily ascertainable by a
Competing Business, (ii) McCullough could continue to develop relationships with the Company’s customers and others with
which the Company does business, and these relationships continue to be among the Company’s most important assets, and (iii)
McCullough could continue to receive specialized knowledge of and/or specialized training in the Company’s Business.

 

In sum, McCullough
has had, and could continue to have, access to the Company’s most competitively sensitive proprietary information and relationships.
In fact, based on the services McCullough provided to the Company during the term of the Prior Employment Agreement and the services
that McCullough may be asked to provide to the Company under this Consulting Agreement, McCullough has and/or could gain such knowledge
of the Company’s Business that, during the two year period following the termination of the Prior Employment Agreement, McCullough
could not perform services for a Competing Business without inevitably disclosing the Company’s trade secrets and Confidential
Information to that Competing Business. However, prior to the provision of any material, non-public information as defined under
the Company’s trading policy that would cause a trading window to be closed for McCullough, the Company shall deliver a written
request to McCullough for him to accept receipt of such material, non-public information and shall receive McCullough’s prior
written consent to receipt of such material, non-public information before providing such information to McCullough (such written
request and written consent is the “Over-the-Wall Documentation”). Further, the Company will keep meticulous records
of the Over-the-Wall Documentation provided to McCullough during the Consulting Period and will share this record with McCullough
upon his request at any time.

 

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Accordingly,
McCullough and the Company have agreed to terminate the restrictive covenants established by Paragraph 9 of the Prior
Employment Agreement and to replace them with the restrictive covenants set forth in this Consulting Agreement. Specifically,
McCullough agrees to the following:

 

(a)          For
a period of two years following the date of this Agreement, McCullough will not, without the express written consent of an authorized
representative of the Company: (i) perform services (as an employee, independent contractor, officer, director, or otherwise),
within the Territory for any Competing Business, that are the same or similar to any services that McCullough performed, or is
performing, for the Company regarding the Company Business or that otherwise utilize skills, knowledge, and/or business contacts
and relationships that McCullough utilized while providing services (whether as an employee or consultant) to the Company regarding
the Company Business, (ii) engage in any activities (or assist others to engage in any activities) within the Territory that compete
with the Company’s Business, (iii) own or beneficially own an equity interest in a Competing Business, (iv) request, induce,
or solicit (or assist others to request, induce, or solicit) any customers, prospective customers, or suppliers of the Company,
which were customers, prospective customers, or suppliers of the Company during the Consulting Period or the last year of McCullough’s
employment by the Company, to curtail or cancel their business with the Company, or to do business within the scope of the Company’s
Business with a Competing Business, (v) request, induce, or solicit (or assist others to request, induce, or solicit) any customers,
prospective customers, or suppliers of the Company with which McCullough worked or had business contact during the Consulting Period
or the last year of his employment by the Company to curtail or cancel their business with the Company, or to do business within
the scope of the Company’s Business with a Competing Business, (vi) request, induce, or solicit (or assist others to request,
induce, or solicit) any employee or independent contractor of the Company to terminate his or her employment or independent relationship
with the Company, (vii) request, induce, or solicit (or assist others to request, induce, or solicit) any person who is employed
by the Company, or who was employed by the Company at any time during the preceding year, to be employed with a Competing Business,
or (viii) employ or engage as a contractor (or assist others to employ or engage as a contractor) for the benefit of any Competing
Business any person who is employed by the Company, or who was employed by the Company at any time during the preceding year. These
obligations will continue for the specified period and the specified period shall be tolled and shall not run during any time in
which McCullough fails to abide by these obligations.

 

(b)          As
an exception to the above restrictions, McCullough may own passive investments in Competing Businesses, (including, but not limited
to, indirect investments through mutual funds), provided that the securities of the Competing Business are publicly traded and
McCullough does not own or control more than two percent of the outstanding voting rights or equity of the Competing Business.
Furthermore, McCullough may serve as an employee or consultant with Jewelry Television or Moissanite Outlet, provided that : (i)
he does not promote, or provide advice or consulting services related to, Moissanite supplied by entities other than the Company,
(ii) he does not provide advice or consulting services related to, or otherwise assist with or support, the direct selling of fashion
jewelry, and (iii) he does not violate any of the restrictions set forth in Paragraph 5(a)(iv)-5(a)(viii) and Paragraph 6 of this
Consulting Agreement.

 

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6.          CONFIDENTIALITY.

 

(a)          All
documents or other records, paper or electronic, that, in any way, constitute, contain, incorporate, or reflect any Confidential
Information and all proprietary rights therein, including Intellectual Property Rights, shall belong exclusively to the Company,
and McCullough agrees to promptly deliver to the Company, upon request or upon termination of McCullough’s consulting services
with the Company, all copies of such materials and Confidential Information in McCullough’s possession, custody, or control,
as well as all other property of the Company in McCullough’s possession, custody, or control. Likewise, McCullough agrees
to promptly deliver to the Company, upon request or upon termination of McCullough’s consulting services with the Company,
all copies of all documents or other records that, in any way, constitute, contain, incorporate, or reflect any Confidential Information
of others that was disclosed or provided to McCullough that is in McCullough’s possession, custody, or control.

 

(b)          McCullough
agrees, during the period during which he is providing consulting services, and thereafter: (i) to hold in confidence and treat
with strict confidentiality all Confidential Information, (ii) not to directly or indirectly reveal, report, publish, disclose,
or transfer any Confidential Information to any person or entity, and (iii) not to utilize any Confidential Information for any
purpose, other than in the course and scope of McCullough’s service for the Company. If McCullough is required to disclose
Confidential Information pursuant to a court order or subpoena or such disclosure is necessary to comply with applicable law, he
shall: (i) promptly notify the Company before any such disclosure is made and provide the Company with reasonable and ample time
within which to object to or oppose any such disclosure, (ii) at the Company’s request and expense take all reasonably necessary
steps to defend against such disclosure, including defending against the enforcement of the court order, subpoena, or other applicable
law, and (iii) permit the Company to participate with counsel of its choice in any related proceedings.

 

7.          RESTRICTIVE
COVENANTS ARE REASONABLE. The market for the Company’s services and the Company’s Business is highly specialized
and highly competitive such that other companies and business entities compete with the Company in various locations throughout
the world. The provisions set forth in this Agreement: (i) are reasonably necessary to protect the Company’s legitimate business
interests, (ii) are reasonable as to the time, territory, and scope of activities that are restricted, (iii) do not interfere with
McCullough’s ability to earn a comparable living or secure employment in the field of McCullough’s choice, (iv) do
not interfere and are not inconsistent with public policy or the public interest, and (v) are described with sufficient accuracy
and definiteness to enable McCullough to understand the scope of the restrictions on McCullough. The restrictive covenants established
by Paragraphs 4-6 of this Consulting Agreement shall be enforceable and remain in effect: (i) notwithstanding the alleged existence
of any alleged breach of this Consulting Agreement by the Company.

 

    	5

    	 

    

  

8.          INJUNCTIVE
RELIEF. Because of the unique nature of the Confidential Information, McCullough understands and agrees that the Company will
suffer irreparable harm in the event that McCullough fails to comply with any of McCullough’s obligations under Paragraphs
5 or 6 of this Agreement and that monetary damages will be inadequate to compensate the Company for such breach. Accordingly, McCullough
agrees that the Company will, in addition to any other remedies available to it at law or in equity, be entitled to injunctive
relief to enforce the terms of Paragraphs 5 or 6 of this Agreement.

 

9.          OTHER.
Except as expressly provided in this Agreement and as set forth in the Separation of Employment Agreement contemporaneously entered
into herewith by the parties, this Agreement supersedes all other understandings and agreements, oral or written, between the parties
and constitutes the sole agreement between the parties with respect to its subject matter. No change or modification of this Agreement
shall be valid or binding on the parties unless such change or modification is in writing and is signed by the parties. McCullough’s
or the Company’s waiver of any breach of a provision of this Agreement shall not waive any subsequent breach by the other
party. In the event that a court determines that the length of time, the geographic area, or the activities prohibited under this
Agreement are too restrictive to be enforceable, the court may reduce the scope of the restriction to the extent necessary to make
the restriction enforceable. If a court of competent jurisdiction holds that any provision or sub-part thereof contained in this
Agreement is invalid, illegal or unenforceable, that invalidity, illegality or unenforceability shall not affect any other provision
in this Agreement.

 

This Agreement
shall apply to, be binding upon and inure to the benefit of the parties’ successors, assigns, heirs and other representatives
and be governed by North Carolina law (without regard to its conflicts of laws provisions).

 

IN WITNESS
WHEREOF, the parties have entered into this Agreement on the day and year written below.

 

MCCULLOUGH
REPRESENTS THAT HE HAS CAREFULLY READ THE ENTIRE AGREEMENT, UNDERSTANDS ITS CONSEQUENCES, AND VOLUNTARILY ENTERS INTO IT.

 

	 	/s/ Randall N. McCullough	 	 3/23/15
	 	Randall N. McCullough	 	Date
	 	 	 	 
	 	CHARLES & COLVARD, LTD.	 	 
	 	 	 	 
	 	By:	 /s/ Neal I. Goldman	 	 3/23/15
	 	Name: 	Neal I. Goldman	 	Date
	 	Title:  	Executive Chairman of	 	 
	 	 	the Board of Directors	 	 

 

    	6

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