(c) On
November 5, 2009, the Board of Directors (the “Board”) of Charles & Colvard,
Ltd. (the “Company”) appointed Randy N. McCullough as the Company’s President
and Chief Executive Officer.
Mr.
McCullough’s career spans 36 years of diverse, progressive responsibilities in
the jewelry industry. For the past 12 years, Mr. McCullough, age 56, was with
Samuels Jewelers, a privately held retail specialty jewelry store chain with 150
stores located primarily in regional shopping malls, where he started in 1997 as
Senior Vice President of Merchandising and Marketing, became President and Chief
Executive Officer in 1998, and, in 2008, became Chairman of the Board. Prior to
Samuels Jewelers, Mr. McCullough was President and Chief Executive Officer of
Silverman’s Factory Jewelers, a vertically integrated retail jewelry chain in
the Southwestern United States. Mr. McCullough began his career with A.A.
Friedman Company, a privately held retail jewelry store chain that grew from 23
stores to over 120 stores during his tenure. Mr. McCullough is a National
Jeweler Retailer Hall of Fame inductee and has served as Chairman of the Diamond
Council of America, a Committee Chairman of the Gemological Institute of
America, and a Director of the Jewelers Summit Advisory Council.
In
connection with Mr. McCullough’s appointment as President and Chief Executive
Officer, the Company entered into an employment agreement with Mr. McCullough
effective as of November 5, 2009 (the “Agreement”). The Agreement has a term of
one year and renews automatically on an annual basis. Under the terms of the
Agreement, Mr. McCullough will receive an initial annual base salary of
$325,000. Beginning in 2010 and for each year thereafter for the term of the
Agreement, Mr. McCullough will be entitled to compensation under a mutually
agreed upon incentive bonus plan up to 75% of his existing salary, based upon
the Company’s performance toward achieving targets in a business plan and budget
submitted by Mr. McCullough and approved by the Board. In addition, on November
5, 2009, Mr. McCullough was granted an incentive stock option to purchase
189,252 shares of the Company’s common stock at an exercise price of $0.58 per
share. The option vests over a three-year period, with 25% of the award vesting
on the grant date and 25% of the award vesting on each of the following three
anniversary dates of the grant date. Mr. McCullough is also entitled to
additional incentive stock option grants for 100,000 shares of the Company’s
common stock on each of the next two anniversary dates of employment with an
identical vesting schedule. Mr. McCullough will receive such benefits as
are made available to other executives of the Company, including, but not
limited to, life, medical, and disability insurance, retirement benefits, and
such vacation as is provided to the other executives of the
Company.
The
Company has agreed to provide Mr. McCullough with a moving allowance of up to
$20,000 as long as the relocation occurs within six months of
November 5, 2009. The Company will also reimburse Mr. McCullough for lodging and
travel expenses for a six-month period in accordance with the Company’s travel
policy.
If
Mr. McCullough’s employment is terminated by the Company by notice of
non-renewal or without just cause (as defined in the Agreement),
Mr. McCullough will continue to receive his base salary at the time of
termination for a period of one year from such termination (the “Termination
Compensation”), so long as he complies with certain covenants in the
Agreement.
If the
Company experiences a change of control (as defined in the Agreement),
Mr. McCullough may voluntarily terminate his employment for good reason (as
defined in the Agreement) within one year after such change of control and be
entitled to receive in a lump sum any compensation due but not yet paid through
the date of termination and an amount equal to the Termination Compensation. Any
equity-based incentive compensation will fully vest and be immediately
exercisable upon a change of control.
During
his employment with the Company and for a period of one year following
termination of his employment, Mr. McCullough is prohibited from competing
with the Company or attempting to solicit the Company’s customers or
executives.
The
foregoing summary of the terms of the Agreement does not purport to be complete
and is qualified in its entirety by reference to the Agreement, a copy of which
is filed as Exhibit 10.1 to this report and incorporated herein by
reference.
(d) On
November 5, 2009, the Board appointed H. Marvin Beasley to serve as director of
the Company. Mr. Beasley was also appointed to serve as a member of the Audit
Committee of the Board and as chairman of a newly created Long-Term Planning
Committee of the Board, which will work with management to establish a long-term
strategy for the Company. Current Board members George R. Cattermole and Dr.
Charles D. Lein have also been appointed to serve on the Long-Term Planning
Committee.
Mr.
Beasley, age 66, recently retired from Helzberg Diamonds (“Helzberg”), a retail
jewelry store chain, where he was Chief Executive Officer for the past five
years. From 2000 to 2004, Mr. Beasley was President and Chief Operating Officer
of Helzberg, responsible for merchandising and marketing, distribution, and
store operations. He started at Helzberg in 1989 as Senior Vice President of
Merchandising and Distribution. Mr. Beasley began his retail jewelry career in
1973 as a Merchandise Manager for Best Products Company.
Pursuant
to the Company’s director compensation policy, effective May 18, 2009 and filed
with the Securities and Exchange Commission on August 14, 2009 as Exhibit 10.5
to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2009, Mr. Beasley was granted an award of 45,820 shares of restricted
stock of the Company on November 5, 2009. The restrictions on these shares will
lapse on the date of the Company’s 2010 Annual Meeting of Shareholders, subject
to continued service on the Board. Mr. Beasley will also receive an annual
retainer and per meeting fees for attendance at Board and committee
meetings.
A copy of
the press release announcing the appointment of Mr. McCullough as the Company’s
President and Chief Executive Officer and Mr. Beasley’s appointment to the Board
is attached as Exhibit 99.1 to this report.
Item
9.01 Financial
Statements and Exhibits.
(d) Exhibits.
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10.1
99.1
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Employment
Agreement, effective as of November 5, 2009, between Charles
& Colvard, Ltd. and Randy N. McCullough
Press release, dated November 9,
2009
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