Exhibit 10.2

 

CHARLES & COLVARD, LTD.

2018 EQUITY 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 “Company”), and
______________ (the “Participant”);

 

RECITALS:

 

In furtherance of the purposes of the Charles & Colvard, Ltd. 2018 Equity
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 Company and the Participant hereby agree as follows:

 

1.           Incorporation of Plan. The rights and duties of the Company 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 are attached hereto and expressly made a part of this Agreement.

 

The number of shares of common stock of the Company (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 Company 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 Committee 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 in Control.

 

(a)          In the event of a Change in Control (as defined in the Plan), the
Award, if outstanding and unvested as of the date of such Change in 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 in
Control event occurs, the Committee may, in its sole and absolute discretion,
determine that the Award shall not vest on an accelerated basis, if the Company
or the surviving or acquiring Company, 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 Committee 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 Committee 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 Company prior to the Change in Control event.

 

(c)          The Committee shall have full and final authority, in its sole and
absolute discretion, to determine whether a Change in Control of the Company has
occurred, the date of the occurrence of such Change in 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 Company ceases for any reason (whether by the Company 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 Participant’s employment shall result in forfeiture of the Award
and the Shares to the extent the Award has not vested as of Participant’s
Termination Date. Notwithstanding the above provisions of this Section 6, if the
Participant terminates employment with the Company for any reason other than
death but enters into a written agreement with the Company to provide, without
interruption, Continuous Service to the Company or an Affiliate as an
Independent Contractor or Consultant and/or continues or commences service as a
member of the Company’s Board of Directors without interruption, the Participant
shall continue to be treated as an Employee of (or in service to) the Company
for purposes of this Award and shall not be treated as having a Termination of
Service until the later of the date Participant is no longer an Employee of the
Company (or an Affiliate) or the date Participant is no longer in service as an
Independent Contractor or Board member (as determined by the Committee, in the
Committee’s sole discretion).

 

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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 Committee’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 2½ 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 Company or an Affiliate
or interfere with the right of the Company 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 Company with respect to the grant of the
Award and any related awards or 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 Company, 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.

 

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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 Committee 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 Schedule A in the Participant’s favor. The
waiver by the Company 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 Committee
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 Committee 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 Committee 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 Committee may require that:
(a) the Participant deliver the certificate(s) (or other written instruments)
for the Shares to the Committee 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 Company); and/or
(b) the Participant deliver to the Company 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 Company shall require the
Participant to pay the Company in cash the amount of any applicable local,
state, federal, foreign or other tax or other amount required by any
governmental authority to be withheld and paid over by the Company to such
authority for the account of the Participant, if any, 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 as applicable. Notwithstanding
the foregoing, the Committee 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 Company 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 Committee in accordance with election procedures established by
the Committee.

 

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(b)          The Participant acknowledges that the Company 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 Company 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 Participant should consult with Participant’s 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 Company 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 Committee, and the Committee shall have all powers with respect to
this Agreement as are provided in the Plan. Any interpretation of this Agreement
by the Committee and any decision made by the Committee 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 Company’s records (or
at such other address as may be designated by the Participant in a manner
acceptable to the Committee), or if to the Company, at the Company’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.

 

18.         Restrictions on Award and Shares. The Company 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 Company 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 Company 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 Company will have no liability
for any inability or failure to do so. The Company 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 Committee 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 Committee determines that allowing issuance of Common Stock (or
distribution of other benefits) would violate any federal or state securities
laws, and the Committee 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.

 

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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 Committee 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 Company occur. In addition, unless otherwise determined by the
Committee, in the Committee’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 Participant’s employer was an Affiliate at the time of
grant and such employer or other party ceases to be an Affiliate, even if
Participant 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 Committee
determines otherwise.

 

22.         Successors and Assigns. The Agreement shall be binding upon the
Company and its successors and assigns, and the Participant and Participant’s
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 Company 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 Company 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).

 

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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 Company 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
Company 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 Company (without the payment by the
Company 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 Company.

 

(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 Company or any Affiliate within the United
States that the Participant learned confidential information about or had
contact with through Participant’s employment or other service with the Company
or an Affiliate within the United States for the purpose of inducing that
customer, supplier, vendor or other service provider to terminate or alter
Participant’s or its relationship with the Company 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 Company 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
Company 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 Company’s policies, including, without limitation, the
Company’s insider trading policies; (v) the Participant’s violation of any
material (as determined by the Committee) federal, state or other law, rule or
regulation; (vi) the Participant’s disclosure or other misuse of any
confidential information or material concerning the Company 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
Company in any way; (viii) the Participant’s refusal to perform Participant’s
duties for the Company 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 Company or its Affiliates without a
reasonable good faith belief that such conduct was in the best interest of the
Company or any of its Affiliates. The Committee 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
Committee 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.

 

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

 

(e)          The Company 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 Committee should
determine otherwise. In any event, the Company 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 Company 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 Company or an Affiliate), to the
extent of the amounts the Participant owes the Company pursuant to this
Agreement, including but not limited to this Section 24. Whether or not the
Company elects to make any set-off in whole or in part, if the Company 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 Company. Further, by executing and returning this Agreement to the Company,
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 Company and the Participant follow on Separate Page.]

 

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

 

  CHARLES & COLVARD, LTD.         By:           Title:  

 

Attest:         By:           Title:           [Corporate Seal]  

 

  PARTICIPANT               (SEAL)         Printed Name:    

 

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CHARLES & COLVARD, LTD.

2018 EQUITY INCENTIVE PLAN

 

Restricted Stock Award Agreement

 

SCHEDULE A

 

SERVICE MEASURES

 

Grant Date: ___________________, 20_____.

 

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 Company 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

 

 

 

 

CHARLES & COLVARD, LTD.

2018 EQUITY INCENTIVE PLAN

 

Restricted Stock Award Agreement

 

SCHEDULE B

 

PERFORMANCE GOALS

 

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 Goals. The Performance Goals set forth in
this Schedule B may be modified by the Committee 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:

 

a.     Financial Goals.

 

b.     Personal Goals.

 

[Insert Schedule]

 

4.          Amount of Award. The amount distributable to the Participant under
the Agreement shall be determined in the discretion of the Committee based upon
the Committee's assessment of the degree to which the Participant successfully
achieved the Performance Goals set forth above.

 

 

2 Vesting of the Award is subject to Participant’s continuous employment with,
or service to, the Company 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.