Document:

Exhibit 10.3

 

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT
(the “Agreement”) is made and entered into this 17th day of March, 2015 (the “Effective Date”) by and between
Charles & Colvard, Ltd. (the “Company”) and H. Marvin Beasley (the “Employee”).

 

WITNESSETH

 

WHEREAS, Employee and
the Company wish to enter into an employment relationship on the terms and conditions set forth in this Agreement; and

 

WHEREAS, the Board
of Directors of the Company (the “Board”) has authorized the Company to enter into this Agreement.

 

NOW THEREFORE, in consideration
of the foregoing and the mutual promises and covenants contained herein and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, the parties hereto agree that:

 

1.          Employment.
The Company hereby employs Employee, and Employee hereby accepts such employment, on the terms and conditions set forth in this
Agreement.

 

2.          Term
of Employment. Unless earlier terminated as provided herein, the term of this Agreement shall commence on the Effective Date
and shall continue until the one-year anniversary of the Effective Date (the “Initial Term”). After the Initial Term,
this Agreement shall automatically renew for successive additional one-year terms on the same terms and conditions set forth herein,
unless: (i) earlier terminated or amended as provided herein or (ii) either party gives written notice of non-renewal at least
thirty (30) days prior to the end of the Initial Term or any renewal term of this Agreement. The Initial Term of this Agreement
and all applicable renewals thereof are collectively referred to herein as the “Term.”

 

3.          Position
and Duties. Employee shall serve as President and Chief Executive Officer of the Company. Employee shall faithfully and to
the best of his ability perform all duties of the Company related to his position with the Company, including, but not limited
to, all duties set forth in this Agreement and/or in the Bylaws of the Company related to the position that he holds, as well as
all duties that are reasonably assigned to him by the Board or its designees. Employee agrees to devote his entire working time,
attention, energy, and skills to the Company in furtherance of the Company’s best interests, while so employed. Employee
shall comply with all reasonable Company policies, standards, rules, and regulations (the “Company Policies”) and all
applicable government laws, rules, and regulations that are now or hereafter in effect. Employee acknowledges receipt of copies
of all written Company Policies that are in effect as of the date of this Agreement.

 

    	 

    	 

    

 

 

4.          Compensation
and Benefits. During the Term, Employee shall receive compensation and benefits for the services performed for the Company
under this Agreement as follows:

 

(a)          Base
Salary. Employee shall receive a base annual salary of Three Hundred Thirty-Five Thousand and 00/100 Dollars ($335,000), payable
in regular and equal installments in accordance with the Company’s regular payroll schedule and practices (“Base Salary”).

 

(b)          Employee
Benefits. Employee shall be entitled to receive those benefits that are made available to the other similarly-situated executive
employees of the Company, including, but not limited to, life, medical, and disability insurance, as well as retirement benefits
(collectively, the “Employee Benefits”), in accordance with the terms and conditions of the applicable plan documents,
provided that Employee meets the eligibility requirements thereof. The Company reserves the right to reduce, eliminate, or change
such Employee Benefits, in its sole discretion, subject to any applicable legal and regulatory requirements.

 

(c)          Equity
Compensation Awards.  The Compensation Committee of the Board has approved an incentive stock option (“ISO”)
granting Employee the right to purchase up to 150,000 shares of the Company’s common stock under the Charles & Colvard,
Ltd. 2008 Stock Incentive Plan (the “2008 Plan”) at an option exercise price equal to the closing price of the common
stock on the Effective Date contingent upon Employee’s execution of this Agreement and commencement of employment with the
Company; provided that such option shall be granted as a non-ISO to the extent it does not qualify for ISO treatment on the Effective
Date. This ISO award shall vest annually over a two-year period in accordance with the following vesting schedule:  33% of
the ISO award (50,000 option shares) shall vest on the Effective Date and an additional 33% of the ISO award (50,000 option shares)
shall vest on each of the following two anniversaries of the Effective Date provided Employee remains continuously employed with
the Company (or other affiliated company) and/or serves on the Board of Directors of the Company through each anniversary. 
The ISO award shall be contingent upon Employee’s execution of a standard Employee Incentive Option Agreement in substantially
the form attached as Exhibit A to this Agreement and the ISO award shall in all respects be subject to and governed by the
provisions of the 2008 Plan and the Employee Incentive Option Agreement.   In addition to the ISO award, the Compensation
Committee of the Board has approved the grant of a performance-based restricted stock award for 100,000 shares of the Company’s
common stock pursuant to the 2008 Plan on the Effective Date contingent upon Employee’s execution of this Agreement and commencement
of employment with the Company.  The restricted stock award shall vest on the first anniversary of the Effective Date provided
Employee has achieved performance-based goals as established by the Board of Directors and remains continuously employed with the
Company (or other affiliated company) and/or serves on the Board of Directors of the Company through that date.  The restricted
stock award shall be contingent upon Employee’s execution of a Performance-Based Restricted Stock Award Agreement in substantially
the form attached as Exhibit B to this Agreement and shall in all respects be subject to, and governed by, the provisions
of the 2008 Plan and corresponding Performance-Based Restricted Stock Award Agreement.

 

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(d)          Reimbursement
of Expenses. Commuting costs for lodging and travel will be reimbursed in accordance with the Company’s Travel Policy,
except that Employee shall be reimbursed for First Class air travel between the Company’s headquarters and Employee’s
residence. The Company shall reimburse Employee for all reasonable out-of-pocket expenses incurred by Employee that specifically
and directly relate to the performance by Employee of the services under this Agreement, provided that Employee complies with the
Company Policies for reimbursement that are now or hereafter in effect. Each such expense shall be submitted for reimbursement
after they are incurred.

 

5.          Withholding.
The Company may withhold from any payments or benefits under this Agreement, including, but not limited to, any payments under
Paragraphs 4(a), (c), and (d), of this Agreement, all federal, state, or local taxes or other amounts, as may be required pursuant
to applicable law, government regulation, or ruling.

 

6.          Termination.
This Agreement and Employee’s employment by the Company shall or may be terminated as follows:

 

(a)          Expiration
of the Term. This Agreement and Employee’s employment by the Company shall terminate upon the expiration of the Term
(“Expiration”).

 

(b)          Death
of Employee. This Agreement and Employee’s employment by the Company shall terminate upon the death of Employee (“Death”).

 

(c)          Discontinuance.
The Company, immediately and without notice, may terminate this Agreement and Employee’s employment by the Company upon the
liquidation, dissolution, or discontinuance of business by the Company in any manner or the filing of any petition by or against
the Company under any federal or state bankruptcy or insolvency laws, provided that such petition is not dismissed within sixty
(60) days after filing (“Discontinuance”).

 

(d)          Termination
by the Company for Just Cause. The Company, immediately and without notice, may terminate this Agreement and Employee’s
employment by the Company at any time for Just Cause. Termination for “Just Cause” shall include termination for Employee’s:
dishonesty; gross incompetence; willful misconduct; breach of fiduciary duty owed to the Company, including any failure to disclose
a material conflict of interest; failure to perform his duties as required by this Agreement or to achieve the reasonable objectives
specified by the Board or their designees; material violation of any law (other than traffic violations or similar offenses); material
failure to comply with Company Policies, including policies prohibiting harassment, discrimination, and retaliation, or any other
reasonable directives of the Board or their designees; conviction of a felony of any nature or of a misdemeanor involving moral
turpitude; use of illegal drugs or other illegal substance, or use of alcohol in a manner that materially interferes with the performance
of Employee’s duties under this Agreement; adverse action or omission that would be required to be disclosed pursuant to
public securities laws, even though such laws may not then apply to the Company, that would limit the ability of the Company or
any affiliated entity to sell securities under any federal or state law, or that would disqualify the Company or any affiliated
entity from any exemption otherwise available to it; disability; or material breach of any provision of this Agreement, including
provisions concerning confidentiality, proprietary information, and restrictive covenants. For purposes of this subsection, the
term “disability” means the inability of Employee, because of the condition of his physical, mental, or emotional health,
to satisfactorily perform the duties of his employment hereunder, with or without a reasonable accommodation, for a continuous
three-month period.

 

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(e)          Termination
by the Company Without Cause. The Company may terminate this Agreement and Employee’s employment by the Company other
than for “Just Cause,” as described in Paragraph 6(d) above, and other than upon “Discontinuance,” as described
in Paragraph 6(c) above, at any time for any reason by providing written notice to Employee, which termination shall be effective
immediately (“Without Cause”).

 

(f)          Termination
by Employee. Employee may terminate this Agreement and his employment by the Company for any reason thirty (30) days after
written notice of Employee’s resignation is received by the Company (“Resignation”).

 

(g)          Obligations
of the Company Upon Termination.

 

(i)          Upon
the termination of this Agreement: (A) pursuant to the expiration of the Term, under Paragraph 6(a) of this Agreement (“Expiration”),
following notice of non-renewal pursuant to Paragraph 2 of this Agreement; (B) pursuant to Paragraph 6(b) of this Agreement (“Death”);
(C) by the Company pursuant to Paragraph 6(c) of this Agreement (“Discontinuance”) or Paragraph 6(d) of this Agreement
(“Just Cause”); (D) by Employee pursuant to Paragraph 6(f) of this Agreement (“Resignation”); or (E) for
any reason other than those set forth in Paragraph 6(g)(ii) of this Agreement; the Company shall have no further obligation hereunder
other than the payment of all compensation and other benefits payable to Employee through the date of such termination.

 

(ii)         Upon
the termination of this Agreement (and subject to Employee’s execution of a release under Paragraph 7 of this Agreement and
compliance with his obligations under Paragraphs 8, 9, 10, and 11 of this Agreement) by the Company pursuant to Paragraph 6(e)
of this Agreement (“Without Cause”), the Company shall owe severance to Employee in accord with the following scale:

 

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		·	If the Company terminates Employee’s employment Without Cause between the Effective Date
and the one-month anniversary of the Effective Date, then the Company shall pay to Employee an amount equal to eleven (11) months
of his Base Salary (less all applicable deductions).

 

		·	If the Company terminates Employee’s employment Without Cause between the one-month anniversary
of the Effective Date and the two-month anniversary of the Effective Date, then the Company shall pay to Employee an amount equal
to ten (10) months of his Base Salary (less all applicable deductions).

 

		·	If the Company terminates Employee’s employment Without Cause between the two-month anniversary
of the Effective Date and the three-month anniversary of the Effective Date, then the Company shall pay to Employee an amount equal
to nine (9) months of his Base Salary (less all applicable deductions).

 

		·	If the Company terminates Employees’ employment Without Cause between the three-month anniversary
of the Effective Date and the four-month anniversary of the Effective Date, then the Company shall pay to Employee an amount equal
to eight (8) months of his Base Salary (less all applicable deductions).

 

		·	If the Company terminates Employee’s employment Without Cause between the four-month anniversary
of the Effective Date and the five-month anniversary of the Effective Date, then the Company shall pay to Employee an amount equal
to seven (7) months of his Base Salary (less all applicable deductions).

 

		·	If the Company terminates Employee’s employment Without Cause between the five-month anniversary
of the Effective Date and the six-month anniversary of the Effective Date, then the Company shall pay to Employee an amount equal
to six (6) months of his Base Salary (less all applicable deductions).

 

		·	If the Company terminates Employee’s employment Without Cause between the six-month anniversary
of the Effective Date and the seven-month anniversary of the Effective Date, then the Company shall pay to Employee an amount equal
to five (5) months of his Base Salary (less all applicable deductions).

 

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		·	If the Company terminates Employee’s employment Without Cause between the seven-month anniversary
of the Effective Date and the eight-month anniversary of the Effective Date, then the Company shall pay to Employee an amount equal
to four (4) months of his Base Salary (less all applicable deductions).

 

		·	If the Company terminates Employee’s employment Without Cause between the eight-month anniversary
of the Effective Date and the nine-month anniversary of the Effective Date, then the Company shall pay to Employee an amount equal
to three (3) months of his Base Salary (less all applicable deductions).

 

		·	If the Company terminates Employee’s employment Without Cause between the nine-month anniversary
of the Effective Date and the ten-month anniversary of the Effective Date, then the Company shall pay to Employee an amount equal
to two (2) months of his Base Salary (less all applicable deductions).

 

		·	If the Company terminates Employee’s employment Without Cause between the ten-month anniversary
of the Effective Date and the eleven-month anniversary of the Effective Date, then the Company shall pay to Employee an amount
equal to one (1) months of his Base Salary (less all applicable deductions).

 

		·	If the Company terminates Employee’s employment Without Cause after the eleven-month anniversary
of the Effective Date, then no payment shall be owed or made to Employee.

 

Any severance obligations
arising under this Paragraph shall be payable in equal installment payments paid in accordance with the Company’s regular
payroll schedule, beginning on the first regular payroll date occurring on or after the date on which the release of claims required
by Paragraph 7 of this Agreement becomes effective and non-revocable.

 

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7.          Release
of Claims. Notwithstanding any provision of this Agreement to the contrary, the Company’s obligation to provide any severance
payment under Paragraph 6(g)(ii) of this Agreement is conditioned upon Employee’s execution of an enforceable release of
any and all claims arising before the date that he signs the release, in a form which is reasonable and which is satisfactory to
the Company (satisfaction of the Company is not to be unreasonably withheld), and his compliance with the provisions of Paragraphs
8, 9, 10, and 11 of this Agreement. If Employee fails to execute such a release or fails to comply with such terms of this Agreement,
then the Company’s obligation to make any payments to him ceases on the effective date of the termination of his employment
by the Company, and Employee must immediately return to the Company any severance payments that he has received from the Company
since the effective date of the termination of his employment by the Company. The release of claims shall be provided to Employee
within seven (7) days after the termination of his employment by the Company, and Employee must execute it within the time period
specified in the release (which shall not be longer than forty-five (45) days from the date upon which he receives it). Such release
shall not be effective until any applicable revocation period has expired. Notwithstanding any provision in this Agreement to the
contrary, any payment conditioned upon this release shall be made, or commence, as applicable, within ninety (90) days after the
termination of Employee’s employment by the Company.

 

8.          Definitions.
For purposes of this Agreement, the following terms shall have the following meanings:

 

(a)          “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 Employee, 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 Employee, or any other person or entity who is obligation
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 (as defined herein); 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.

 

(b)          “Inventions”
shall means ideas, concepts, techniques, inventions, discoveries, and works of authorship, whether or not patentable or protectable
by copyright or as a mask work and whether or not reduced to practice, including, but not limited, devices, processes, computer
programs and related source code and object code, mask works, and methods, together with any improvements thereon or thereto, derivative
works made therefrom, and know-how, descriptions, sketches, drawings, or other knowledge, information, or material related thereto.

 

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(c)          “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.

 

(d)          “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 any part of the Company’s
Business.

 

(e)          “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, but is not limited to: (i) marketing and distributing Moissanite jewelry
and Moissanite gemstones, (ii) fabricating (including wafering, pre-forming, and faceting), marketing, and distributing Moissanite
gemstones or other diamond simulants to the gem and jewelry industry, and (iii) direct selling of fashion jewelry. Employee understands
that during Employee’s employment with the Company, the Company’s Business may expand or change, and Employee agrees
that any such expansions or changes shall expand or contract the definition of the Company’s Business and Employee’s
obligations under this Agreement accordingly.

 

(f)          “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 Employee’s principal place of employment or work for the Company, (viii) the state of North Carolina,
and (ix) within a 100 mile radius of the Company’s corporate headquarters.

 

9.          Covenant
Not to Compete. As a result of Employee’s employment by the Company: (i) Employee will 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) Employee will develop 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, (iii)
Employee will receive specialized knowledge of and specialized training in the Company’s Business, and (iv) Employee will
gain such knowledge of the Company’s Business that, during the course of Employee’s employment with the Company and
for a period of one year following the termination thereof, Employee could not perform services for a Competing Business without
inevitably disclosing the Company’s trade secrets and Confidential Information to that Competing Business. Accordingly, Employee
agrees to the following:

 

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(a)          While
employed by the Company, Employee 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, (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 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) for the benefit of any Competing Business
any employee or independent contractor of the Company to terminate his or her employment or independent contractor relationship
with the Company, or (vi) employ (or assist others to employ) for the benefit of any Competing Business any person who has been
employed by the Company within the last year of Employee’s employment with the Company.

 

(b)          For
a period of one year following the termination of Employee’s employment with the Company, Employee 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 Employee performed for the Company or that otherwise utilize skills, knowledge, and/or business contacts and relationships
that Employee utilized while providing services to the Company, (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 last
year of Employee’s employment with 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 Employee worked or had business
contact during the last year of Employee’s employment with 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 has been employed by the Company within the last year of Employee’s employment by the Company
or thereafter 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) any person who has been employed by the Company within the last year of Employee’s employment
by the Company or thereafter. These obligations will continue for the specified period regardless of whether the termination of
Employee’s employment was voluntary or involuntary or with or without cause, and the specified period shall be tolled and
shall not run during any time in which Employee fails to abide by these obligations.

 

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(c)          As
an exception to the above restrictions, Employee 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
Employee does not own or control more than two percent of the outstanding voting rights or equity of the Competing Business.

 

10.         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 Employee agrees to promptly deliver to the Company, upon request or upon termination of Employee’s employment with the
Company, all copies of such materials and Confidential Information in Employee’s possession, custody, or control, as well
as all other property of the Company in Employee’s possession, custody, or control. Likewise, Employee agrees to promptly
deliver to the Company, upon request or upon termination of Employee’s employment 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 Employee during the Term that is in Employee’s possession, custody, or control.

 

(b)          Employee
agrees, during the Term 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 Employees
work for the Company. If Employee is required to disclose Confidential Information pursuant to a court order or subpoena or such
disclosure is necessary to comply with applicable law, the undersigned 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.

 

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11.         Proprietary
Information.

 

(a)          Employee
agrees that any Inventions created, conceived, developed, or reduced to practice, in whole or in part, by Employee, either solely
or in conjunction with others, during or after the Term that arise in any way from the use of or reliance on any Confidential Information
or any of the Company’s equipment, facilities, supplies, trade secret information, or time, that relate to the Company’s
Business or the Company’s demonstrably anticipated business, research, or development, or that result from any work performed
by Employee for, on behalf of, or at the direction of the Company, shall belong exclusively to the Company and shall be deemed
part of the Confidential Information for purposes of this Agreement, whether or not fixed in a tangible medium of expression. Employee
agrees that all rights, title, and interest in and to all such Inventions, including, but not limited to, Intellectual Property
Rights shall vest and reside in, and shall be the exclusive property of, the Company. Without limiting the foregoing, Employee
agrees that any and all such Inventions shall be deemed to be “works made for hire” and that the Company shall be deemed
the sole and exclusive owner thereof. In the event and to the extent that any such Inventions are determined not to constitute
“works made for hire” or that, by operation of law or otherwise, any right, title, or interest in or to the Inventions,
including, but not limited to, any Intellectual Property Rights, vests not in the Company, but, rather, in Employee, Employee hereby:
(i) irrevocably and unconditionally assigns and transfers to the Company all rights, title, and interest in and to any such Inventions,
including, but not limited to, all Intellectual Property Rights and (ii) forever waives and agrees never to assert all such rights,
title, and interest.

 

(b)          Employee
agrees to promptly and fully disclose in writing to the Board of Directors of the Company: (i) any Invention created, conceived,
developed or reduced to practice by Employee, either solely or in conjunction with others, during the Term and (ii) any such Invention
created, conceived, developed, or reduced to practice after the Term that belongs exclusively to the Company pursuant to the provisions
of Paragraph 11(a) of this Agreement. For the avoidance of doubt, in no event shall any provision of this Agreement, including
without limitation Paragraph 11(b), provide or be construed to provide Employee or any other party with any license or other right
or authority to create, conceive, develop, or reduce to practice, after the Term, any Invention in which the Company has an ownership
interest, without the prior written consent of the Company.

 

(c)          Employee
agrees to assist the Company, at the Company’s expense, either during or subsequent to the Term, to obtain and enforce for
the Company’s own benefit, in any country, Intellectual Property Rights in connection with any and all Inventions created,
conceived, developed, or reduced to practice by Employee (in whole or in part) that belong or have been assigned to the Company
pursuant to the provisions of Paragraph 11(a) of this Agreement. Upon request, either during or subsequent to the Term, Employee
will execute all applications, assignments, instruments, and papers and perform all acts that the Company or its counsel may reasonably
deem necessary or desirable to obtain, maintain, or enforce any Intellectual Property Rights in connection with any such Inventions
or to otherwise protect the interests of the Company in those Inventions.

 

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12.         Acknowledgements,
Representations, and Warranties.

 

(a)          Employee
acknowledges that the Company has a strict policy against using proprietary information belonging to any other person or entity
without the express permission of the owner of that information.

 

(b)          Employee
represents and warrants to the Company that Employee’s performance under this Agreement and as an employee of the Company
does not and will not breach any non-competition, non-solicitation, or confidentiality agreement to which Employee is a party.
Employee represents and warrants to the Company that Employee has not entered into, and agrees not to enter into, any agreement
that conflicts with or violates this Agreement.

 

(c)          Employee
represents and warrants to the Company that Employee has not brought and shall not bring to the Company, or use in the performance
of Employee’s responsibilities for the Company, any materials or documents of a former employer that are not generally available
to the public or that did not belong to Employee prior to Employee’s employment with the Company, unless Employee has obtained
written authorization from the former employer or other owner for their possession and use and provided the Company with a copy
thereof.

 

13.         Indemnification.
The Employee will be eligible for indemnification to the fullest extent authorized under the Company’s Articles or Incorporation
and By-Laws (as applicable) and will be eligible for coverage under the Company’s Director’s & Officer’s
liability insurance policy as approved by the Board, subject to the terms and conditions contained therein.

 

14.         Entire
Agreement. This Agreement constitutes the entire agreement of the parties with respect to the matters set forth herein and
supersedes any prior agreements or understandings between them, whether written or oral.

 

15.         Waiver.
The failure of either party to insist, in any one or more instance, upon performance of the terms and conditions of this Agreement
shall not be construed as a waiver or a relinquishment of any right granted hereunder or of the future performance of any such
term or condition.

 

16.         Notices.
Any notice to be given under this Agreement shall be deemed sufficient if addressed in writing and delivered personally, by telefax
with receipt acknowledged, or by registered or certified U.S. mail to the following:

 

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For the Company:

Chairman
of the Board of Directors

Charles &
Colvard, Ltd.

170 Southport
Drive

Morrisville,
North Carolina 27560

Fax: (919)
468-0486

 

For Employee:

H. Marvin
Beasley

11320 West
121st Terrace

Overland
Park, Kansas 66213

 

17.         Severability.
In the event that any provision of any paragraph of this Agreement shall be deemed to be invalid or unenforceable for any reason
whatsoever, it is agreed such invalidity or unenforceability shall not affect any other provision of such paragraph or of this
Agreement, and the remaining terms, covenants, restrictions or provisions in such paragraph and in this Agreement shall remain
in full force and effect and any court of competent jurisdiction may so modify the objectionable provision as to make it valid,
reasonable, and enforceable. 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.

 

18.         Amendment.
This Agreement may be amended only by an agreement in writing signed by each of the parties hereto.

 

19.         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
Employee’s ability to earn a comparable living or secure employment in the field of Employee’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 Employee to understand the scope of the restrictions on Employee.

 

20.         Injunctive
Relief. Because of the unique nature of the Confidential Information, Employee understands and agrees that the Company will
suffer irreparable harm in the event that Employee fails to comply with any of Employee’s obligations under Paragraphs 8,
9, 10, or 11 of this Agreement and that monetary damages will be inadequate to compensate the Company for such breach. Accordingly,
Employee 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 8, 9, 10, or 11 of this Agreement.

 

    	13

    	 

    

 

 

21.         Publication.
Employee hereby authorizes the Company to provide a copy of this Agreement to any and all of Employee’s future employers
and to notify any and all such future employers that the Company intends to exercise its legal rights arising out of or in connection
with this Agreement and/or any breach or any inducement of a breach hereof.

 

22.         Survival.
Employee agrees that: (i) Employee’s employment with the Company is contingent upon Employee’s execution of this Agreement,
which is a material inducement to the Company to offer employment and the compensation and benefits hereunder to Employee and to
provide Confidential Information to Employee, and (ii) Paragraphs 8, 9, 10, or 11 of this Agreement shall survive any termination
for any reason whatsoever of Employee’s employment with the Company.

 

23.         Governing
Law. This Agreement shall be construed, interpreted, and governed in accordance with the laws of the state of North Carolina,
without regard to the conflicts of laws principles thereof. The state and federal courts in North Carolina shall be the exclusive
venues for the adjudication of all disputes arising out of this Agreement, and the parties consent to the exercise of personal
jurisdiction over them in any such adjudication and hereby waive any and all objections and defenses to the exercise of such personal
jurisdiction.

 

24.         Benefit.
This Agreement shall be binding upon and inure to the benefit of and shall be enforceable by and against the Company, its successors
and assigns, and Employee, her heirs, beneficiaries, and legal representatives. The Company may assign this Agreement or any rights
hereunder, or delegate any obligations hereunder, without the consent of Employee. Employee shall not assign this Agreement or
delegate Employee’s obligations hereunder without the prior written consent of the Company.

 

25.         Compliance
with Section 409A.

 

(a)          Parties’
Intent. The parties intend that the provisions of this Agreement comply with Section 409A of 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. If any provision of this Agreement (or of any award of
compensation, including equity compensation or benefits) would cause Employee to incur any additional tax or interest under Section 409A,
the Company shall, upon the specific request of Employee, use its reasonable business efforts to in good faith reform such provision
to comply with Code Section 409A; provided, that to the maximum extent practicable, the original intent and economic
benefit to Employee and the Company of the applicable provision shall be maintained, and the Company shall have no obligation to
make any changes that could create any additional economic cost or loss of benefit to the Company. The Company shall timely use
its reasonable business efforts to amend any plan or program in which Employee participates to bring it in compliance with Section
409A.

 

    	14

    	 

    

 

 

(b)          Separation
from Service. A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement
relating to 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.

 

(c)          Separate
Payments. Each installment payment required under this Agreement shall be considered a separate payment for purposes of Section
409A.

 

(d)          Delayed
Distribution to Key Employees. If the Company determines in accordance with Sections 409A and 416(i) of the Internal Revenue
Code of 1986, as amended, and the regulations promulgated thereunder, in the Company’s sole discretion, that Employee is
a Key Employee of the Company on the date Employee’s employment with the Company terminates and that a delay in benefits
provided under this Agreement is necessary to comply with Code Section 409A(A)(2)(B)(i), then any severance payments and any continuation
of benefits or reimbursement of benefit costs provided by this Agreement, and not otherwise exempt from Section 409A, shall be
delayed for a period of six (6) months following the date of termination of Employee’s employment (the “409A Delay
Period”). In such event, any severance payments and the cost of any continuation of benefits provided under this Agreement
that would otherwise be due and payable to Employee during the 409A Delay Period shall be paid to Employee in a lump sum cash amount
in the month following the end of the 409A Delay Period. For purposes of this Agreement, “Key Employee” shall mean
an employee who, on an Identification Date (“Identification Date” shall mean each December 31) is a key employee as
defined in Section 416(i) of the Code without regard to paragraph (5) thereof. If Employee is identified as a Key Employee on an
Identification Date, then Employee shall be considered a Key Employee for purposes of this Agreement during the period beginning
on the first April 1 following the Identification Date and ending on the following March 31.

 

    	15

    	 

    

 

 

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

 

	 	CHARLES & COLVARD, LTD.
	 	 	 
	 	By: 	/s/ Neal I. Goldman
	 	 	Neal I. Goldman
	 	 	Executive Chairman of the Board of Directors
	 	 	 
	 	EMPLOYEE
	 	 
	 	 	 /s/ H. Marvin Beasley 
	 	 	H. Marvin Beasley

 

    	16Exhibit 10.4

CHARLES & COLVARD, LTD. 

2008 STOCK INCENTIVE PLAN 

 

Restricted Stock Award Agreement

 

THIS RESTRICTED STOCK AWARD AGREEMENT (which,
together with Schedule A and Schedule B attached hereto, is referred to herein as the “Agreement”), made
effective as of _______________ (as defined below, the “Grant Date”), between CHARLES & COLVARD, LTD., a North
Carolina corporation (the “Corporation”), and _______________, (the “Participant”);

 

RECITALS: 

 

In furtherance of the purposes of the Charles &
Colvard, Ltd. 2008 Stock Incentive Plan, as it may be hereafter amended and/or restated (the “Plan”) and in consideration
of the services of the Participant and such other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Corporation and the Participant hereby agree as follows:

 

1.          Incorporation
of Plan. The rights and duties of the Corporation and the Participant under this Agreement shall, in all respects, be subject
to and governed by the provisions of the Plan, the terms of which are incorporated herein by reference. In the event of any conflict
between the provisions in this Agreement and those of the Plan, the provisions of the Plan shall govern. Unless otherwise defined
herein, capitalized terms in this Agreement shall have the same definitions as set forth within the Plan.

 

2.          Terms
of Award. The following terms used in this Agreement shall have the meanings set forth in this Section 2:

 

The “Participant” is _______________.

 

The “Grant Date” is _______________.

 

The “Restriction Period” is the
period beginning on the Grant Date and ending on the date or dates and satisfaction of such conditions (including both Service
Measures and Performance Measures) as described in Schedule A and Schedule B, which is attached hereto and expressly
made a part of this Agreement.

 

The number of shares of common stock of the
Corporation (the “Common Stock”) subject to the Restricted Stock Award granted under this Agreement shall be ______________________
(________) shares (the “Shares”).

 

3.          Grant
of Restricted Stock Award. Subject to the terms of this Agreement and the Plan, the Corporation hereby grants the Participant
a Restricted Stock Award (the “Award”) for that number of Shares of Common Stock as is set forth in Section 2.
The Participant expressly acknowledges that the terms of Schedule A and Schedule B shall be incorporated herein by reference
and shall constitute part of this Agreement. 

 

    	 

    	 

    

 

4.          Vesting
and Earning of Award. Subject to the terms of the Plan, the Award shall be deemed vested and earned, and the applicable restrictions
imposed on such Shares shall lapse, upon such date or dates, and subject to such conditions (including both Service Measures and
Performance Measures), as are described in this Agreement, including but not limited to the terms of Schedule A and Schedule
B, attached hereto. The Administrator has sole and absolute authority to determine whether and to what degree the Award has
vested and is payable and to interpret the terms and conditions of this Agreement and the Plan.

 

5.          Effect
of Change of Control.

 

(a)          In
the event of a Change of Control (as defined in the Plan), the Award, if outstanding and unvested as of the date of such Change
of Control, shall become fully vested, whether or not then otherwise vested, and the restrictions attached to such Shares shall
lapse except as may otherwise be provided in Section 5(b) immediately below.

 

(b)          Notwithstanding
the foregoing, in the event that a Change of Control event occurs, the Administrator may, in its sole and absolute discretion,
determine that the Award shall not vest on an accelerated basis, if the Corporation or the surviving or acquiring corporation,
as the case may be, shall have taken such action, including, but not limited to, the assumption of Awards granted under the Plan
or the grant of substitute awards (in either case, with substantially similar terms or equivalent economic benefits as Awards granted
under the Plan), as the Administrator determines to be equitable or appropriate to protect the rights and interests of Participants
under the Plan. For the purposes herein, if the Committee is acting as the Administrator authorized to make the determinations
provided for in this Section 5(b), the Committee shall be appointed by the Board of Directors, at least two-thirds of the
members of which shall have been Directors of the Corporation prior to the Change of Control event.

 

(c)          The
Administrator shall have full and final authority, in its sole and absolute discretion, to determine whether a Change of Control
of the Corporation has occurred, the date of the occurrence of such Change of Control and any incidental matters relating thereto.

 

6.          Termination
of Employment or Service; Forfeiture of Award. Except as may be otherwise provided in the Plan or this Agreement, in the event
that the employment of the Participant is terminated and/or Participant’s service to the Corporation ceases for any reason
(whether by the Corporation or the Participant and whether voluntarily or involuntarily) and all or part of the Award has not yet
vested pursuant to Sections 4 or 5 above and/or Schedule A and Schedule B attached hereto, then the Award, to
the extent not vested as of the Participant’s Termination Date, shall be forfeited immediately upon such termination, and
the Participant shall have no further rights or interests with respect to the Award or the Shares underlying that portion of the
Award that has not yet vested. The Participant expressly acknowledges and agrees that the termination of his or her employment
shall result in forfeiture of the Award and the Shares to the extent the Award has not vested as of his or her Termination Date.
[Notwithstanding the above provisions of this Section 6, if the Participant terminates employment with the Corporation for
any reason other than death but enters into a written agreement with the Corporation to provide, without interruption, continuing
services to the Corporation or an Affiliate as an Independent Contractor and/or continues or commences service as a member of the
Corporation’s Board of Directors without interruption, the Participant shall continue to be treated as an Employee of (or
in service to) the Corporation for purposes of this Award and shall not be treated as having a termination of employment or service
until the later of the date he is no longer an Employee of the Corporation (or an Affiliate) or the date he is no longer in service
as an Independent Contractor or Board member (as determined by the Administrator, in the Administrator’s sole discretion).]

 

    	2

    	 

    

 

7.          Settlement
of Award. The Award (or vested portion thereof) shall be payable to the Participant in whole shares of Common Stock as soon
as practical following the end of the Restriction Period and the Administrator’s determination of Participant’s satisfactory
achievement of stated Performance Measures, if any. In no event, however, shall the Award (or applicable portion thereof) be settled
and delivered to Participant more than 2 1⁄2 months following the end of the Restriction Period.

 

8.          No
Right of Employment; Forfeiture of Award. None of the Plan, this Agreement, the grant of the Award, or any other action or
documentation related to the Plan or the Award shall confer upon the Participant any right to continue in the employment of, or
as a service provider to, the Corporation or an Affiliate or interfere with the right of the Corporation or an Affiliate to terminate
the Participant’s employment or service at any time. Except as otherwise provided in the Plan or this Agreement, all rights
of the Participant with respect to the Award shall terminate upon termination of the Participant’s employment or service.

 

9.          Nontransferability
of Award and Shares. The Award shall not be transferable (including by sale, assignment, pledge or hypothecation) other than
by will or the laws of intestate succession. The designation of a beneficiary in accordance with the Plan does not constitute a
transfer. The Participant shall not sell, transfer, assign, pledge or otherwise encumber the Shares subject to the Award (except
as provided in Section 13 herein) until the Restriction Period has expired and all conditions to vesting and transfer have
been met.

 

10.         Superseding
Agreement. This Agreement supersedes any statements, representations or agreements of the Corporation with respect to the grant
of the Award, any other equity-based awards or any related rights, and the Participant hereby waives any rights or claims related
to any such statements, representations or agreements. This Agreement does not supersede or amend any confidentiality agreement,
nonsolicitation agreement, noncompetition agreement, employment agreement or any other similar agreement between the Participant
and the Corporation, including, but not limited to, any restrictive covenants contained in such agreements.

 

11.         Governing
Law. Except as otherwise provided in the Plan or herein, this Agreement shall be construed and enforced according to the laws
of the State of North Carolina, without regard to the conflict of laws provisions of any state, and in accordance with applicable
federal laws of the United States.

 

    	3

    	 

    

 

12.         Amendment
and Termination; Waiver. Subject to the terms of the Plan and this Section 12, this Agreement may be amended, altered,
suspended or terminated only by the written agreement of the parties hereto. Notwithstanding the foregoing, the Administrator shall
have unilateral authority to amend the Plan and this Agreement (without the Participant’s consent) to the extent necessary
to comply with Applicable Laws or changes to Applicable Laws (including, but in no way limited, to Code Section 409A and federal
securities laws) as well as to accelerate vesting of the Award or eliminate or reduce any service or performance measures set forth
in Attachment A in the Participant’s favor. The waiver by the Corporation of a breach of any provision of this Agreement
by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant.

 

13.         Certificates
for Shares; Rights as Shareholder. Unless the Administrator determines otherwise: (i) the Participant shall have voting
rights and (except as provided in clause (ii) below) other rights as a shareholder with respect to shares subject to the portion
of the Award that has not yet vested and (ii) notwithstanding clause (i) herein, the Administrator may determine that
any dividends (whether cash or stock) subject to the Award shall be subject to the same vesting or other restrictions that apply
to the shares subject to the Award. Unless the Administrator determines otherwise, a certificate or certificates for Shares subject
to the Award (or, in the case of uncertificated shares, other written evidence of ownership in accordance with Applicable Laws)
shall be issued in the name of the Participant as soon as practicable after the Award has been granted. Notwithstanding the foregoing,
the Administrator may require that: (a) the Participant deliver the certificate(s) (or other written instruments) for the
Shares to the Administrator or its designee to be held in escrow until the Award vests (in which case the Shares will be released
to the Participant) or is forfeited (in which case the Shares shall be returned to the Corporation) and/or (b) the Participant
deliver to the Corporation a stock power (or similar instrument), endorsed in blank, relating to the Shares subject to the Award
that are subject to forfeiture.

 

14.         Withholding;
Tax Matters.

 

(a)          The
Participant acknowledges that the Corporation shall require the Participant to pay the Corporation in cash the amount of any local,
state, federal, foreign or other tax or other amount required by any governmental authority to be withheld and paid over by the
Corporation to such authority for the account of the Participant, and the Participant agrees, as a condition to the grant of the
Award and delivery of the Shares or any other benefit, to satisfy such obligations. Notwithstanding the foregoing, the Administrator
may establish procedures to permit the Participant to satisfy such obligations in whole or in part, and any other local, state,
federal, foreign or other income tax obligations relating to the Award, by electing (the “election”) to have the Corporation
withhold shares of Common Stock from the Shares to which the Participant is entitled. The number of Shares to be withheld shall
have a Fair Market Value as of the date that the amount of tax to be withheld is determined as nearly equal as possible to (but
not exceeding) the amount of such obligations being satisfied. Each election must be made in writing to the Administrator in accordance
with election procedures established by the Administrator.

 

    	4

    	 

    

 

(b)          The
Participant acknowledges that the Corporation has made no warranties or representations to the Participant with respect to the
tax consequences (including, but not limited to, income tax consequences) related to the transactions contemplated by this Agreement,
and the Participant is in no manner relying on the Corporation or its representatives for an assessment of such tax consequences.
The Participant acknowledges that there may be adverse tax consequences upon the grant of the Award and/or the acquisition or disposition
of the Shares subject to the Award and that the Participant has been advised that he or she should consult with his own attorney,
accountant, and/or tax advisor regarding the decision to enter into this Agreement and the consequences thereof. The Participant
also acknowledges that the Corporation has no responsibility to take or refrain from taking any actions in order to achieve a certain
tax result for the Participant, including no responsibility to advise or assist the Participant with respect to potential Code
Section 83(b) election with respect to the Award.

 

15.         Administration.
The authority to construe and interpret this Agreement and the Plan, and to administer all aspects of the Plan, shall be vested
in the Administrator, and the Administrator shall have all powers with respect to this Agreement as are provided in the Plan. Any
interpretation of this Agreement by the Administrator and any decision made by the Administrator with respect to this Agreement
shall be conclusive, final, and binding in all respects.

 

16.         Notices.
Except as may be otherwise provided by the Plan, any written notices provided for in this Agreement or the Plan shall be in writing
and shall be deemed sufficiently given if either hand delivered or if sent by fax or overnight courier, or by postage paid first
class mail. Notices sent by mail shall be deemed received three business days after mailed but in no event later than the date
of actual receipt. Notices shall be directed, if to the Participant, at the Participant’s address indicated by the Corporation’s
records (or at such other address as may be designated by the Participant in a manner acceptable to the Administrator), or if to
the Corporation, at the Corporation’s principal office, attention Chief Financial Officer, Charles & Colvard, Ltd.

 

17.         Severability.
If any provision of the Agreement shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect
the remaining parts of the Agreement, and the Agreement shall be construed and enforced as if the illegal or invalid provision
had not been included.

 

    	5

    	 

    

 

18.         Restrictions
on Award and Shares. The Corporation may impose such restrictions on the Award, the Shares and/or any other benefits underlying
the Award as it may deem advisable, including, without limitation, restrictions under the federal securities laws, the requirements
of any stock exchange or similar organization and any blue sky, state or foreign securities laws applicable to such securities.
Notwithstanding any other provision in the Plan or the Agreement to the contrary, the Corporation shall not be obligated to issue,
deliver or transfer shares of Common Stock, make any other distribution of benefits, or take any other action, unless such delivery,
distribution or action is in compliance with all Applicable Laws (including, but not limited to, the requirements of the Securities
Act). The Corporation will be under no obligation to register shares of Common Stock or other securities with the Securities and
Exchange Commission or to effect compliance with the exemption, registration, qualification or listing requirements of any state
or foreign securities laws, stock exchange or similar organization, and the Corporation will have no liability for any inability
or failure to do so. The Corporation may cause a restrictive legend or legends (including but, in no way limited to, any legends
that may be necessary or appropriate pursuant to Section 13 herein) to be placed on any certificate for Shares issued pursuant
to the Award in such form as may be prescribed from time to time by Applicable Laws or as may be advised by legal counsel. Further,
the Administrator may delay the right to receive or dispose of shares of Common Stock (or other benefits) upon settlement of the
Award at any time when the Administrator determines that allowing issuance of Common Stock (or distribution of other benefits)
would violate any federal or state securities laws, and the Administrator may provide in its discretion that any time periods to
receive shares of Common Stock (or other benefits) subject to the Award are tolled during a period of suspension.

 

19.         Counterparts;
Further Instruments. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. The parties hereto agree to execute such further instruments
and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

 

20.         Effect
of Changes in Duties or Status. Notwithstanding the other provisions of the Plan and the Agreement, the Administrator has discretion
to determine, at the time of grant of the Award or at any time thereafter, the effect, if any, on the Award (including but not
limited to the vesting of the Award) if the Participant’s duties and/or responsibilities change or the Participant’s
status as an Employee changes, including but not limited to, a change from full-time to part-time, or vice versa, or if other similar
changes in the nature or scope of the Participant’s employment with or provisions of services to the Corporation occur. In
addition, unless otherwise determined by the Administrator, in the Administrator’s sole discretion, for purposes of the Plan,
a Participant shall be considered to have terminated employment and to have ceased to be an Employee if his employer was an Affiliate
at the time of grant and such employer or other party ceases to be an Affiliate, even if he continues to be employed by or provide
services to such employer or party.

 

21.         Rules
of Construction. Headings are given to the Sections of this Agreement solely as a convenience to facilitate reference. The
reference to any statute, regulation or other provision of law shall be construed to refer to any amendment to or successor of
such provision of law unless the Administrator determines otherwise.

 

22.         Successors
and Assigns. The Agreement shall be binding upon the Corporation and its successors and assigns, and the Participant and his
or her executors, administrators and permitted transferees and beneficiaries.

 

23.         Right
of Offset. Notwithstanding any other provision of the Plan or this Agreement (and taking into account any Code Section 409A
considerations, if applicable), the Corporation may at any time reduce the amount of any distribution or benefit otherwise payable
to or on behalf of the Participant by the amount of any obligation of the Participant to the Corporation or an Affiliate that is
or becomes due and payable (including, but in no way limited to, any obligation that may arise under Section 304 of the Sarbanes-Oxley
Act of 2002).

 

    	6

    	 

    

 

24.         Forfeiture
of Shares and/or Gain from Shares.

 

(a)          Notwithstanding
any other provision of this Agreement, if, at any time during the Participant’s employment with or service to the Corporation
or an Affiliate or during the 12-month period following termination of employment or service for any reason (regardless of whether
such termination was by the Corporation or the Participant, and whether voluntary or involuntary), the Participant engages in a
Prohibited Activity (as defined herein), then: (i) the Award shall immediately be terminated and forfeited in its entirety,
(ii) any Shares, regardless of whether such Shares are vested or unvested, shall immediately be forfeited and returned to
the Corporation (without the payment by the Corporation of any consideration for such Shares), and the Participant shall cease
to have any rights related thereto and shall cease to be recognized as the legal owner of such Shares, and (iii) any Gain
(as defined below) realized by the Participant with respect to any Shares shall immediately be paid by the Participant to the Corporation.

 

(b)          For
purposes of this Agreement, a “Prohibited Activity” shall mean: (i) the Participant’s solicitation or assisting
any other person in so soliciting, directly or indirectly, of any customers, suppliers, vendors or other service providers to or
of the Corporation or any Affiliate within the United States that the Participant learned confidential information about or had
contact with through his employment or other service with the Corporation or an Affiliate within the United States for the purpose
of inducing that customer, supplier, vendor or other service provider to terminate or alter his or its relationship with the Corporation
or an Affiliate; (ii) the Participant’s inducement, directly or indirectly, of any employees or service providers to
terminate their employment with or service to the Corporation or an Affiliate for the purpose of performing services for, assisting,
advising or otherwise supporting any business which is competitive with the business of the Corporation or an Affiliate; (iii) the
Participant’s violation of any noncompetition, nonsolicitation or confidentiality restrictions or other restrictive covenants
applicable to the Participant; (iv) the Participant’s violation of any of the Corporation’s policies, including,
without limitation, the Corporation’s insider trading policies; (v) the Participant’s violation of any material
(as determined by the Administrator) federal, state or other law, rule or regulation; (vi) the Participant’s disclosure
or other misuse of any confidential information or material concerning the Corporation or an Affiliate (except as otherwise required
by law or as agreed to by the parties herein); (vii) the Participant’s dishonesty in a manner that negatively impacts
the Corporation in any way; (viii) the Participant’s refusal to perform his duties for the Corporation or an Affiliate;
(ix) the Participant’s engaging in fraudulent conduct; or (x) the Participant’s engaging in any conduct that
is or could be materially damaging to the Corporation or its Affiliates without a reasonable good faith belief that such conduct
was in the best interest of the Corporation or any of its Affiliates. The Administrator shall have sole and absolute discretion
to determine if a Prohibited Activity has occurred.

 

(c)          For
purposes of this Agreement, “Gain” shall mean, unless the Administrator determines otherwise, an amount equal to (i)
the greater of: (A) the Fair Market Value per share of the Shares (or portion thereof) at the time of grant; (B) the
Fair Market Value Per Share of the Shares (or portion thereof) at the time of vesting; or (C) the disposition price per Share
of any Shares sold or disposed at the time of disposition multiplied by (ii) the number of Shares sold or disposed of.

 

    	7

    	 

    

 

(d)          Notwithstanding
the provisions of Section 24(a) herein, the waiver by the Corporation in any one or more instances of any rights afforded
to the Corporation pursuant to the terms of Section 24(a) herein shall not be deemed to constitute a further or continuing
waiver of any rights the Corporation may have pursuant to the terms of this Agreement or the Plan (including, but not limited to,
the rights afforded the Corporation in Section 23 herein).

 

(e)          The
Corporation and the Participant hereby expressly agree that, notwithstanding the other provisions of this Section 24, if the
Participant has entered into an employment agreement, consulting agreement or other agreement containing noncompetition, nonsolicitation,
confidentiality or similar covenants, then the provisions contained in such agreement(s) with respect to the scope (e.g., duration,
territory, or prohibited activity) of such restrictive covenants shall control (and thus prevail over Section 24(b)(i), Section 24(b)(ii)
and Section 24(b)(iii) herein), unless the Administrator should determine otherwise. In any event, the Corporation shall retain
the forfeiture and recoupment rights provided in Section 24(a) in the event of a violation of such restrictive covenants unless,
and then only to the extent prohibited by, or restricted under, Applicable Laws.

 

(f)          By
accepting this Agreement, and without limiting the effect of Section 23 herein, the Participant consents to a deduction (to
the extent permitted by Applicable Law) from any amounts the Corporation or an Affiliate may owe the Participant from time to time
(including amounts owed to the Participant as wages or other compensation, fringe benefits, or vacation pay, as well as any other
amounts owed to the Participant by the Corporation or an Affiliate), to the extent of the amounts the Participant owes the Corporation
pursuant to this Agreement, including but not limited to this Section 24. Whether or not the Corporation elects to make any
set-off in whole or in part, if the Corporation does not recover by means of set-off the full amount owed by the Participant pursuant
to this Agreement, the Participant agrees to immediately pay the unpaid balance to the Corporation. Further, by executing and returning
this Agreement to the Corporation, the Participant acknowledges and agrees that: (i) Participant has read the Plan and this
Agreement in its entirety; (ii) Participant has had the opportunity to consult with legal counsel prior to execution of this
Agreement; (iii) this Agreement is valid and binding upon, and enforceable against, the Participant in accordance with its
terms, including, but not limited to, the restrictions contained in this Section 24; and (iv) the consideration for this
Agreement is valuable and sufficient consideration.

 

[Signatures of the Corporation and the Participant
follow on Separate Page.]

 

    	8

    	 

    

 

IN WITNESS WHEREOF, this Agreement has been
executed on behalf of the Corporation and by the Participant on the day and year first above written.

 

	 	CHARLES & COLVARD, LTD.
	 	 
	 	By:	 
	 	 	 
	 	Title:    	 

 

	Attest:	 
	 	 	 
	By:	 	 
	 	 	 
	Title:	 	 

 

	[Corporate Seal]

 

	 	PARTICIPANT
	 	 
	 	______________________ (SEAL)
	 	   ______________

 

    	9

    	 

    

 

CHARLES & COLVARD, LTD.

2008 STOCK INCENTIVE PLAN

 

Restricted Stock Award Agreement

 

SCHEDULE A

 

SERVICE MEASURES

 

Grant Date: _______________, __.

 

Number of Shares Subject to Award: _______________ shares.

 

 Restriction Period: The Shares
subject to the Award shall vest and be earned, as provided below, subject to the terms and conditions as may be imposed by the
Plan and the Agreement1:

 

	
        Date of
        Vesting
	 	
        Shares
        to be Vested

 

[Insert Schedule] 

 

 

1 Vesting of the Award is subject to Participant’s
continuous employment with, or service to, the Corporation from the Grant Date through the Date of Vesting and the other terms
and conditions imposed under the Plan and/or this Agreement, including achievement of the performance goals set forth in the Performance
Measures described in Schedule B.

 

    	A-1

    	 

    

 

CHARLES & COLVARD, LTD.

2008 STOCK INCENTIVE PLAN

 

Restricted Stock Award Agreement

 

SCHEDULE B

 

PERFORMANCE MEASURES

 

1.  Purpose.
The purpose of this Schedule B is to set forth the Performance Measures that will be applied to determine the amount of
the Award to be made under the terms of the attached Restricted Stock Award Agreement (the “Agreement”). This Schedule
B is incorporated into and forms a part of the Agreement.

 

2.  Revision
of Performance Measures. The Performance Measures set forth in this Schedule B may be modified by the Administrator
during, and after the end of, the Restriction Period to reflect significant events that occur during the Restriction Period.

 

3.  Performance
Goals. The Performance goals shall be as follows2:

 

[Insert Schedule]

 

4.  Amount
of Award. The amount distributable to the Participant under the Agreement shall be determined in the discretion of the Administrator
based upon the Administrator’s assessment of the degree to which the Participant successfully achieved the performance measures
set forth above.

 

 

2 Vesting of the Award is subject
to Participant’s continuous employment with, or service to, the Corporation through the Date of Vesting set forth in the
Service Measures described in Schedule A and the other terms and conditions imposed under the Plan and/or this Agreement.

 

    	B-1

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