Exhibit 10.1


 


CHARLES & COLVARD, LTD.


FISCAL 2019 Q1-Q2 SENIOR MANAGEMENT EQUITY
INCENTIVE PROGRAM


 


Adopted May 24, 2018


 


The Charles & Colvard Fiscal 2019 Q1-Q2 Senior Management
Equity Incentive Program (the “Program”) is a compensatory program established pursuant to the Charles & Colvard,
Ltd. 2008 Stock Incentive Plan (the “2008 Plan”) for the first six months of the 2019 fiscal year (i.e., July 1, 2018
through December 31, 2018). 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, other than the Senior Vice President
of Sales and Vice Presidents of Sales (the “Eligible Employees”).


 


The Program supersedes and replaces all prior management incentive
plans or programs for all periods commencing on or after July 1, 2018.


 


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 Company 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 2008 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 70% 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 30% 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).


 


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 70 Share Equivalents
and the Cash Component would equal 30 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) 60% of each Award shall be based on the achievement of a shared Company goal regarding revenue growth (the “Revenue Measure”),
(2) 15% of each Award shall be based on the achievement of a shared Company goal regarding margin (the “Margin Measure”),
(3) 15% of each Award shall be based on the achievement of a shared Company goal regarding EBITDA (the “EBITDA Measure”),
and (4) 10% of each Award shall be based on the achievement of a shared Company goal regarding cash and cash equivalents on the
Company’s balance sheet (the “Cash Measure,” and together with the Revenue Measure, the Margin Measure, and the
EBITDA Measure, the “Company Measures”), all for the period from July 1, 2018 to December 31, 2018 (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 in order for the portion of the Award attributed to the Margin Measure, the EBITDA Measure, and the Cash Measure to be
vested/paid, as applicable. The Company must achieve at least 90% of the Revenue Measure in order for the portion of the Award
attributed to the Revenue Measure to be vested/paid, as applicable. Achievement on a sliding scale from 90% to 120% of the Revenue
Measure shall result in payment ranging from 75% to 140% of the portion of the Award attributed to the Revenue Measure. The Restricted
Stock Component and Cash Component of each Award shall be reduced proportionately by any performance that is measured below 100%.
The Company Measures are determined by the Committee and may be modified by the Committee during, and after the end of, the Performance
Measurement Period to reflect extraordinary, unusual, or nonrecurring events that occur during the restriction period as permitted
by the 2008 Plan. In addition, an Eligible Employee must remain in continuous service until December 31, 2018 (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 Committee has granted the following
Awards:


 


	Position	Maximum Share Equivalents
	Chief Executive Officer	75,000
	Chief Financial Officer and Chief Operating Officer	37,500
	Eligible Vice President(s)	17,500


 


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


 


Source of Equity Compensation Awards; Coordination with 2008
Plan


 


The Restricted Stock Component of all Awards granted pursuant
to the Program shall be issued under and pursuant to the 2008 Plan. All terms, conditions, and requirements of the 2008 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 2008 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 2008 Plan. To the extent there is any conflict or ambiguity between the terms of this Program and the 2008 Plan
or between this Program and any applicable Award Agreement, the terms of the 2008 Plan or the applicable Award Agreement shall
control.


 






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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 2008 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 2008 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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