Item 5.02 Departure of Directors or Certain Officers; Election of Directors;


           Appointment of Certain Officers; Compensatory Arrangements of Certain
           Officers.

Award Pursuant to the 2018 Equity Incentive Plan

On September 13, 2021, the Compensation Committee (the "Committee") of the Board of Directors of Charles & Colvard, Ltd. (the "Company") granted Don O'Connell, the Company's Chief Executive Officer, a discretionary award in the value of 50,000 share equivalents to be distributed in the proportion of 65% cash component, and 35% CTHR common stock component for extraordinary individual and company performance during the 2021 fiscal year. The award was granted under the Charles & Colvard, Ltd. 2018 Equity Incentive Plan (the "2018 Plan"). The value of the share equivalents was set on the grant date of the award, and the award vested immediately upon grant. As a result, Mr. O'Connell vested in 17,500 shares of common stock and cash totaling $91,162.50 on September 13, 2021. The 2018 Plan was previously filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on November 9, 2018.

Adoption of Fiscal 2022 Senior Management Equity Incentive Program

On September 15, 2021, the Compensation Committee approved the Charles & Colvard, Ltd. Fiscal 2022 Senior Management Equity Incentive Program (the "FY2022 Program"), with effect as of July 1, 2021. The FY2022 Program supersedes and replaces all prior management incentive plans or programs.

The FY2022 Program provides an incentive opportunity for the Company's executive officers and senior vice presidents (the "Eligible Employees") through the grant of an award expressed in "Units" where each Unit shall consist of (i) a restricted stock award representing 65% of the Unit (the "Restricted Stock Component"), to be granted to Eligible Employees upon approval of the FY2022 Program and (ii) a cash bonus award representing 35% of the Unit (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 the Restricted Stock Component of a Unit shall be set on the grant date of the Unit under the FY2022 Program. The value of the Cash Component of a Unit shall be calculated on the Vesting Date of the Unit as the product of 0.35 multiplied by the closing price of one share of the Company's Common Stock on the Vesting Date (the "Vesting FMV").

For example, if an award is expressed as 100 Units and all performance goals are achieved at the 100% level (as more fully described below), all 100 Units would fully vest. The Restricted Stock Component of the 100 Units would equate to 65 fully vested shares of the Company's Common Stock. Assuming the Vesting FMV is $2.00, the Cash Component would equate to $70.00 (100 Units multiplied by 0.35 multiplied by $2.00).

For the avoidance of doubt, the Cash Component of a Unit does not represent any security interest in the Company, and does not in any way represent an ownership interest in the Company, nor does it give an Eligible Employee any rights as a shareholder of the Company.

Units granted under the FY2022 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 Unit shall be based on the achievement of a shared Company goal regarding revenue (the "Revenue Measure"); (2) 20% of each Unit 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) 15% of each Unit shall be based on the achievement of individual performance goals (the "Personal Measures"), all for the period from July 1, 2021 through June 30, 2022 (the "Performance Measurement Period").

If the Company does not achieve 90% of the Revenue Measure, the Restricted Stock Component of each Unit shall be forfeited and the Cash Component of each Unit shall not be paid. The Company must achieve at least 90% of the Revenue Measure in order for the portion of the Unit attributed to the EBITDA Measure and Personal Measures to be vested/paid, as applicable. Achievement on a sliding scale from 90% to 125% of the Revenue Measure shall result in payment ranging from 75% to 150% of the portion of the Unit 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 Unit 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, 2022 (the "Vesting Date") for restrictions to fully lapse on the Restricted Stock Component and for the Cash Component to be paid.

Under the FY2022 Program, the Compensation Committee has granted the Chief Executive Officer 150,000 target Units, the Chief Financial Officer 75,000 target Units, and each Senior Vice President 50,000 target Units. The FY2022 Program also provides the Compensation Committee discretion to make additional awards above the targeted award level in recognition of extraordinary performance. The Restricted Stock Component of all Units granted pursuant to the FY2022 Program is issued under and pursuant to the 2018 Plan and subject to the terms of the Company's standard performance-based restricted stock award agreement.

The foregoing description of the FY2022 Program does not purport to be complete and is qualified in its entirety by reference to the FY2022 Program, a copy of which is filed as Exhibit 10.1 to this Form 8-K and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.






(d)    Exhibits.



Exhibit No.   Description of Document
  10.1          Charles & Colvard, Ltd. Fiscal 2022 Senior Management Equity
              Incentive Program, effective July 1, 2021

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