Exhibit 10.3

CHARLES & COLVARD, LTD.

2008 STOCK INCENTIVE PLAN

 

Restricted Stock Award Agreement

Pursuant to Long-Term Incentive Program

 

THIS AGREEMENT (together with Schedule A, attached hereto, the “Agreement”),
made effective as of                         , 20   (as defined below, the
“Grant Date”), between CHARLES & COLVARD, LTD., a North Carolina corporation
(the “Corporation”), and                      , an Employee of the Corporation
or an Affiliate (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”), the
Charles & Colvard, Ltd. Long-Term Incentive Program adopted April 17, 2014 (the
“LTIP”), 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 the
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 with 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
such date or dates and satisfaction of such conditions as described in Schedule
A, 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, the LTIP 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 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 upon such date or dates, and subject to
such conditions, as are described in this Agreement, including but not limited
to the terms of Schedule A, attached hereto. The Administrator has sole
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 as of the date of such Change of Control, shall become
fully vested, whether or not then otherwise vested.

 

(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, 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
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 for any reason (whether by the
Corporation or the Participant and whether voluntary or involuntary) and all or
part of the Award has not yet vested pursuant to Section 4, Section 5 and/or
Schedule A herein, 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 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, unless the Administrator
determines otherwise, if the Participant terminates employment with the
Corporation (for any reason other than death) but enters into a written
agreement to provide continuing services without interruption to the Corporation
or an Affiliate as an Independent Contractor, the Participant shall continue to
be treated as an Employee of or in service to the Corporation and shall not be
treated as having a termination of employment 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 (as determined by the
Administrator, in the Administrator’s discretion).

 

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7.          Settlement of Award. The Award shall be payable in whole shares of
Common Stock.

 

8.          No Right of Employment; Forfeiture of Award. None of the Plan, the
LTIP, this Agreement, the grant of the Award, or any other action or
documentation related to the Plan or the LTIP shall confer upon the Participant
any right to continue in the employment of 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.

 

12.         Amendment and Termination; Waiver. Subject to the terms of the Plan,
the LTIP, 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 Participant 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). The waiver by the Corporation of a breach of any provision of the
Agreement by the Participant shall not operate or be construed as a waiver of
any subsequent breach by the Participant.

 

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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. Except as otherwise provided in the
Plan or this Agreement, the Participant will have all voting, dividend and other
rights of a shareholder with respect to the Shares following issuance of the
certificate or certificates for the Shares.

 

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.

 

(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.

 

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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.

 

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.

 

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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 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 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),
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).

 

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 herein) realized by
the Participant with respect to any Shares shall immediately be paid by the
Participant to the Corporation.

 

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(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.

 

(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.

 

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(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.]

 

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IN WITNESS WHEREOF, this Agreement has been executed in 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)           Printed Name:  

  

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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 Agreement2:

 

Date of Vesting   Shares Vested       1st Anniversary of Grant Date   1/3
(rounded down to nearest whole share)       2nd Anniversary of Grant Date   1/3
(rounded down to nearest whole share)       3rd Anniversary of Grant Date   All
Remaining Shares

 

2 Vesting of the Award is subject to continued employment or service of the
Participant and the other terms and conditions imposed under the Plan and/or
this Agreement.

 

A-1