Exhibit 10.1


 


CHARLES & COLVARD, LTD.


FISCAL 2021 SENIOR MANAGEMENT EQUITY
INCENTIVE PROGRAM


 


Adopted July 31, 2020


 


The Charles & Colvard, Ltd. Fiscal 2021 Senior Management
Equity Incentive Program (the “Program”) is a compensatory program established pursuant to the Charles & Colvard,
Ltd. 2018 Equity Incentive Plan (the “2018 Plan”) for the 2021 fiscal year (i.e., July 1, 2020 through June 30, 2021).
The Compensation Committee (the “Committee”) of the Board of Directors of Charles & Colvard, Ltd. (the “Company”)
is charged with administering the Program. The Program covers performance-based restricted stock awards and cash bonus awards for
Company personnel at the level of Vice-President and above (the “Eligible Employees”).


 


The Program supersedes and replaces all prior management incentive
plans or programs for all periods commencing on or after July 1, 2020.


 


Purpose and Objective


 


The Program is intended to further strengthen the Company’s
pay for performance philosophy and more closely align the Eligible Employees’ interests with those of the Company and its
shareholders by granting Eligible Employees significant equity and cash compensation awards that are tied to both Company and individual
performance. The Program provides for a mixture of both performance-based and time-based vesting of equity compensation awards
to permit the Committee to tie vesting to the attainment of specific performance measures under the 2018 Plan while also encouraging
the longer-term retention of Eligible Employees.


 


Description of Awards


 


Each award (an “Award”) granted under this Program
shall consist of (1) a restricted stock award representing 65% of the Award’s value (the “Restricted Stock Component”),
to be granted to Eligible Employees upon approval of this Program, and (2) a cash bonus award representing 35% of the Award’s
value (the “Cash Component”), to be paid to Eligible Employees on the payroll date following the Vesting Date (as defined
below) subject to achievement of performance goals.


 


The value of Awards shall be expressed in “Share Equivalents,”
which is the number of shares of the Company’s restricted stock that would be granted pursuant to each Award if the Restricted
Stock Component equaled 100% of the Award. For example, if an Award is expressed as 100 Share Equivalents and all performance goals
are achieved at the 100% level (as more fully described below), the Restricted Stock Component would equal 65 Share Equivalents
and the Cash Component would equal 35 Share Equivalents. The value of the Share Equivalents shall be set on the grant date of the
Restricted Stock Component of the Awards.


 






     


     


    

 


Achievement of Awards


 


Awards granted under this Program have both performance and
service measures. Achievement of an Eligible Employee’s performance measures shall be measured by the Committee as follows:
(1) 65% of each Award shall be based on the achievement of a shared Company goal regarding revenue (the “Revenue Measure”);
(2) 15% of each Award shall be based on the achievement of a shared Company goal regarding EBITDA (the “EBITDA Measure,”
and, together with the Revenue Measure, the “Company Measures”); and (3) 20% of each Award shall be based on the achievement
of individual performance goals (the “Personal Measures”), all for the period from July 1, 2020 through June 30, 2021
(the “Performance Measurement Period”). If the Company does not achieve 80% of the Revenue Measure, the Restricted
Stock Component of each Award shall be forfeited and the Cash Component of each Award shall not be paid. The Company must achieve
at least 80% of the Revenue Measure and a positive EBITDA Measure in order for the portion of the Award attributed to the EBITDA
Measure and Personal Measures to be eligible for vesting/payment, as applicable, at the discretion of the Committee. Achievement
on a sliding scale from 90% to 125% of the Revenue Measure shall result in payment ranging from 75% to 140% of the portion of the
Award attributed to the Revenue Measure. Eligible Employees may achieve from 0% to 100% of the EBITDA Measure and his or her Personal
Measures. The Restricted Stock Component and Cash Component of each Award shall be reduced proportionately by any performance that
is measured below 100% accordingly. The Personal Measures and Company Measures are determined by the Committee and may be modified
by the Committee during, and after the end of, the Performance Measurement Period, subject to the terms of the 2018 Plan. In addition,
an Eligible Employee must remain in continuous service until July 31, 2021 (the “Vesting Date”) for restrictions to
fully lapse on the Restricted Stock Component and for the Cash Component to be paid.


 


Under this Program, the Eligible Employees shall be eligible
to receive the following Awards:


 


	Position	Maximum Share Equivalents
	Chief Executive Officer	150,000
	Chief Financial Officer and Chief Operating Officer	75,000
	Vice President(s)	50,000


 


The Program provides the Committee discretion to make additional
Awards above the targeted award level in recognition of extraordinary performance.


 


Committee Discretion in Granting Awards and Administering
the Program for Future Employees


 


Any person who commences employment with the Company after July
1, 2020 may be designated an Eligible Employee for purposes of the Program at the discretion of the Committee and receive an Award
with a pro-rated number of Share Equivalents.


 




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Source of Equity Compensation Awards; Coordination with 2018
Plan


 


The Restricted Stock Component of all Awards granted pursuant
to the Program shall be issued under and pursuant to the 2018 Plan. All terms, conditions, and requirements of the 2018 Plan are
expressly incorporated into the Program by reference. The Restricted Stock Component of all Awards granted pursuant to the Program
shall be evidenced by an appropriate Award Agreement in the form approved by the Committee for use under the 2018 Plan, and the
Restricted Stock Component of each Award hereunder shall be subject to the terms and conditions set forth in the applicable Award
Agreement and the 2018 Plan. To the extent there is any conflict or ambiguity between the terms of this Program and the 2018 Plan
or between this Program and any applicable Award Agreement, the terms of the 2018 Plan or the applicable Award Agreement shall
control.


 


Amendment and Termination of the Program 


 


The Program may be amended or terminated at any time by the
Committee or the Company’s Board of Directors. The Committee shall have unilateral authority to amend the Program and any
Award granted pursuant to the Program (without the recipient’s consent) to the extent necessary to comply with applicable
laws, rules, or regulations or changes to applicable laws, rules, or regulations (including but not limited to Section 409A of
the Internal Revenue Code of 1986, as amended, federal securities laws, or related regulations or other guidance).


 


Withholding; Tax Matters 


 


In accordance with the terms of the 2018 Plan and applicable
Award Agreements thereunder, the Company shall withhold, or shall require the recipient to pay the Company 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 Company to such authority for the account of the recipient. The Company makes no warranties or representations with
respect to the tax consequences (including but not limited to income tax consequences) related to the transactions contemplated
by this Program and the 2018 Plan. A recipient should consult with his/her own attorney, accountant, and/or tax advisor regarding
the decision to accept equity compensation awards under the Program and the consequences thereof. The Company has no responsibility
to take or refrain from taking any actions in order to achieve a certain tax result for any recipient.


 






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