Exhbit 10.7

SCIO DIAMOND TECHNOLOGY CORP.

FORM OF QUALIFIED STOCK OPTION GRANT AGREEMENT

      This Stock Option Grant Agreement (the “Agreement”) is entered into on
          2012, by and between Scio Diamond Technology Corp., a Nevada
corporation (the “Corporation”), and    (the “Optionee”), effective as of
            2012 (the “Grant Date”).

In consideration of the premises, mutual covenants and agreements herein, the
Corporation and the Optionee agree as follows:

1.            Grant of Option. The Corporation hereby grants to the Optionee,
pursuant to the 2012 Share Incentive Plan (the “Plan”), a stock option to
purchase from the Corporation, at a price of $      per share (the “Exercise
Price”), up to             shares of Common Stock of the Corporation, $0.001 par
value, subject to the provisions of this Agreement and the Plan (the “Options”).
The Options shall expire at 5:00 p.m. Pacific Time on the last business day
preceding the 3 year anniversary of the Grant Date (the “Expiration Date”),
unless fully exercised or terminated earlier.

2.            Terminology. Unless stated otherwise in this Agreement,
capitalized terms in this Agreement shall have the meaning set forth in the
Plan.

3.            Exercise of Option.

(a)             Vesting. Subject to the terms of the Plan with respect to
vesting, the Options granted shall vest in the amounts and as of the dates
Corporation reaches the performance milestones shown in Exhibit A as determined
by the Administrator, and shall stay vested, provided that the Optionee is in
the continuous employ of, or in a service relationship with, the Corporation
from the Grant Date through the applicable date upon which such Options become
vested. The extent to which the Options are vested as of a particular vesting
date shall be rounded down to the nearest whole share. However, vesting is
rounded up to the nearest whole share on the last vesting date.

(b)           Right to Exercise. The Optionee shall have the right to exercise
the Options, whether or not vested, in whole or in part at any time prior to the
Expiration Dare or earlier termination of the Options in accordance with the
Plan and this Agreement; provided, that to the extent, if any, that the
aggregate Fair Market Value of the Common Stock subject to the Options as of the
Grant Date, plus the aggregate fair market value (determined as of the date of
grant) of all other stock with respect to which incentive stock options granted
to the Optionee prior to the Grant Date under all plans of the Corporation and
its parent and subsidiary corporations first become exercisable during any
calendar year exceeds $100,000 (the “Annual Limitation”), then except as
otherwise provided in this Agreement the Options shall be exercisable during
that year only to the extent, if any, that their exercisability does not cause
the Annual Limitation to be exceeded. Any Options that are not exercisable due
to the proviso in the preceding sentence shall be exercisable during the next
calendar year, subject again to the application of that proviso. To the extent
not exercised, the number of shares as to which the Option is exercisable shall
accumulate and remain exercisable, in whole or in part, at any time after
becoming exercisable, but not later than the Expiration Date or other
termination of the Option. In the event of the Optionee’s termination of
employment, the exercisability is governed by Section 4.

(c)            Exercise Procedure. Subject to the conditions set forth in this
Agreement, the Option shall be exercised (to the extent then exercisable) by
delivery of written notice of exercise on any business day to the Corporate
Secretary of the Corporation in such form as the Administrator may require from
time to time. Such notice shall specify the number of shares in respect to which
the Option is being exercised and shall be accompanied by full payment of the
Exercise Price for such shares in accordance with Section 3(e) of this
Agreement. The exercise shall be effective upon receipt by the Corporate
Secretary of the Corporation of such written notice accompanied by the required
payment. The Option may be exercised only in multiples of whole shares and may
not be exercised at any one time as to fewer than one hundred shares (or such
lesser number of shares as to which the Option is then exercisable). No
fractional shares shall be issued pursuant to this Option.

 
 
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(d)            Effect. The exercise, in whole or in part, of the Option shall
cause a reduction in the number of shares of Common Stock subject to the Option
equal to the number of shares of Common Stock with respect to which the Option
is exercised.

(e)            Method of Payment. In addition to any other method approved by
the Administrator, if any, payment of the Exercise Price shall be by any of the
following, or a combination thereof, as determined by the Administrator in its
discretion at the time of exercise:

(i)           by delivery of cash, certified or cashier’s check, or money order
or other cash equivalent acceptable to Administrator in its sole discretion; or

(ii)           by a broker-assisted cashless exercise in accordance with
Regulation T of the Board of Governors of the Federal Reserve System and the
following provisions. Subject to such limitations as the Administrator may
determine, at any time during which the Common Stock is publicly traded, the
Exercise Price shall be deemed to be paid, in whole or in part, if the Optionee
delivers a properly executed exercise notice, together with irrevocable
instructions: (i) to a brokerage firm approved by the Corporation to deliver
promptly to the Corporation the aggregate amount of sale or loan proceeds to pay
the Exercise Price and any withholding tax obligations that may arise in
connection with the exercise; and (ii) to the Corporation to deliver the
certificates for such purchased shares directly to such brokerage firm.

(f)            Issuance of Shares Upon Exercise. Upon due exercise of the
Option, in whole or in part, in accordance with the terms of this Agreement, the
Corporation shall issue to the Optionee, the brokerage firm specified in the
Optionee’s delivery instructions pursuant to a broker-assisted cashless
exercise, or such other person exercising the Option, as the case may be, the
number of shares of Common Stock so paid for, in the form of fully paid and
non-assessable stock and shall deliver certificates therefore as soon as
practicable thereafter.

(g)            Restrictions on Exercise and upon Shares Issued upon Exercise.
Notwithstanding any other provision of the Agreement, the Option may not be
exercised at any time that the Corporation does not have in effect a
registration statement under the Securities Act of 1933, as amended, relating to
the offer of Common Stock to the Optionee under the Plan, unless the Corporation
agrees to permit such exercise. Upon the issuance of any shares of Common Stock
pursuant to the exercise of the Option, the Optionee will, upon the request of
the Corporation, agree in writing that the Optionee is acquiring such shares for
investment only and not with a view to resale, and that the Optionee will not
sell, pledge or otherwise dispose of such shares so issued unless (i) the
Corporation is furnished with an opinion of counsel to the effect that
registration of such shares pursuant to the Securities Act of 1933, as amended,
is not required by that Act or by the rules and regulations thereunder; (ii) the
staff of the Securities and Exchange Commission has issued a “no-action” letter
with respect to such disposition; or (iii) such registration or notification as
is, in the opinion of counsel for the Corporation, required for the lawful
disposition of such shares has been filed by the Corporation and has become
effective; provided, however, that the Corporation is not obligated hereby to
file any such registration or notification. In addition, the Common Stock issued
upon the exercise of any Options shall be subject to repurchase by the
Corporation for an amount equal to the Exercise Price of such Options (i) upon
the occurrence of an event described in Section 4(d) of this Agreement, or (ii)
if the Options were not vested when they were exercised, upon the occurrence of
any event that would have resulted in the termination of those Options under the
Plan and this Agreement if those Options had not been exercised. The Corporation
may place a legend embodying such restrictions on the certificates evidencing
such shares.

4.             Termination of Employment or Service.

(a)           Exercise Period Following Cessation of Employment or Other Service
Relationship, In General. If Optionee ceases to be employed by, or in a service
relationship with the Corporation for any reason other than death, Disability,
or discharge for Cause, (i) the unvested Options shall terminate immediately
upon such cessation, and (ii) the vested Options shall remain exercisable during
the 30-day period following such cessation, but in no event after the Expiration
Date. Unless sooner terminated, any unexercised vested Options shall terminate
upon the expiration of such 30-day period.
 
 
 
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(b)           Death of Optionee. If Optionee dies prior to the expiration or
other termination of the Options, (i) the unvested Options shall terminate
immediately upon Optionee’s death, and (ii) the vested Options shall remain
exercisable during the one-year period following Optionee’s death, but in no
event after the Expiration Date, by Optionee’s executor, personal
representative, or the person(s) to whom the Options are transferred by will or
the laws of descent and distribution. Unless sooner terminated, any unexercised
vested Options shall terminate upon the expiration of such one-year period.

(c)           Disability of Optionee. If Optionee ceases to be employed by, or
in a service relationship with, the Corporation as a result of Optionee’s
Disability, (i) the unvested Options shall terminate immediately upon such
cessation, and (ii) the vested Options shall remain exercisable during the
one-year period following such cessation, but in no event after the Expiration
Date. Unless sooner terminated, any unexercised vested Options shall terminate
upon the expiration of such one-year period.

(d)           Misconduct. Notwithstanding anything to the contrary in this
Agreement, the Options shall terminate in their entirety, regardless of whether
the Options are vested, immediately upon Optionee’s discharge of employment or
other service relationship for Cause or upon Optionee’s commission of any of the
following acts during any period following the cessation of Optionee’s
employment or other service relationship during which the Options otherwise
would be exercisable: (i) fraud on or misappropriation of any funds or property
of the Corporation, or (ii) breach by Optionee of any provision of any
employment, non-disclosure, non-competition, non-solicitation, assignment of
inventions, or other similar agreement executed by Optionee for the benefit of
the Corporation, as determined by the Administrator, which determination will be
conclusive.

5.           Adjustments and Business Combinations.

(a)            Adjustments for Events Affecting Common Stock. In the event of
changes in the Common Stock of the Corporation by reason of any stock dividend,
spin-off, split-up, reverse stock split, recapitalization, reclassification,
merger, consolidation, liquidation, business combination or exchange of shares
and the like, the Administrator shall, in its discretion, make appropriate
substitutions for or adjustments in the number, kind and price of shares covered
by this Option, and shall, in its discretion and without the consent of the
Optionee, make any other substitutions for or adjustments in this Option,
including but not limited to reducing the number of shares subject to the Option
or providing or mandating alternative settlement methods such as settlement of
the Option in cash or in shares of Common Stock or other securities of the
Corporation or of any other entity, or in any other matters which relate to the
Option as the Administrator shall, in its sole discretion, determine to be
necessary or appropriate.

(b)            Pooling of Interests Transaction. Notwithstanding anything in the
Plan or this Agreement to the contrary and without the consent of the Optionee,
the Administrator, in its sole discretion, may make any modifications to the
Option, including but not limited to cancellation, forfeiture, surrender or
other termination of the Option in whole or in part regardless of the vested
status of the Option, in order to facilitate any business combination that is
authorized by the Board to comply with requirements for treatment as a pooling
of interests transaction for accounting purposes under generally accepted
accounting principles.

(c)            Adjustments for Other Events. The Administrator is authorized to
make, in its discretion and without the consent of the Optionee, adjustments in
the terms and conditions of, and the criteria included in, the Option in
recognition of unusual or nonrecurring events affecting the Corporation, or the
financial statements of the Corporation, or of changes in applicable laws,
regulations, or accounting principles, whenever the Administrator determines
that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Option or the Plan.

(d)            Binding Nature of Adjustments. Adjustments under this Section 5
will be made by the Administrator, whose determination as to what adjustments,
if any, will be made and the extent thereof will be final, binding and
conclusive. No fractional shares will be issued pursuant to this Option on
account of any such adjustments.

(e)            Effect of Change of Control Event. All outstanding portions of
the Option, if any, shall become fully vested upon the occurrence of any Change
of Control Event, except to the extent that provision is made in connection with
the Change of Control Event for the continuation or assumption of the Option by,
or for the substitution of equivalent options with respect to, the surviving or
successor entity or a parent thereof, and shall be exercisable in accordance
with the Plan; provided, that unless otherwise decided in the sole discretion of
the Administrator, the acceleration of vesting in connection with a Change of
Control Event shall be limited as provided in the Plan.
 
 
 
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6.            Non-Guarantee of Employment. Nothing in the Plan or in this
Agreement shall confer on an individual any legal or equitable right against the
Corporation or the Administrator, except as expressly provided in the Plan or
this Agreement. Nothing in the Plan or in this Agreement shall (a) constitute
inducement, consideration, or contract for employment or service between an
individual and the Corporation; (b) confer any right on an individual to
continue in the service of the Corporation; or (c) shall interfere in any way
with the right of the Corporation to terminate such service at any time with or
without cause or notice, or to increase or decrease compensation for such
service.

7.            No Rights as Stockholder. The Optionee shall not have any of the
rights of a stockholder with respect to the shares of Common Stock that may be
issued upon the exercise of the Option (including, without limitation, any
rights to receive dividends or noncash distributions with respect to such
shares) until such shares of Common Stock have been issued to him or her upon
the due exercise of the Option. No adjustment shall be made for dividends or
distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued.

8.            Incentive/Nonqualified Nature of the Option. The Options are
intended to qualify as an incentive stock option within the meaning of
Section 422A of the Code to the extent set forth herein, and this Agreement
shall be so construed; provided, however, to the extent that the aggregate Fair
Market Value as of the date of this grant, of the shares into which the Option
becomes exercisable for the first time by the Optionee during any calendar year
exceeds $100,000, the portion of the Option which is in excess of the $100,000
limitation will be treated as a nonqualified stock option.

9.            Withholding of Taxes.

(a)            In General. At the time the Option is exercised in whole or in
part, or at any time thereafter as requested by the Corporation, the Optionee
hereby authorizes withholding from payroll or any other payment of any kind due
the Optionee and otherwise agrees to make adequate provision for foreign,
federal, state and local taxes required by law to be withheld, if any, which
arise in connection with the Option (including, without limitation, upon a
disqualifying disposition with the meaning of Code section 421(b)). The
Corporation may require the Optionee to make a cash payment to cover any
withholding tax obligation as a condition of exercise of the Option. If the
Optionee does not make such payment when requested, the Corporation may refuse
to issue any stock certificate under the Plan until arrangements satisfactory to
the Administrator for such payment have been made.

(b)            Means of Payment. The Administrator may, in its sole discretion,
permit the Optionee to satisfy, in whole or in part, any withholding tax
obligation which may arise in connection with the Option by any of the following
means or by a combination of such means: (i) tendering a cash payment,
(ii) authorizing the Corporation to deduct any such tax obligations from any
payment of any kind otherwise due to the Optionee, (iii) authorizing the
Corporation to withhold shares of Common Stock otherwise issuable to the
Optionee pursuant to the exercise of this Option, or (iv) delivering to the
Corporation unencumbered shares of Common Stock already owned by the Optionee.

(c)            Disposition of Shares. The acceptance of shares of Common Stock
upon exercise of this Option shall constitute an agreement by the Optionee
(i) to notify the Corporation if any of such shares are disposed of by the
Optionee within two years from the Grant Date or within one year from the date
the shares were issued to the Optionee pursuant to the exercise of the Option,
and (ii) if required by law, to remit to the Corporation, at the time of any
such disposition, an amount sufficient to satisfy the Corporation’s withholding
tax obligations with respect to such disposition, whether or not, as to both
(i) and (ii), the Optionee is employed by or has any other relationship with the
Corporation at the time of such disposition.
 
 
 
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10.           Compliance with Regulations of the FRB and OCC; Forfeiture.
Subject to the terms of the Plan, the grant of Options made hereby are subject
to the rules and regulations promulgated by the Federal Reserve Board (“FRB”)
and the Office of the Comptroller of Currency (“OCC”). In accordance with
certain provisions of such regulations, the Options granted hereby must be
exercised or forfeited in the event the Company or its affiliates, becomes
critically undercapitalized (as defined in 12 C.F.R. § 6.4, or any successor law
or regulation), is subject to FRB or OCC enforcement action, or receives a
capital directive under 12 C.F.R § 6.21 or any successor law or regulation.

11.            The Corporation’s Rights. The existence of this Option shall not
affect in any way the right or power of the Corporation or its stockholders to
make or authorize any or all adjustments, recapitalizations, reorganizations or
other changes in the Corporation’s capital structure or its business, or any
merger or consolidation of the Corporation, or any issue of bonds, debentures,
preferred or other stocks with preference ahead of or convertible into, or
otherwise affecting the Common Stock or the rights thereof, or the dissolution
or liquidation of the Corporation, or any sale or transfer of all or any part of
the Corporation’s assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.

12.            Optionee. Whenever the word “Optionee” is used in any provision
of this Agreement under circumstances where the provision should logically be
construed, as determined by the Administrator, to apply to the estate, personal
representative or beneficiary to whom this Option may be transferred by will, by
the laws of descent and distribution, or pursuant to a qualified domestic
relations order as defined in Code section 414(p), the word “Optionee” shall be
deemed to include such person.

13.            Transferability of Option. This Option is not transferable other
than by will or the laws of descent and distribution, pursuant to a qualified
domestic relations order as defined in Code section 414(p), or as otherwise
permitted by the Administrator, in its sole discretion. During the lifetime of
the Optionee, the Option may be exercised only by the Optionee, by such
permitted transferees or, during the period the Optionee is under a legal
disability, by the Optionee’s guardian or legal representative. Except as
provided above, the Option may not be assigned, transferred, pledged,
hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process.

14.            Notices. All notices and other communications made or given
pursuant to this Agreement shall be in writing and shall be sufficiently made or
given if hand delivered or mailed by certified mail, addressed to the Optionee
at the address contained in the records of the Corporation, or addressed to the
Administrator, care of the Corporation for the attention of its Corporate
Secretary at its principal office or, if the receiving party consents in
advance, transmitted and received via telecopy or via such other electronic
transmission mechanism as may be available to the parties.

15.            Entire Agreement. This Agreement and the Plan contain the entire
agreement between the parties with respect to the Option granted hereunder. Any
oral or written agreements, representations, warranties, written inducements, or
other communications made prior to the execution of this Agreement with respect
to the Option granted hereunder shall be void and ineffective for all purposes.

16.           Amendment. This Agreement may not be modified, except as provided
in the Plan or in a written document signed by each of the parties hereto.

17.            Conformity with Plan. This Agreement is intended to conform in
all respects with, and is subject to all applicable provisions of, the Plan,
which is incorporated herein by reference. Inconsistencies between this
Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. In the event of any ambiguity in this Agreement or any matters as to which
this Agreement is silent, the Plan shall govern. A copy of the Plan is available
upon request to the Administrator.
 
 
 
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18.            Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Nevada, other than the conflict of
laws principles thereof.

19.            Headings. The headings in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by
its duly authorized officer as of the date first above written.

SCIO DIAMOND TECHNOLOGY CORP.

By: ____________________________    

Print Name: Edward S. Adams   

Title: Chairman of the Board of Directors    

 
The undersigned hereby acknowledges that he/she has carefully read this
Agreement and the Plan and agrees to be bound by all of the provisions set forth
in such documents.

OPTIONEE:

_______________________________
By:

_______________________________
Name:

_______________________________
Date:
 
 

 
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Exhibit A
   
Scio Diamond 2013 / 14 Production Performance Option Plan
 Grantee
       
Laser Operation in SC*
 X
20%
     
$1 Million EBITDA (cumulative from July 1, 2012 forward)
 X
40%
     
$5 Million in Revenue (cumulative from July 1, 2012 forward)
 X
40%
           
Total Shares under option at Fair Market Value date of Grant**
                 -
100%
                 
*  The Company will have placed in service equipment for cutting and polishing
of diamond material in support of the growers operating in South
Carolina.  Lasers, polishers and related infrastructure and control equipment
must be operational and available for fabrication of fifty (50%) of all of the
Company’s diamond production.
   
**  The CEO of the Company shall have discretion to award up to 300,000 total
additional options to Messrs. McMahon and Nichols in the amount he sees fit in
connection with their relative performance of such parties in connection with
their contributions to production performance.
   

 
 
 
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EXERCISE FORM

Scio Diamond Technology Corp.
411 University Ridge, Suite D
Greenville SC  29601

Ladies and Gentlemen:

I hereby exercise the Performance Option granted to me on __________, by Scio
Diamond Technology Corp. (the “Corporation”), subject to all the terms and
provisions thereof and of the Share Incentive Plan (the “Plan”), and notify you
of my desire to purchase ___ incentive shares and ___ non-qualified shares of
Common Stock of the Corporation at a price of $_______  per share pursuant to
the exercise of said Option.

Payment Amount: $___________________

     
Date:                                                             
 
                                                            
   
Optionee Signature
         
Received by Scio Diamond Technology Corp. on
         
                                                            

Broker Information:

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Firm Name

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Contact Person
   

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Broker Address
   

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City, State, Zip Code
 
Phone Number
   

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Broker Account Number
   

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Electronic Transfer Number:
   

 

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