Exhibit 10.53
CHARLES & COLVARD, LTD.
FISCAL YEAR 2001 EXECUTIVE COMPENSATION PLAN,
AS AMENDED MAY 20, 2002
PLAN SUMMARY
1. Purpose. The purpose of the 2001 Executive Compensation Plan, as amended
May 20, 2002 (the "Plan"), is to provide selected key employees of Charles
& Colvard, Ltd. (the "Company") with incentive awards in the form of cash
payments and/or bonus option grants (each, an "award" and collectively,
"awards") based upon attainment of performance goals, thereby promoting a
closer identification of the participants' interests with the interests of
the Company and its shareholders, and further stimulating such
participants' efforts to enhance the efficiency, profitability, growth and
value of the Company. The Plan was adopted in fiscal year 2001 and may
continue in effect for future years, as modified by the Compensation
Committee (the "Committee") of the Board of Directors (the "Board") or by
the Board in its or their discretion. (For the purposes herein, the
"Committee" shall be interpreted to mean the Board if in fact the Board
takes the indicated action.)
2. Eligibility. Key employees of the Company selected by the Committee shall
be eligible to participate (each, a "participant"). Eligible participants
shall be selected to participate on an annual or other periodic basis as
determined by the Committee. For the 2002 plan year, the key employees
eligible to participate in the Plan shall be the Chief Executive Officer,
Chief Financial Officer, Vice President of Sales and Marketing, Vice
President of Manufacturing, Director of Marketing, Director of Domestic
Sales, Director of International Sales, Director of Information Technology
and such other key employees as may be selected by the Committee to
participate in the Plan; provided, however, that the Committee shall have
sole discretion to determine eligibility for Plan participation and
participation in the Plan for any single plan year shall not guarantee
eligibility to participate in any other plan year. Nothing contained in the
Plan or the terms of any award will be construed as conferring upon any
participant the right to continue in the employment of the Company or as
imposing upon the Company the obligation to continue to employ a
participant. Awards granted under the Plan may not be assigned or
transferred by a participant to any other person or entity. (For the
purposes of the Plan, a "plan year" shall coincide with the particular
fiscal year of the Company.) A participant must be employed by the Company
at December 31 of the applicable plan year to be eligible for a bonus for
that plan year.
3. Administration of the Plan. The Plan will be administered by the Committee.
The Committee is vested with the authority to determine eligibility, grant
awards and establish and modify performance criteria. In addition, without
limiting the foregoing, the Committee has full authority in its discretion
to take any action with respect to the Plan including, without limitation,
the authority (i) to determine all matters relating to awards, including
selection of individuals to be granted awards, the types of awards, the
number of shares of the Company's common stock (the "Common Stock"), if
any, subject to an award, and all terms, conditions, restrictions and
limitations of an award; and (ii) to construe and interpret the Plan and
any instruments evidencing awards granted under the Plan, to establish and
interpret rules and regulations for administering the Plan and to make all
other determinations deemed necessary or advisable for administering the
Plan. All determinations of the Committee with respect to the Plan will be
final and binding on the Company and all persons having or claiming an
interest in any award granted under the Plan. No member of the Committee
shall be liable while acting as administrator for any action or
determination made in good faith with respect to the Plan or any award.
4. Nature of Awards. Awards granted under the Plan may consist of cash bonuses
and/or bonuses in the form of option grants ("option bonuses"). The terms
of option bonuses will be governed by the terms of the 1997 Omnibus Stock
Plan of C3, Inc., as amended (the "1997 Plan"), or any other stock
incentive plan which may apply to such option bonuses and shall be subject
to the terms and conditions of such plan and the respective award
agreement.
5. Determination of Awards. The Committee will establish those performance
goals (each, a "goal") which shall apply to the determination of awards, if
any, to be made with respect to a participant for any plan year. A
participant's ability to earn an award for a particular plan year will be
based on the Company's attainment of the goals for that plan year. The
goals and any other factors which may apply with respect to the grant of
awards during a plan year shall be determined by the Committee and may
differ from the goals applicable in other plan years; provided, however,
that, unless the Committee determines otherwise, all awards which may be
earned by Plan participants during any particular plan year will be
determined based on the same goals.
6. Determination of Cash Bonuses.
(a) General. The Company shall establish a cash bonus pool (the "cash
bonus pool"), which will be used to fund cash awards earned under the
Plan. The cash bonus pool will be funded in the event that the Company
achieves its annual operating goals for the particular plan year,
which for 2002 shall consist of the operating income goal ("income
goal") and carat shipments goal ("shipment goal") as set out in the
Company's annual business plan, as approved by the Board. The maximum
cash bonus to be earned in any plan year by a participant is $500,000
per year during the first three years of employment with the Company,
$1,000,000 per year during the next succeeding three years of
employment with the Company and $2,500,000 per year thereafter.
(b) 2002 Plan Year. For the 2002 plan year, the provisions which follow
shall apply with respect to the award of cash bonuses; provided,
however, that the Committee shall have full discretion to modify the
goals and any other performance or other factors applicable to the
determination of Plan awards for any subsequent plan year and shall
not be bound by the provisions applicable for the 2002 plan year.
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(i) Following the 2002 plan year, if the Committee determines that
the income goal has been met, five percent (5%) of the Company's
operating income will be contributed to the cash bonus pool from
which cash bonuses for the 2002 plan year may be distributed.
(ii) If both the income goal and the shipments goal have been met at
the end of the 2002 plan year, an additional five percent (5%)
of the Company's operating income will be added to the cash
bonus pool.
(iii) If both the income goal and the shipments goal have been met at
the end of the 2002 plan year, fifteen percent (15%) of all
pre-bonus, operating income in excess of the income goal will be
added to the cash bonus pool for the 2002 plan year.
(iv) If the income goal is not met at the end of the 2002 plan year,
the Committee (based on recommendations by the CEO) may in its
discretion determine what amount, if any, will be contributed to
the cash bonus pool and be payable to any eligible participant.
(v) The cash bonus pool if earned and payable will be paid 40% to
the CEO and 20% to each of the CFO, VP of Manufacturing and VP
of Sales and Marketing.
(vi) Sales and Marketing Directors who are eligible for cash
commission payments will not participate in cash bonuses, if
any, in 2002.
7. Determination of Option Bonuses.
(a) General. The Company shall establish an option bonus pool (the "option
pool") which will be used to fund option awards earned under the Plan.
Options from the option pool shall be awarded in the event the Company
achieves its income goal for the particular year. Nothing in the terms
of the Plan shall limit the authority of the Company to grant stock
options or other stock-based awards under the 1997 Plan or other
applicable plan.
(b) 2002 Plan Year. For the 2002 plan year, the provisions which follow
shall apply with respect to the award of option bonuses; provided,
however, that the Committee shall have full discretion to modify the
goals and any other performance or other factors applicable to the
determination of Plan awards for any subsequent plan year and shall
not be bound by the provisions applicable for the 2002 plan year.
(i) For the 2002 plan year, the option bonus pool shall consist of
options for 130,000 shares of the Common Stock.
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(ii) If the income goal has been met at the end of the 2002, the
option pool will be distributed as follows: 40,000 options to
the CEO, 20,000 options to each of the CFO, Vice President of
Manufacturing and Vice President of Sales and Marketing, 9,000
options to the Director of Information Technology and 7,000
options to each of the Director of Marketing Director of
Domestic Sales and Director of International Sales. Any options
granted will have an option price equal to the closing sales
price on the last trading day immediately prior to the Company's
public announcement of the 2002 financial results, will vest
immediately and will be exercisable over ten years.
(iii) If the income goal is not met at the end of the 2002 plan year,
the Committee (based on recommendations by the CEO) may in its
discretion determine the option grants, if any, that will be
awarded to any eligible participant.
8. Timing of Awards. Unless the Committee determines otherwise, cash bonuses
will be distributed as soon as practical following the completion of the
annual audit for the respective preceding fiscal year by the Company's
independent accountants. Except to the extent that the terms of the 1997
Plan (or other applicable plan) provide otherwise, and unless the Committee
determines otherwise, option bonuses will be granted as of the last trading
day immediately preceding the public announcement of the Company's
financial performance for the respective preceding fiscal year.
9. Option Bonus Adjustments. Option bonuses will be adjusted proportionately
in the event of any stock splits or similar adjustments occurring after the
adoption of the Plan and prior to the end of fiscal year 2002 and may be
subject to further adjustment in the event of any stock splits or other
capital adjustments which occur after the end of the fiscal year, subject
to the terms of the 1997 Plan or other applicable plan and the Committee's
discretion thereunder.
10. Proration of Awards. To the extent a participant is employed by the Company
for less than the full fiscal year, the bonus to which the participant is
otherwise entitled shall be prorated to reflect the percentage of the
fiscal year that the participant was employed by the Company.
11. Amendment. The Plan and any award granted under the Plan may be amended or
terminated at any time by the Committee; provided, however, that (i)
amendment or termination of an outstanding award may not, without the
consent of the participant, adversely affect the rights of the participant
with respect to such award; and (ii) approval of an amendment to the Plan
by the shareholders of the Company shall be required in the event
shareholder approval of such amendment is required by applicable law.
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