Exhibit 10.2


 


CHARLES & COLVARD, LTD.


LONG-TERM INCENTIVE PROGRAM


 


Adopted April 17, 2014 


 


The Charles & Colvard, Ltd. Long-Term Incentive Program
(the “Program”) is a compensatory program established pursuant to the Charles & Colvard, Ltd. 2008 Stock Incentive
Plan (the “2008 Plan”). The Program is intended to guide the Compensation Committee (the “Committee”) of
the Board of Directors of Charles & Colvard, Ltd. (the “Company”) in making annual long-term equity compensation
awards to the Company’s executive officers and other Eligible Employees (as defined below) pursuant to the 2008 Plan.


 


The Program supersedes and replaces all prior long-term incentive
plans or programs, including the Company’s Amended and Restated Corporate Incentive Plan (amended August 30, 2013) for all
periods commencing on or after January 1, 2014.


 


Purpose and Objective


 


The Program is intended to further strengthen the Company’s
pay for performance philosophy and more closely align the Eligible Employee’s long-term interests with the Company and its
shareholders’ by granting Eligible Employees significant long-term equity compensation awards. In addition, the Program provides
for a mixture of both performance-based and time-based vesting to permit the Committee to tie vesting of equity compensation awards
under the 2008 Plan to the attainment of specific Performance Measures under the 2008 Plan while also encouraging the longer-term
retention of Eligible Employees.


 


Targeted Annual Equity Compensation Award Levels


 


The Program serves as a guide to the Committee and executive
officers with respect to permitting consistent grants of annual equity compensation awards pursuant to the 2008 Plan. Nothing in
the Program, however, obligates the Committee to make annual equity compensation awards to executive officers or other Eligible
Employees for a particular year.


 


The Committee has established the following targets for the
value of equity compensation awards to be provided under the Program when calculated as a percentage of an officer’s Base
Salary (as defined below):


 


	Position	 	Targeted Award (as percentage of Base 

Salary)	 
	Chief Executive Officer (CEO)	 	 	80	%
	Chief Financial Officer (CFO)	 	 	60	%
	Chief Operating Officer (COO)	 	 	60	%
	Presidents and Below	 	 	60	%



 




    	 



    	 



    

 


For Eligible Employees below the President level, the Committee,
in consultation with Company management, will reserve a pool of the Company’s Common Stock to be reserved for award of stock
options pursuant to the 2008 Plan. The Committee will delegate to corporate officers authority to award stock options subject to
certain award limits and subject to standard stock option award agreements under the 2008 Plan to Eligible Employees below the
President level. The number of options granted to Eligible Employees below the President level may be determined by executive officers
by using a percentage of an Eligible Employee’s Base Salary or by such other criteria as the executive officers in their
discretion deem appropriate.


 


The Program provides the Committee discretion to make additional
equity compensation awards above the targeted award level in recognition of extraordinary performance or, alternatively, reduce
targeted award levels as circumstances warrant.


 


For purposes of the Program, the term “Base Salary”
shall mean an Eligible Employee’s regular annualized base salary amount in effect as of the date the equity compensation
award is granted, excluding any bonuses, commissions, reimbursements, equity compensation proceeds, deferred compensation payments,
disability benefits, fringe benefits, cash-outs, or other similar compensatory amounts included in an Eligible Employee’s
overall income.


 


Composition of Equity Compensation Awards


 


Awards to Executive Officers and Presidents


 


Equity compensation awards granted to officers at the President
level and above shall include a mix of both Nonqualified Stock Options (“NSOs”) and Restricted Stock Awards pursuant
to the 2008 Plan. The Committee anticipates annual equity compensation awards under the Program shall consist of seventy percent
(70%) NSOs and thirty percent (30%) Restricted Stock Awards. All equity compensation awards under the Program shall be subject
to three-year vesting schedules.


 


NSO Awards


 


NSOs granted to officers at the President level and above under
the Program will include a mix of both performance-based and time-based vesting. The performance-based vesting component shall
provide for one-third (1/3) vesting of the option provided the Company achieves certain minimum targeted earnings before interest,
taxes, depreciation, and amortization (“EBITDA”) for the fiscal year for which the NSO was granted. The EBITDA target
for such purposes shall be established by the Committee, in consultation with Company management, at the beginning of the applicable
fiscal year and may be the same as or different from EBITDA targets established under the Company’s Short-Term Incentive
Plan or other Company bonus plans or programs.


 


One hundred percent (100%) of the EBITDA target must be achieved
in order for an optionee to vest in the portion of the NSO subject to the EBITDA performance goal. If the EBITDA target is not
achieved at the end of the fiscal year for which the NSO was granted, the entire NSO shall be immediately forfeited and the optionee
shall have no further rights or interests in the NSO.


 




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If the EBITDA target for the fiscal year for which the NSO was
granted is achieved, one-third (1/3) of the NSO award (rounded down to the nearest whole share, if applicable) shall vest on the
first anniversary of the NSO grant date provided the optionee remains in continuous service with the Company through the NSO grant
date. In addition, another one-third (1/3) of the NSO (rounded down to the nearest whole share, if applicable) shall vest on the
second anniversary of the NSO grant date with the remaining portion of the NSO vesting in full on the third anniversary of the
NSO grant date provided the optionee remains in continuous service with the Company through each vesting date.


 


Restricted Stock Awards


 


Restricted Stock Awards granted under the Program will also
be subject to a three year vesting schedule with one-third (1/3) of the restricted shares (rounded down to the nearest whole share,
if applicable) vesting on each of the first and second anniversaries of the award date and the remaining shares vesting in full
on the third anniversary of the award date provided the recipient remains in continuous service with the Company through each vesting
date.


 


Awards to Other Eligible Employees


 


Awards granted to Eligible Employees below the President level
under the Program shall consist entirely of NSOs. The NSOs may include a mix of performance-based and time-based vesting or may
be subject solely to time-based vesting as the Committee, in the Committee’s sole discretion, may provide. In all cases,
however, NSOs awarded pursuant to the Program shall be subject to a three year or longer vesting schedule unless the Committee
expressly approves awards subject to a shorter vesting schedule.


 


Committee Discretion in Making Awards and Administering the
Program


 


The Committee may grant equity compensation awards at levels
above or below the targeted award levels as the Committee, in the Committee’s sole discretion, deems appropriate. Executive
officers who join the Company during a fiscal year may be eligible for equity compensation awards in conjunction with their hiring
or may otherwise be eligible for equity compensation awards pursuant to the Program, including prorated awards, as the Committee
shall determine.


 


Participants must remain in continuous service with the Company
through the applicable vesting dates, including the first anniversary of the NSO grant date for NSOs subject to performance-based
vesting, in order to receive the award.


 


The Committee shall have full and absolute discretion to adjust
the threshold EBITDA target applicable to the portion of the NSO subject to performance-based vesting for one-time events, including
accounting charges not forecasted, as approved by the Committee.


 


For NSOs granted to officers and above under the Program, the
applicable EBITDA Performance Measure shall serve as a threshold requirement in order for the officers to have the potential to
actually vest in any portion of the NSO by remaining in continuous service with the Company on each of the first three anniversaries
of the NSO grant date.


 




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Eligible Employees


 


Each of the Company’s executive officers and the Company’s
other officers employed at the President level or above as of the date this Program is adopted and as of the beginning of each
of the Company’s subsequent fiscal years shall be eligible to participate in the Program and receive equity compensation
awards granted by the Committee for that particular year. In addition, the Company’s management shall, no later than the
first regularly scheduled meeting of the Committee coinciding with the Committee’s adoption of this Program and the first
regularly scheduled meeting of the Committee in each subsequent fiscal year (the “Effective Date”), provide to the
Committee the list of other Company employees selected to receive equity compensation awards pursuant to the Program (such employees
along with the executive officers herein referred to as the “Eligible Employees”) for such fiscal year. Participation
in the Program in any one year shall not guarantee the right to participate in any other year.


 


Any non-officer employee of the Company who commences employment
with the Company after the Effective Date for a particular fiscal year may be designated an Eligible Employee for purposes of the
Program for such fiscal year at the discretion of the Committee or executive officer delegated authority for granting equity compensation
awards under the Program; provided, however, that any non-officer employee who commences employment during the fourth fiscal quarter
of a year shall not be eligible to participate in the Program for said fiscal year unless the Committee expressly approves such
participation.


 


Source of Equity Compensation Awards; Coordination with 2008
Plan


 


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. All awards 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 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 this Program and any Award Agreement granted pursuant to the 2008 Plan, the terms of the 2008 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 participant 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 Code Section 409A, federal securities
laws or related regulations or other guidance).


 




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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 participant 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 participant. 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 participant 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 participant.


 




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