Exhibit 10.2


 


EXECUTION COPY


 


SECOND AMENDMENT TO THE
EMPLOYMENT AGREEMENT

BY AND BETWEEN ROCKWOOD HOLDINGS, INC.

and SEIFOLLAH GHASEMI


 


The Employment Agreement by and between Rockwood
Holdings, Inc. (the “Company”) and Seifollah Ghasemi (the “Executive”) entered
into as of September 28, 2001 (the “Executive Employment Agreement”) and
amended as of August 9, 2004, is hereby amended (the “Amendment”) in the
manner, and effective as of the dates, set forth below:


 


1.             The first two sentences of Section 3 shall
be amended and restated in full as follows, effective from and after April 1,
2004:


 


“During the
Employment Term, effective from and after April 1, 2004 the Company shall pay
Executive a base salary at an annual rate of $1,100,000 and effective August 1,
2004 such annual rate shall be increased to $1,250,000, payable in
substantially equal periodic payments in accordance with the Company’s
practices for other executive employees, as such practices may be determined
from time to time, except that any salary amount in arrears on September 24,
2004 shall be paid in a lump sum as soon as practicable thereafter.  Commencing in 2006, Executive shall be
entitled to such increases in Executive’s base salary, if any, as may be
determined from time to time in the sole discretion of the Board.”


 


2.             Section 4(a) shall be amended as of the
date of execution of the Amendment by inserting the following sentence after
the first sentence thereof:


 


“Effective January
1, 2004, “125%” shall replace “100%” in the preceding sentence.


 


3.             Section 5 shall be amended as of the date
of execution of the Amendment by denominating the first paragraph thereof as
“(a)”, by inserting a new paragraph (b) after the first paragraph thereof, as
set forth below, denominating the last paragraph thereof as “(c)”, eliminating
from Section 5(a) the parenthetical “(the “Option”)”, and changing “Option” to
“option” where it appears in the penultimate clause of the last sentence of
Section 5(a).  New Section 5(b) shall
read as follows:


 


“b.           On or before September
24, 2004, Executive:


 

















 


(i)            shall
invest an additional $1,500,000 in Common Stock at the Initial Per Share Price,
and shall, as soon as practicable thereafter, receive the grant of an option to
purchase that number of shares of Common Stock having a value (based on the
Initial Per Share Price times the number of shares of Common Stock) equal to
five times the amount invested by Executive pursuant to this Section 5(b)(i),
or 15,000 shares of Common Stock,


 


which option
shall be governed by the terms of an option agreement in the form attached
hereto as Exhibit B; and


 


(ii)           shall, at the same time
as the grant is made under (i) above, receive the grant of an option to
purchase 250 shares of Common Stock, which option shall be governed by the terms
of an option agreement in the form attached hereto as Exhibit A.


 


4.             Section 6(b) shall be retitled “b.
Supplemental Pension Benefit; Special One-Time Payment.”, the existing
paragraph shall be numbered (i), and a new subsection (ii) shall be added, effective
as of the date of execution of the Amendment, as follows:


 


“ (ii)        As soon as practicable
following September 24, 2004, the Company shall pay Executive a special
one-time payment of $200,000.”


 


5.             Effective as of the date of execution of
the Amendment, Section 8(a)(iii)(A) shall be amended by inserting “and any
accrued but unpaid Supplemental Pension Benefit” immediately following “Base
Salary”.


 


6.             Effective as of the date of execution of
the Amendment, Sections 8(a)(iii)(D), 8(b)(ii)(C) and 8(c)(iii)(D) shall be
eliminated and the word “and” in the subparagraph preceding such subparagraph
moved appropriately and a period inserted in lieu thereof.


 


7.             Section 8(c)(ii) shall be amended by
changing the letters “(D)” (the second time it appears in Section 8(c)(ii)),
“(E)”, and “(F)” to “(E)”, “(F)”, and “(G)”, respectively.


 


8.             Section 8(c)(iii)(C) shall be amended and
restated in its entirety, effective as of the date of execution of the
Amendment, as follows:


 


“during each
of the twelve (12) months following the date of Executive’s termination of
employment, the Company shall make the additional $48,000 payment described in
Section 6(b)(i) to Executive.”


 


This Amendment may be executed in one or more
counterparts and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.


 


2

















 


IN WITNESS WHEREOF, the parties hereto have duly
executed this Amendment this 24th day of September, 2004.


 


 


	
  ROCKWOOD HOLDINGS, INC.

  	
  SEIFOLLAH GHASEMI

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Thomas J.
  Riordan

  	
   

  	
  /s/ Seifollah Ghasemi

  	
   

  
	
  By: Thomas J. Riordan

  	
   

  
	
  Title: Vice President, Law & Administration

  	
   

  
				



 


3

















 


Exhibit A


 


STOCK OPTION AGREEMENT


(Time Option)


 


This Stock
Option Agreement (the “Agreement”), dated as of September 24, 2004 (the “Grant
Date”), is made by and between Rockwood Holdings, Inc., a Delaware corporation
(hereinafter referred to as the “Company”), and Seifollah Ghasemi, an employee
of the Company or a Subsidiary (as defined in the Plan) or an Affiliate (as
defined below) of the Company, hereinafter referred to as “Optionee”.


 


WHEREAS, the
Committee (as defined below), appointed to administer the Plan, has determined
that it would be to the advantage and best interest of the Company and its
shareholders to grant the Optionee an option to purchase shares of its common
stock, par value $0.01 per share (the “Common Stock”) as an incentive for
increased efforts during the Optionee’s term of employment with the Company or
its Subsidiaries or Affiliates;


 


NOW,
THEREFORE, in consideration of the mutual covenants herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto do hereby agree as follows:


 


ARTICLE I


 


DEFINITIONS


 


Whenever the
following terms are used in this Agreement, they shall have the meaning
specified in the Plan or below unless the context clearly indicates to the
contrary.


 


Section 1.1.            - Affiliate


 


“Affiliate”
shall mean, with respect to the Company, any entity directly or indirectly
controlling, controlled by, or under common control with, the Company or any
other entity designated by the Board of Directors of the Company in which the
Company or an Affiliate has an interest.


 


Section 1.2.            - Cause


 


“Cause” shall
mean (i) the Optionee’s willful and continued refusal to perform duties, which
are within the control of the Optionee and consistent with the Optionee’s title
and position, that is not cured within 15 days following receipt by the
Optionee of written notice from the Company of such failure, (ii) the
Optionee’s conviction of or plea of guilty or no contest to a (x) felony, (y) a
misdemeanor involving the Company or (z) misdemeanor not involving the Company,
which results in material and demonstrable harm to the business or


 

















 


reputation of the Company (in each case of
(x), (y) or (z), other than as a result of vicarious liability under any environmental
criminal statute), (iii) the Optionee’s willful malfeasance or misconduct (x)
relating to the Company which is demonstrably injurious to the Company or its
subsidiaries, other than in a manner that is insignificant or inconsequential
or (y) not involving the Company, but which results in material, adverse and
demonstrable harm to the Company or its subsidiaries or (iv) a breach by the
Optionee of the material terms of Section 25 of the Management Stockholder’s
Agreement, following notice of such breach (which notice may be oral or
written) that (if, in the good faith discretion of the Board, is able to be
cured by the Optionee) is not cured within 15 days following receipt by the
Optionee of written notice from the Company that it reasonably believes the
Optionee is in breach of any such covenants; provided, however,
that Cause shall cease to exist as an event on the 60th day
following actual and substantiated knowledge of the Cause event by a
non-employee member of the Board affiliated with KKR.  For purposes of this subsection, no act, or
failure to act, on the Optionee’s part shall be considered “willful” unless
done or omitted to be done, by him not in good faith and without reasonable
belief that his action or omission was in the best interests of the Company.


 


Section 1.3.            - Change of Control


 


“Change of
Control” shall mean (i) sales of all or substantially all of the assets of the
Company to a Person who is not KKR or an affiliate of KKR (collectively, the “KKR
Partnerships”), (ii) a sale by KKR or any of its respective affiliates
resulting in more than 50% of the voting stock of the Company being held by a
Person or group that does not include KKR or any of its respective affiliates
or (iii) a merger, consolidation, recapitalization or reorganization of the
Company with or into another Person which is not an affiliate of KKR; if and
only if as a result of any of the foregoing events in (i)-(iii) the KKR
Partnerships lose the ability, without the approval of a Person who is not an
affiliate of KKR, to elect a majority of the Board of Directors of the Company
(or the resulting entity). 
Notwithstanding the foregoing, if any of the transactions described in
(i)-(iii) of the preceding sentence shall occur and the other Person involved
in such transaction (or its ultimate parent entity) is an operating company
controlled by KKR or an affiliate of KKR prior to such transaction (an
“Alternate KKR Entity”), then the determination of whether a change of control
has occurred shall be made by determining whether an event set forth in clauses
(i), (ii) or (iii) above has occurred (including the ability to elect a
majority of the Board) if the Alternate KKR Entity is treated as being
unaffiliated with KKR and by treating the voting power of the Alternate KKR Entity
in the Company (or the resulting entity) as if it were held by a Person
unaffiliated with KKR.


 


Section 1.4.            - Code


 


“Code” shall
mean the Internal Revenue Code of 1986, as amended.


 


Section 1.5.    – Committee


 


“Committee”
shall mean the Compensation Committee of the Company.


 


Section 1.6.            – Disability


 


“Disability”
shall mean a determination, made at the request of the Optionee or upon the
reasonable request of the Company set forth in a notice to the Optionee, by a
physician


 


2

















 


selected by the Company and the Optionee,
that the Optionee is unable to perform his duties as an employee of the Company
or its subsidiaries and in all reasonable medical likelihood such inability
will continue for a period in excess of 180 consecutive days (such inability is
hereinafter referred to as “Disability” or being “Disabled”).


 


Section 1.7.            – Fiscal Year


 


“Fiscal Year”
shall mean each fiscal year of the Company.


 


Section 1.8.            -  Good Reason


 


“Good Reason”
shall mean, without the Optionee’s consent, (A) a reduction in the Optionee’s
base salary or annual bonus opportunity, (B) a substantial reduction in the
Optionee’s duties, authorities, and responsibilities or removal from the
Optionee of the title of Chief Executive Officer of the Company, (C) the
Optionee’s removal from, or failure to be re-elected to the Board, (D) the
elimination or reduction of the Optionee’s eligibility to participate in the
Company’s benefit programs that is inconsistent with the eligibility of
similarly situated employees of the Company to participate therein, provided,
however, that any adverse change to the terms of the Supplemental
Pension Benefit shall be deemed an event of Good Reason, (E) a transfer of the
Optionee’s primary workplace by more than 35 miles from the Company’s offices
in Princeton, New Jersey, (F) any failure by the Company to pay when due any
payment owed to the Optionee within 15 days after the date such payment becomes
due or (G) failure of any successor to the Company (whether direct or indirect
and whether by merger, acquisition, consolidation or otherwise) to assume in a
writing delivered to the Optionee, upon the assignee becoming such, the
obligations of the Company hereunder; provided, that either of the
events described in clauses (A) and (B) of this definition shall constitute
Good Reason only if the Company fails to cure such event within 30 days after
receipt from the Optionee of written notice of the event which constitutes Good
Reason; and provided, further, that “Good Reason” shall cease to
exist for an event on the 60th day following the later of its
occurrence or the Optionee’s knowledge thereof, unless the Optionee has given
the Company written notice thereof prior to such date.


 


Section 1.9.            - Group


 


“Group” shall
mean two or more Persons acting together as a partnership, limited partnership,
syndicate or other group for the purpose of acquiring, holding or disposing of
securities of the Company.


 


Section 1.10.          - Initial Vesting
Date


 


“Initial
Vesting Date” shall mean January 1, 2003.


 


Section 1.11.          – KKR


 


“KKR” shall mean Kohlberg Kravis Roberts & Co.
Ltd.


 


3

















 


Section 1.12.          - Management
Stockholder’s Agreement


 


“Management
Stockholder’s Agreement” shall mean that certain Amended and Restated
Management Stockholder’s Agreement dated as of September 24, 2004 between the
Optionee and the Company, as amended from time to time.


 


Section 1.13.          - Options


 


“Options”
shall mean the Option to purchase Common Stock granted under this Agreement,
which shall, in part and to the extent permitted by applicable law and as set
forth on the signature page hereto, be an “incentive stock option,” within the
meaning of Section 422 of the Code.  To
the extent that, for any reason, an Option intended to be an incentive stock
option does not qualify as an incentive stock option, it shall be deemed an
Option that is not an incentive stock option.


 


Section 1.14.          - Person


 


“Person” shall
mean “person”, as such term is used for purposes of Section 13(d) or 14(d) of
the Securities Exchange Act of 1934, as amended (or any successor section
thereto).


 


Section 1.15.          - Plan


 


“Plan” shall
mean the Amended and Restated 2003 Stock Purchase and Option Plan for Rockwood
Holdings, Inc. and Subsidiaries.


 


Section 1.16.          - Pronouns


 


The masculine
pronoun shall include the feminine and neuter, and the singular the plural,
where the context so indicates.


 


Section 1.17.          - Retirement


 


“Retirement”
shall mean retirement at age 65 or over (or such other age as may be approved
by the Board of Directors of the Company) after having been employed by the
Company or a Subsidiary for at least three years after November 1, 2001.


 


Section 1.18.          - Secretary


 


“Secretary”
shall mean the Secretary of the Company.


 


Section 1.19.          - Vesting Date


 


“Vesting Date”
shall mean each anniversary of the Initial Vesting Date on which the Option
becomes exercisable pursuant to Section 3.1(a)(i) hereof.


 


4

















 


ARTICLE II


 


GRANT OF OPTION


 


Section 2.1.            - Grant of Option


 


For good and
valuable consideration, on and as of the date hereof the Company irrevocably
grants to the Optionee an Option to purchase any part or all of an aggregate of
the number of shares set forth on the signature page hereof of its Common Stock
upon the terms and conditions set forth in this Agreement.


 


Section 2.2.            - Exercise Price


 


Subject to
Section 2.4, the exercise price of the shares of Common Stock covered by the
Option shall be $500.00 per share without commission or other charge (which is
the fair market value per share of the Common Stock on the Grant Date).


 


Section 2.3.            – No Guarantee of
Employment


 


Nothing in
this Agreement or in the Plan shall confer upon the Optionee any right to
continue in the employ of the Company or any Subsidiary or Affiliate or shall
interfere with or restrict in any way the rights of the Company and its
Subsidiaries or Affiliates, which are hereby expressly reserved, to terminate
the employment of the Optionee at any time for any reason whatsoever, with or
without Cause.


 


Section 2.4.            - Adjustments in
Option Pursuant to Merger, Consolidation, etc.


 


Subject to
Sections 8 and 9 of the Plan, in the event that the outstanding shares of the
stock subject to the Option, are, from time to time, changed into or exchanged
for a different number or kind of shares of the Company or other securities of
the Company by reason of a merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares, or other
corporate event, the Committee shall make, as appropriate and equitable, an
adjustment in the number and kind of shares and/or the amount of consideration
as to which or for which, as the case may be, the Option, or portion thereof
then unexercised, shall be exercisable and/or, other than in an event that is a
Change of Control, shall pay to the Optionee a dividend in respect of the
shares of Common Stock subject to the Option, in any event in order to allow
the Optionee to participate in such corporate event in an equitable
manner.  Any such adjustment made by the
Committee shall be final and binding upon the Optionee, the Company and all
other interested persons.


 


5

















 


ARTICLE III


 


PERIOD OF EXERCISABILITY


 


Section 3.1.            - Commencement of
Exercisability


 


(a)           So long as the Optionee
continues to be employed by the Company or its Subsidiaries, the Option shall
become exercisable pursuant to the following schedule:


 


	
  Date Option

  Becomes Exercisable

  	
   

  	
  Percentage
  of Option Shares Granted

  As to Which Option Is Exercisable

  
	
   

  	
   

  	
   

  
	
  After the first anniversary of the Initial Vesting Date

  	
   

  	
  20%

  
	
   

  	
   

  	
   

  
	
  After the second anniversary of the Initial Vesting Date

  	
   

  	
  40%

  
	
   

  	
   

  	
   

  
	
  After the third anniversary of the Initial Vesting Date

  	
   

  	
  60%

  
	
   

  	
   

  	
   

  
	
  After the fourth anniversary of the Initial Vesting Date

  	
   

  	
  80%

  
	
   

  	
   

  	
   

  
	
  After the fifth anniversary of the Initial Vesting Date

  	
   

  	
  100%

  



 


(b)           That portion of the
Option intended to be an “incentive stock option” within the meaning of Section
422 of the Code (“ISO”) and that portion of the Option that is not intended to
be an ISO (“NQSO”) shall each become exercisable ratably in accordance with the
above schedule.  For example, following
the first anniversary of the Initial Vesting Date, 20% of the ISOs and 20% of the
NQSOs shall be exercisable, while 40% of the ISOs and 40% of the NQSOs shall be
exercisable following the second anniversary of the Initial Vesting Date, and
so on.


 


(c)           Notwithstanding the
foregoing, the Option shall become immediately exercisable as to 100% of the
shares of Common Stock subject to such Option immediately prior to a Change of
Control (but only to the extent such Option has not otherwise terminated or
become exercisable).


 


(d)           Notwithstanding the
foregoing, no portion of the Option shall become exercisable as to any
additional shares of Common Stock following the termination of employment of
the Optionee for any reason, and any portion of the Option which is
non-exercisable as of the Optionee’s termination of employment shall be immediately
cancelled.


 


6

















 


Section 3.2.            - Expiration of
Option


 


Except as
otherwise provided in Section 5 or 6 of the Management Stockholder’s Agreement,
the Optionee may not exercise the Option to any extent after the first to occur
of the following events:


 


(a)           The tenth anniversary
of the Grant Date; or


 


(b)           The tenth anniversary
of the Grant Date, if the Optionee’s employment is terminated by reason of
death or Disability;


 


(c)           The first anniversary
of the date of the Optionee’s termination of employment by reason of
Retirement, by the Company without Cause or by the Optionee for Good Reason; or


 


(d)           The date of an
Optionee’s termination of employment by the Company for any reason other than
as set forth in Section 3.2(b) or (c) above (without regard to Section 5 or 6
of the Management Stockholder’s Agreement); or


 


(e)           The date the Option is
terminated pursuant to Section 5 or 6 of the Management Stockholder’s
Agreement; or


 


(f)            If the Committee so
determines pursuant to Section 9 of the Plan, the effective date of either the
merger or consolidation of the Company into another Person, or the exchange or
acquisition by another Person of all or substantially all of the Company’s
assets or 80% or more of its then outstanding voting stock, or the
recapitalization, reclassification, liquidation or dissolution of the
Company.  At least ten days prior to the
effective date of such merger, consolidation, exchange, acquisition, recapitalization,
reclassification, liquidation or dissolution, the Committee shall give the
Optionee notice of such event if the Option has then neither been fully
exercised nor become unexercisable under this Section 3.2.


 


7

















 


ARTICLE IV


 


EXERCISE OF OPTIONS


 


Section 4.1.            - Person Eligible
to Exercise


 


Except as
otherwise provided in the Management Stockholder’s Agreement, during the
lifetime of the Optionee, only he may exercise the Option or any portion
thereof.  After the death of the
Optionee, any exercisable portion of the Option may, prior to the time when the
Option becomes unexercisable under Section 3.2, be exercised by his personal
representative or by any person empowered to do so under the Optionee’s will or
under the then applicable laws of descent and distribution.


 


Section 4.2.            - Partial Exercise


 


Any
exercisable portion of the Option or the entire Option, if then wholly
exercisable, may be exercised in whole or in part at any time prior to the time
when the Option or portion thereof becomes unexercisable under Section 3.2; provided,
however, that any partial exercise shall be for whole shares of Common
Stock only.


 


Section 4.3.            - Manner of
Exercise


 


The Option, or
any exercisable portion thereof, may be exercised solely by delivering to the
Secretary or his office all of the following prior to the time when the Option
or such portion becomes unexercisable under Section 3.2:


 


(a)           Notice in writing
signed by the Optionee or the other person then entitled to exercise the Option
or portion thereof, stating that the Option or portion thereof is thereby
exercised, such notice complying with all applicable rules established by the
Committee;


 


(b)           Full payment (in cash,
by check or by a combination thereof) for the shares with respect to which the
Option or portion thereof is exercised;


 


(c)           A bona fide written
representation and agreement, in a form satisfactory to the Committee, signed
by the Optionee or other person then entitled to exercise the Option or portion
thereof, stating that the shares of stock are being acquired for his own
account, for investment and without any present intention of distributing or
reselling said shares except as may be permitted under the Securities Act of
1933, as amended (the “Act”), and then applicable rules and regulations
thereunder, and that the Optionee or other person then entitled to exercise the
Option or portion thereof will indemnify the Company against and hold it free
and harmless from any loss, damage, expense or liability resulting to the
Company if any sale or distribution of the shares by such person is contrary to
the representation and agreement referred to above; provided, however,
that the Committee may, in its reasonable discretion, take whatever additional
actions it deems reasonably necessary to ensure the observance and performance
of


 


8

















 


such
representation and agreement and to effect compliance with the Act and any
other federal or state securities laws or regulations;


 


(d)           Full payment to the
Company of all amounts which, under federal, state or local law, it is required
to withhold upon exercise of the Option; and


 


(e)           In the event the Option
or portion thereof shall be exercised pursuant to Section 4.1 by any person or
persons other than the Optionee, appropriate proof of the right of such person
or persons to exercise the Option.


 


Without
limiting the generality of the foregoing, the Committee may require an opinion
of counsel acceptable to it to the effect that any subsequent transfer of
shares acquired on exercise of the Option does not violate the Act, and may
issue stop-transfer orders covering such shares.  Share certificates evidencing stock issued on exercise of this
Option shall bear an appropriate legend referring to the provisions of subsection
(c) above and the agreements herein. 
The written representation and agreement referred to in subsection (c)
above shall, however, not be required if the shares to be issued pursuant to
such exercise have been registered under the Act, and such registration is then
effective in respect of such shares.  In
addition to the foregoing, after a Public Offering (as defined in the
Management Stockholder’s Agreement), the Optionee may, in the Committee’s good
faith discretion, make payment of the exercise price (as required in Section
4.3(b) above) in shares of Common Stock that the Optionee has held for at least
six months or otherwise pursuant to an irrevocable broker loan program
established in accordance with applicable law.


 


Section 4.4.            - Conditions to Issuance
of Stock Certificates


 


The shares of
stock deliverable upon the exercise of the Option, or any portion thereof, may
be either previously authorized but unissued shares or issued shares, which
have then been reacquired by the Company. 
Such shares shall be fully paid and nonassessable.  The Company shall not be required to issue
or deliver any certificate or certificates for shares of stock purchased upon
the exercise of the Option or portion thereof prior to fulfillment of all of
the following conditions:


 


(a)           The obtaining of
approval or other clearance from any state or federal governmental agency which
the Committee shall, in its reasonable and good faith discretion, determine to
be necessary or advisable; and


 


(b)           The lapse of such
reasonable period of time following the exercise of the Option as the Committee
may from time to time establish for reasons of administrative convenience.


 


Section 4.5.            - Rights as
Stockholder


 


The holder of
the Option shall not be, nor have any of the rights or privileges of, a
stockholder of the Company in respect of any shares purchasable upon the
exercise of the Option or any portion thereof unless and until certificates
representing such shares shall have been issued by the Company to such holder.


 


9

















 


ARTICLE V


 


MISCELLANEOUS


 


Section 5.1.            - Administration


 


The Committee
shall have the power to interpret the Plan and this Agreement and to adopt such
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret or revoke any such rules.  All actions taken and all interpretations
and determinations made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons.  No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Option. 
In its absolute discretion, the Board of Directors may at any time and
from time to time exercise any and all rights and duties of the Committee under
the Plan and this Agreement.


 


Section 5.2.            - Option Not
Transferable


 


Except as
provided in the Management Stockholder’s Agreement, neither the Option nor any
interest or right therein or part thereof shall be liable for the debts,
contracts or engagements of the Optionee or his successors in interest or shall
be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect;
provided, however, that this Section 5.2 shall not prevent transfers by will or
by the applicable laws of descent and distribution.


 


Section 5.3.            - Shares to Be
Reserved


 


The Company
shall at all times during the term of the Option reserve and keep available
such number of shares of stock as will be sufficient to satisfy the
requirements of this Agreement.


 


Section 5.4.            - Notices


 


Any notice to
be given under the terms of this Agreement to the Company shall be addressed to
the Company in care of its Secretary, and any notice to be given to the
Optionee shall be addressed to him at the address given beneath his signature
hereto.  By a notice given pursuant to
this Section 5.4, either party may hereafter designate a different address for
notices to be given to him.  Any notice,
which is required to be given to the Optionee, shall, if the Optionee is then
deceased, be given to the Optionee’s personal representative if such
representative has previously informed the Company of his status and address by
written notice under this Section 5.4. 
Any notice shall have been deemed duly given when enclosed in a properly
sealed envelope


 


10

















 


or wrapper addressed as aforesaid, deposited
(with postage prepaid) in a post office or branch post office regularly
maintained by the United States Postal Service.


 


Section 5.5.            - Titles


 


Titles are
provided herein for convenience only and are not to serve as a basis for
interpretation or construction of this Agreement.


 


Section 5.6.            - Applicability of
Plan and Management Stockholder’s Agreement


 


The Option and
the shares of Common Stock issued to the Optionee upon exercise of the Option
shall be subject to all of the terms and provisions of the Plan and the
Management Stockholder’s Agreement, to the extent applicable to the Option and
such shares.  In the event of any
conflict between this Agreement and the Plan, the terms of the Plan shall
control.  In the event of any conflict between
this Agreement or the Plan and the Management Stockholder’s Agreement, the
terms of the Management Stockholder’s Agreement shall control.


 


Section 5.7.            - Amendment


 


This Agreement
may be amended only by a writing executed by the parties hereto, which
specifically states that it is amending this Agreement.


 


Section 5.8.            - Governing Law


 


The laws of the State of Delaware shall govern the interpretation,
validity and performance of the terms of this Agreement regardless of the law
that might be applied under principles of conflicts of laws.


 


Section 5.9.            - Arbitration


 


In the event
of any controversy among the parties hereto arising out of, or relating to,
this Agreement which cannot be settled amicably by the parties, such
controversy shall be finally, exclusively and conclusively settled by mandatory
arbitration conducted expeditiously in accordance with the American Arbitration
Association rules, by a single independent arbitrator.  If the parties are unable to agree on the
selection of an arbitrator, then any party may petition the American
Arbitration Association for the appointment of the arbitrator, which
appointment shall be made within ten days of the petition therefore.  Either the Company or the Optionee  may institute such arbitration proceeding by giving written
notice to the other party.  The
arbitrator in New York or New Jersey shall hold a hearing within 30 days of his
or her appointment.  In preparation for
their presentation at such hearing, each party may depose a maximum of four
people.  Each such deposition shall last
no more than six hours.  Each side may
file with the arbitrator one brief, not in excess of 30 pages, excluding
exhibits.  Each side shall have no more
than eight hours to present its position to the arbitrator.  The hearing shall be no more than three days
in length.  The decision of the
arbitrator shall be final and binding upon all parties hereto and shall be
rendered pursuant to a written decision, which contains a detailed recital of
the arbitrator’s reasoning.  Judgment
upon the award rendered may be entered in any court having jurisdiction thereof.


 


11

















 


IN WITNESS
WHEREOF, this Agreement has been executed and delivered by the parties hereto.


 


 


	
   

  	
  ROCKWOOD
  HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Thomas J. Riordan

  	
   

  
	
   

  	
  Its:

  	
  Vice
  President, Law & Administration

  
	
   

  	
   

  	
   

  
	
   

  	
  OPTIONEE:

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Seifollah Ghasemi

  	
   

  
	
   

  	
  SEIFOLLAH
  GHASEMI

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  c/o Rockwood
  Holdings, Inc.

  	
   

  
	
   

  	
  100 Overlook
  Center

  	
   

  
	
   

  	
  Princeton,
  NJ 08540

  	
   

  
	
   

  	
  Address

  
	
   

  	
   

  	
   

  
	
   

  	
  Optionee’s
  Taxpayer Identification Number:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
									



 


Aggregate
number of shares


of Common
Stock for which


the Option
granted


hereunder is
exercisable


(100% of total
number of shares):


 


250, of which


 


200 shall be
incentive stock options, and


50 shall be
non-qualified stock options.


 


12

















 


Exhibit B


 


STOCK OPTION AGREEMENT


(Time and Performance)


 


This Stock
Option Agreement (the “Agreement”), dated as of September 24, 2004 (the “Grant
Date”), is made by and between Rockwood Holdings, Inc., a Delaware corporation
(hereinafter referred to as the “Company”), and Seifollah Ghasemi, an employee
of the Company or a Subsidiary (as defined in the Plan) or an Affiliate (as
defined below) of the Company, hereinafter referred to as “Optionee”.


 


WHEREAS, the
Committee (as defined below), appointed to administer the Plan, has determined
that it would be to the advantage and best interest of the Company and its
shareholders to grant the Optionee an option to purchase shares of its common
stock, par value $0.01 per share (the “Common Stock”) as an incentive for
increased efforts during the Optionee’s term of employment with the Company or
its Subsidiaries or Affiliates;


 


NOW,
THEREFORE, in consideration of the mutual covenants herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto do hereby agree as follows:


 


ARTICLE I


 


DEFINITIONS


 


Whenever the
following terms are used in this Agreement, they shall have the meaning
specified in the Plan or below unless the context clearly indicates to the
contrary.


 


Section 1.1.            - Affiliate


 


“Affiliate”
shall mean, with respect to the Company, any entity directly or indirectly
controlling, controlled by, or under common control with, the Company or any
other entity designated by the Board of Directors of the Company in which the
Company or an Affiliate has an interest.


 


Section 1.2.            - Cause


 


“Cause” shall
mean (i) the Optionee’s willful and continued refusal to perform duties, which
are within the control of the Optionee and consistent with the Optionee’s title
and position, that is not cured within 15 days following receipt by the
Optionee of written notice from the Company of such failure, (ii) the
Optionee’s conviction of or plea of guilty or no contest to a (x) felony, (y) a
misdemeanor involving the Company or (z) misdemeanor not involving the Company,
which results in material and demonstrable harm to the business or


 

















 


reputation of the Company (in each case of
(x), (y) or (z), other than as a result of vicarious liability under any
environmental criminal statute), (iii) the Optionee’s willful malfeasance or
misconduct (x) relating to the Company which is demonstrably injurious to the
Company or its subsidiaries, other than in a manner that is insignificant or
inconsequential or (y) not involving the Company, but which results in
material, adverse and demonstrable harm to the Company or its subsidiaries or
(iv) a breach by the Optionee of the material terms of Section 25 of the
Management Stockholder’s Agreement, following notice of such breach (which
notice may be oral or written) that (if, in the good faith discretion of the
Board, is able to be cured by the Optionee) is not cured within 15 days
following receipt by the Optionee of written notice from the Company that it
reasonably believes the Optionee is in breach of any such covenants; provided,
however, that Cause shall cease to exist as an event on the 60th
day following actual and substantiated knowledge of the Cause event by a
non-employee member of the Board affiliated with KKR.  For purposes of this subsection, no act, or failure to act, on
the Optionee’s part shall be considered “willful” unless done or omitted to be
done, by him not in good faith and without reasonable belief that his action or
omission was in the best interests of the Company.


 


Section 1.3.            - Change of Control


 


“Change of
Control” shall mean (i) sales of all or substantially all of the assets of the
Company to a Person who is not KKR or an affiliate of KKR (collectively, the “KKR
Partnerships”), (ii) a sale by KKR or any of its respective affiliates
resulting in more than 50% of the voting stock of the Company being held by a
Person or group that does not include KKR or any of its respective affiliates
or (iii) a merger, consolidation, recapitalization or reorganization of the
Company with or into another Person which is not an affiliate of KKR; if and
only if as a result of any of the foregoing events in (i)-(iii) the KKR
Partnerships lose the ability, without the approval of a Person who is not an
affiliate of KKR, to elect a majority of the Board of Directors of the Company
(or the resulting entity). 
Notwithstanding the foregoing, if any of the transactions described in
(i)-(iii) of the preceding sentence shall occur and the other Person involved
in such transaction (or its ultimate parent entity) is an operating company
controlled by KKR or an affiliate of KKR prior to such transaction (an
“Alternate KKR Entity”), then the determination of whether a change of control
has occurred shall be made by determining whether an event set forth in clauses
(i), (ii) or (iii) above has occurred (including the ability to elect a
majority of the Board) if the Alternate KKR Entity is treated as being
unaffiliated with KKR and by treating the voting power of the Alternate KKR
Entity in the Company (or the resulting entity) as if it were held by a Person
unaffiliated with KKR.


 


Section 1.4.            - Code


 


“Code” shall
mean the Internal Revenue Code of 1986, as amended.


 


Section 1.5.            – Committee


 


“Committee”
shall mean the Compensation Committee of the Company.


 


Section 1.6.            – Disability


 


“Disability”
shall mean a determination, made at the request of the Optionee or upon the
reasonable request of the Company set forth in a notice to the Optionee, by a
physician


 


2

















 


selected by the Company and the Optionee,
that the Optionee is unable to perform his duties as an employee of the Company
or its subsidiaries and in all reasonable medical likelihood such inability
will continue for a period in excess of 180 consecutive days (such inability is
hereinafter referred to as “Disability” or being “Disabled”).


 


Section 1.7.            - Financial
Statement Approval Date


 


“Financial
Statement Approval Date” shall mean the date on which the audited financial
statements of the Company for any given Fiscal Year have been finally approved
by the auditing firm engaged by the Company to review such statements (which
approval shall in no event occur later than March 31 of the calendar year
immediately following the applicable Fiscal Year).


 


Section 1.8.            - Fiscal Year


 


“Fiscal Year”
shall mean each fiscal year of the Company.


 


Section 1.9.            - Good Reason


 


“Good Reason”
shall mean, without the Optionee’s consent, (A) a reduction in the Optionee’s
base salary or annual bonus opportunity, (B) a substantial reduction in the
Optionee’s duties, authorities, and responsibilities or removal from the
Optionee of the title of Chief Executive Officer of the Company, (C) the
Optionee’s removal from, or failure to be re-elected to the Board, (D) the
elimination or reduction of the Optionee’s eligibility to participate in the
Company’s benefit programs that is inconsistent with the eligibility of
similarly situated employees of the Company to participate therein, provided,
however, that any adverse change to the terms of the Supplemental
Pension Benefit shall be deemed an event of Good Reason, (E) a transfer of the
Optionee’s primary workplace by more than 35 miles from the Company’s offices
in Princeton, New Jersey, (F) any failure by the Company to pay when due any
payment owed to the Optionee within 15 days after the date such payment becomes
due or (G) failure of any successor to the Company (whether direct or indirect
and whether by merger, acquisition, consolidation or otherwise) to assume in a
writing delivered to the Optionee, upon the assignee becoming such, the
obligations of the Company hereunder; provided, that either of the
events described in clauses (A) and (B) of this definition shall constitute
Good Reason only if the Company fails to cure such event within 30 days after
receipt from the Optionee of written notice of the event which constitutes Good
Reason; and provided, further, that “Good Reason” shall cease to
exist for an event on the 60th day following the later of its
occurrence or the Optionee’s knowledge thereof, unless the Optionee has given
the Company written notice thereof prior to such date.


 


Section 1.10.          - Group


 


“Group” shall
mean two or more Persons acting together as a partnership, limited partnership,
syndicate or other group for the purpose of acquiring, holding or disposing of
securities of the Company.


 


3

















 


Section 1.11.          - Initial Vesting
Date


 


“Initial
Vesting Date” shall mean the Grant Date.


 


Section 1.12.          - Interim Termination
Event


 


“Interim
Termination Event” shall mean any event that terminates the Optionee’s
employment described in Section 3.2(b) or (c) below, which occurs after
December 31 of any given calendar year but prior to the Financial Statement
Approval Date occurring in the immediately following calendar year.


 


Section 1.13.          - Management
Stockholder’s Agreement


 


“Management
Stockholder’s Agreement” shall mean that certain Amended and Restated
Management Stockholder’s Agreement dated as of September 24, 2004 between the
Optionee and the Company, as amended from time to time.


 


Section 1.14.          - Options


 


“Options”
shall mean the Time Option (which shall, in part and to the extent permitted by
applicable law and as set forth on the signature page hereto, be an “incentive
stock option”, within the meaning of Section 422 of the Code) and Performance
Option (which shall in its entirety be an option that is not an incentive stock
option) to purchase Common Stock granted under this Agreement.  To the extent that, for any reason, an
Option intended to be an incentive stock option does not qualify as an
incentive stock option, it shall be deemed an Option that is not an incentive
stock option.


 


Section 1.15.   - Performance
Option


 


“Performance
Option” shall mean an Option with respect to which the commencement of
exercisability is governed by Section 3.1(b) hereof.


 


Section 1.16.          Performance Target


 


“Performance
Target” shall have the meaning as set forth in Appendix A attached hereto.


 


Section 1.17.          - Person


 


“Person” shall
mean “person”, as such term is used for purposes of Section 13(d) or 14(d) of
the Securities Exchange Act of 1934, as amended (or any successor section
thereto).


 


Section 1.18.          - Plan


 


“Plan” shall
mean the Amended and Restated 2003 Stock Purchase and Option Plan for Rockwood Holdings,
Inc. and Subsidiaries.


 


4

















 


Section 1.19.          - Pronouns


 


The masculine
pronoun shall include the feminine and neuter, and the singular the plural,
where the context so indicates.


 


Section 1.20.          - Retirement


 


“Retirement”
shall mean retirement at age 65 or over (or such other age as may be approved
by the Board of Directors of the Company) after having been employed by the
Company or a Subsidiary for at least three years after November 1, 2001.


 


Section 1.21.          - Secretary


 


“Secretary”
shall mean the Secretary of the Company.


 


Section 1.22.          - Time Option


 


“Time Option”
shall mean an Option with respect to which the commencement of exercisability
is governed by Section 3.1(a) hereof.


 


Section 1.23.          - Vesting Date


 


“Vesting Date”
shall mean each anniversary of the Initial Vesting Date on which the Time
Option becomes exercisable pursuant to Section 3.1(a)(i) hereof.


 


5

















 


ARTICLE II


 


GRANT OF OPTIONS


 


Section 2.1.            - Grant of Options


 


For good and
valuable consideration, on and as of the date hereof the Company irrevocably
grants to the Optionee a Time Option and a Performance Option to purchase any
part or all of an aggregate of the number of shares set forth with respect to
each such Option on the signature page hereof of its Common Stock upon the
terms and conditions set forth in this Agreement.


 


Section 2.2.            - Exercise Price


 


Subject to
Section 2.4, the exercise price of the shares of Common Stock covered by the Options
shall be $500.00 per share without commission or other charge (which is the
fair market value per share of the Common Stock on the Grant Date).


 


Section 2.3.            – No Guarantee of
Employment


 


Nothing in
this Agreement or in the Plan shall confer upon the Optionee any right to
continue in the employ of the Company or any Subsidiary or Affiliate or shall
interfere with or restrict in any way the rights of the Company and its
Subsidiaries or Affiliates, which are hereby expressly reserved, to terminate the
employment of the Optionee at any time for any reason whatsoever, with or
without Cause.


 


Section 2.4.            - Adjustments in
Options Pursuant to Merger, Consolidation, etc.


 


Subject to
Sections 8 and 9 of the Plan, in the event that the outstanding shares of the
stock subject to an Option, are, from time to time, changed into or exchanged
for a different number or kind of shares of the Company or other securities of
the Company by reason of a merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares, or other
corporate event, the Committee shall make, as appropriate and equitable, an
adjustment in the number and kind of shares and/or the amount of consideration
as to which or for which, as the case may be, such Option, or portions thereof
then unexercised, shall be exercisable and/or, other than in an event that is a
Change of Control, shall pay to the Optionee a dividend in respect of the
shares of Common Stock subject to the Option, in any event in order to allow
the Optionee to participate in such corporate event in an equitable
manner.  Any such adjustment made by the
Committee shall be final and binding upon the Optionee, the Company and all
other interested persons.


 


6

















 


ARTICLE III


 


PERIOD OF EXERCISABILITY


 


Section 3.1.            - Commencement of
Exercisability


 


(a)           Time Option.


 


(i)            So long as the
Optionee continues to be employed by the Company or its Subsidiaries, the Time
Option shall become exercisable pursuant to the following schedule:


 


	
  Date Time Option

  Becomes Exercisable

  	
   

  	
  Percentage
  of Time Option Shares Granted

  As to Which Time Option Is Exercisable

  
	
   

  	
   

  	
   

  
	
  After the first anniversary of the Initial Vesting Date

  	
   

  	
  20%

  
	
   

  	
   

  	
   

  
	
  After the second anniversary of the Initial Vesting Date

  	
   

  	
  40%

  
	
   

  	
   

  	
   

  
	
  After the third anniversary of the Initial Vesting Date

  	
   

  	
  60%

  
	
   

  	
   

  	
   

  
	
  After the fourth anniversary of the Initial Vesting Date

  	
   

  	
  80%

  
	
   

  	
   

  	
   

  
	
  After the fifth anniversary of the Initial Vesting Date

  	
   

  	
  100%

  



 


(ii)           That portion of the
Option intended to be an “incentive stock option” within the meaning of Section
422 of the Code (“ISO”) and that portion of the Option that is not intended to
be an ISO (“NQSO”) shall each become exercisable ratably in accordance with the
above schedule.  For example, following
the first anniversary of the Initial Vesting Date, 20% of the ISOs and 20% of
the NQSOs shall be exercisable, while 40% of the ISOs and 40% of the NQSOs
shall be exercisable following the second anniversary of the Initial Vesting
Date, and so on.


 


(iii)          Notwithstanding the
foregoing, the Time Option shall become immediately exercisable as to 100% of
the shares of Common Stock subject to such Option immediately prior to a Change
of Control (but only to the extent such Option has not otherwise terminated or
become exercisable).


 


7

















 


(b)           Performance Option.


 


(i)            The Option shall
become exercisable with respect to 20% of the shares of Common Stock subject to
such Option in respect of each Fiscal Year (beginning with the 2004 Fiscal
Year) upon the achievement by the Company of the Performance Target established
in respect of each such Fiscal Year and set forth on Appendix A attached
hereto; provided, however, that such Option shall only become
exercisable as to 20% of the shares of Common Stock subject to such Option
(each such 20% of the shares, a “Tranche”) on December 31 of each such
Fiscal Year upon the occurrence of the Financial Statement Approval Date
applicable to such Fiscal Year so long as either (i) the Optionee remains
employed with the Company on the applicable Financial Statement Approval Date
or (ii) an Interim Termination Event occurs between such December 31 and the
applicable Financial Statement Approval Date. 
If the Company does not achieve its Performance Target for any given
Fiscal Year (a “Missed Year”), the Option shall not become exercisable
in respect of such Fiscal Year, as set forth in the immediately preceding
sentence; provided, however, that if the Company achieves
the Performance Target as established for any Fiscal Year subsequent to a
Missed Year, then any prior percentage of the Option (the exercisability
of which had not previously occurred) in respect of prior Missed Years shall
become exercisable (but only to the extent such Option has not otherwise
terminated or become exercisable). 
Notwithstanding the foregoing, the Option shall become exercisable as to
100% of the shares of Common Stock subject to such Option (to the extent such
Option has not otherwise terminated or become exercisable) on the eighth
anniversary of the Grant Date.


 


(ii)           Notwithstanding the
foregoing, upon the occurrence of a Change of Control prior to December 31,
2008, the Option (to the extent such Option has not otherwise terminated) shall
be exercisable with respect to the number of shares of Common Stock equal to
the total number of shares of Common Stock subject to the Option multiplied by
a fraction, (i) the numerator of which is the number of shares of Common Stock
that have previously become exercisable in respect of prior Fiscal Years, plus,
with respect to the Tranche that could have become vested in respect the Fiscal
Year in which the Change of Control occurs, if the Board determines, in its
good faith discretion that, as of the date of the Change of Control, the
Company would, but for the Change of Control, have achieved the Performance
Target for such year, a pro rata portion of such Tranche (based on the number
of days that have elapsed in such Fiscal Year through the date of the Change of
Control, relative to 365 days) (the “Pro-Rata Fiscal Year”) and (ii) the
denominator of which is the maximum number of shares that could have become
vested in such completed Fiscal Years (whether or not they actually vested),
plus a pro-rata portion of the maximum number of shares that could have become
vested for the Fiscal Year in which the Change of Control occurred.  (See Exhibit I for an example of the
application of this Section 3.1(b)(ii).) 
Notwithstanding the foregoing provisions of this Section 3.1(b), if the
Board determines, in its good faith discretion, that, as of the date of the
Change of Control, the Company achieved the applicable Performance Target set
forth in Appendix A hereto, the Option shall become exercisable in full.  The Board shall make such determination
based on an interpolation of the applicable Fiscal Year goals set forth in
Appendix A.


 


8

















 


(c)           Notwithstanding the
foregoing, no Option which does not otherwise become exercisable in accordance
with Section 3.1(b)(i) above shall become exercisable as to any additional
shares of Common Stock following the termination of employment of the Optionee
for any reason, and any Option which is non-exercisable as of the Optionee’s
termination of employment (other than any Option which becomes exercisable in
accordance with Section 3.1(b)(i) shall be immediately cancelled.


 


Section 3.2.            - Expiration of
Options


 


Except as
otherwise provided in Section 5 or 6 of the Management Stockholder’s Agreement,
the Optionee may not exercise the Options to any extent after the first to
occur of the following events:


 


(a)           The tenth anniversary
of the Grant Date;


 


(b)           The tenth anniversary
of the Grant Date, if the Optionee’s employment is terminated by reason of
death or Disability;


 


(c)           The first anniversary
of the date of the Optionee’s termination of employment by reason of
Retirement, by the Company without Cause or by the Optionee for Good Reason;


 


(d)           The date of an
Optionee’s termination of employment by the Company for any reason other than
as set forth in Section 3.2(b) or (c) above (without regard to Section 5 or 6
of the Management Stockholder’s Agreement);


 


(e)           The date the Option is
terminated pursuant to Section 5 or 6 of the Management Stockholder’s
Agreement; or


 


(f)            If the Committee so
determines pursuant to Section 9 of the Plan, the effective date of either the
merger or consolidation of the Company into another Person, or the exchange or
acquisition by another Person of all or substantially all of the Company’s
assets or 80% or more of its then outstanding voting stock, or the
recapitalization, reclassification, liquidation or dissolution of the
Company.  At least ten days prior to the
effective date of such merger, consolidation, exchange, acquisition,
recapitalization, reclassification, liquidation or dissolution, the Committee
shall give the Optionee notice of such event if the Option has then neither
been fully exercised nor become unexercisable under this Section 3.2.


 


9

















 


ARTICLE IV


 


EXERCISE OF OPTIONS


 


Section 4.1.            - Person Eligible
to Exercise


 


Except as
otherwise provided in the Management Stockholder’s Agreement, during the
lifetime of the Optionee, only he may exercise an Option or any portion
thereof.  After the death of the
Optionee, any exercisable portion of an Option may, prior to the time when an
Option becomes unexercisable under Section 3.2, be exercised by his personal
representative or by any person empowered to do so under the Optionee’s will or
under the then applicable laws of descent and distribution.


 


Section 4.2.            - Partial Exercise


 


Any
exercisable portion of an Option or the entire Option, if then wholly
exercisable, may be exercised in whole or in part at any time prior to the time
when the Option or portion thereof becomes unexercisable under Section 3.2;
provided, however, that any partial exercise shall be for whole shares of
Common Stock only.


 


Section 4.3.            - Manner of
Exercise


 


An Option, or
any exercisable portion thereof, may be exercised solely by delivering to the
Secretary or his office all of the following prior to the time when the Option
or such portion becomes unexercisable under Section 3.2:


 


(a)           Notice in writing
signed by the Optionee or the other person then entitled to exercise the Option
or portion thereof, stating that the Option or portion thereof is thereby
exercised and indicating the extent to which the portion of the Option being
exercised constitutes Incentive Stock Options, such notice complying with all
applicable rules established by the Committee;


 


(b)           Full payment (in cash,
by check or by a combination thereof) for the shares with respect to which such
Option or portion thereof is exercised;


 


(c)           A bona fide written
representation and agreement, in a form satisfactory to the Committee, signed
by the Optionee or other person then entitled to exercise such Option or
portion thereof, stating that the shares of stock are being acquired for his
own account, for investment and without any present intention of distributing
or reselling said shares except as may be permitted under the Securities Act of
1933, as amended (the “Act”), and then applicable rules and regulations
thereunder, and that the Optionee or other person then entitled to exercise such
Option or portion thereof will indemnify the Company against and hold it free
and harmless from any loss, damage, expense or liability resulting to the
Company if any sale or distribution of the shares by such person is contrary to
the representation and agreement referred to above; provided, however, that the
Committee may, in its reasonable discretion, take whatever


 


10

















 


additional
actions it deems reasonably necessary to ensure the observance and performance
of such representation and agreement and to effect compliance with the Act and
any other federal or state securities laws or regulations;


 


(d)           Full payment to the
Company of all amounts which, under federal, state or local law, it is required
to withhold upon exercise of the Option; and


 


(e)           In the event the Option
or portion thereof shall be exercised pursuant to Section 4.1 by any person or
persons other than the Optionee, appropriate proof of the right of such person
or persons to exercise the Option.


 


Without
limiting the generality of the foregoing, the Committee may require an opinion
of counsel acceptable to it to the effect that any subsequent transfer of
shares acquired on exercise of an Option does not violate the Act, and may
issue stop-transfer orders covering such shares.  Share certificates evidencing stock issued on exercise of this
Option shall bear an appropriate legend referring to the provisions of
subsection (c) above and the agreements herein.  The written representation and agreement referred to in
subsection (c) above shall, however, not be required if the shares to be issued
pursuant to such exercise have been registered under the Act, and such
registration is then effective in respect of such shares.  In addition to the foregoing, after a Public
Offering (as defined in the Management Stockholder’s Agreement), the Optionee
may, in the Committee’s good faith discretion, make payment of the exercise
price (as required in Section 4.3(b) above) in shares of Common Stock that the
Optionee has held for at least six months or otherwise pursuant to an
irrevocable broker loan program established in accordance with applicable law.


 


Section 4.4.            - Conditions to
Issuance of Stock Certificates


 


The shares of
stock deliverable upon the exercise of an Option, or any portion thereof, may
be either previously authorized but unissued shares or issued shares, which
have then been reacquired by the Company. 
Such shares shall be fully paid and nonassessable.  The Company shall not be required to issue
or deliver any certificate or certificates for shares of stock purchased upon
the exercise of an Option or portion thereof prior to fulfillment of all of the
following conditions:


 


(a)           The obtaining of
approval or other clearance from any state or federal governmental agency which
the Committee shall, in its reasonable and good faith discretion, determine to
be necessary or advisable; and


 


(b)           The lapse of such
reasonable period of time following the exercise of the Option as the Committee
may from time to time establish for reasons of administrative convenience.


 


Section 4.5.            - Rights as
Stockholder


 


The holder of
an Option shall not be, nor have any of the rights or privileges of, a
stockholder of the Company in respect of any shares purchasable upon the exercise
of the Option or any portion thereof unless and until certificates representing
such shares shall have been issued by the Company to such holder.


 


11

















 


ARTICLE V


 


MISCELLANEOUS


 


Section 5.1.            - Administration


 


The Committee
shall have the power to interpret the Plan and this Agreement and to adopt such
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret or revoke any such rules.  All actions taken and all interpretations
and determinations made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons.  No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Options. 
In its absolute discretion, the Board of Directors may at any time and
from time to time exercise any and all rights and duties of the Committee under
the Plan and this Agreement.


 


Section 5.2.            - Options Not
Transferable


 


Except as
provided in the Management Stockholder’s Agreement, neither the Options nor any
interest or right therein or part thereof shall be liable for the debts,
contracts or engagements of the Optionee or his successors in interest or shall
be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect;
provided, however, that this Section 5.2 shall not prevent transfers by will or
by the applicable laws of descent and distribution.


 


Section 5.3.            - Shares to Be
Reserved


 


The Company
shall at all times during the term of the Options reserve and keep available
such number of shares of stock as will be sufficient to satisfy the
requirements of this Agreement.


 


Section 5.4.            - Notices


 


Any notice to
be given under the terms of this Agreement to the Company shall be addressed to
the Company in care of its Secretary, and any notice to be given to the
Optionee shall be addressed to him at the address given beneath his signature
hereto.  By a notice given pursuant to
this Section 5.4, either party may hereafter designate a different address for
notices to be given to him.  Any notice,
which is required to be given to the Optionee, shall, if the Optionee is then
deceased, be given to the Optionee’s personal representative if such
representative has previously informed the Company of his status and address by
written notice under this Section 5.4. 
Any notice shall have been deemed duly given when enclosed in a properly
sealed envelope


 


12

















 


or wrapper addressed as aforesaid, deposited
(with postage prepaid) in a post office or branch post office regularly
maintained by the United States Postal Service.


 


Section 5.5.            - Titles


 


Titles are
provided herein for convenience only and are not to serve as a basis for
interpretation or construction of this Agreement.


 


Section 5.6.            - Applicability of
Plan and Management Stockholder’s Agreement


 


The Options
and the shares of Common Stock issued to the Optionee upon exercise of the
Options shall be subject to all of the terms and provisions of the Plan and the
Management Stockholder’s Agreement, to the extent applicable to the Options and
such shares.  In the event of any
conflict between this Agreement and the Plan, the terms of the Plan shall
control.  In the event of any conflict
between this Agreement or the Plan and the Management Stockholder’s Agreement,
the terms of the Management Stockholder’s Agreement shall control.


 


Section 5.7.            - Amendment


 


This Agreement
may be amended only by a writing executed by the parties hereto, which
specifically states that it is amending this Agreement.


 


Section 5.8.            - Governing Law


 


The laws of the State of Delaware shall govern the interpretation, validity
and performance of the terms of this Agreement regardless of the law that might
be applied under principles of conflicts of laws.


 


Section 5.9.            - Arbitration


 


In the event
of any controversy among the parties hereto arising out of, or relating to, this
Agreement which cannot be settled amicably by the parties, such controversy
shall be finally, exclusively and conclusively settled by mandatory arbitration
conducted expeditiously in accordance with the American Arbitration Association
rules, by a single independent arbitrator. 
If the parties are unable to agree on the selection of an arbitrator,
then any party may petition the American Arbitration Association for the
appointment of the arbitrator, which appointment shall be made within ten days
of the petition therefore.  Either the
Company or the Optionee  may
institute such arbitration proceeding by giving written notice to the other
party.  The arbitrator in New York or
New Jersey shall hold a hearing within 30 days of his or her appointment.  In preparation for their presentation at
such hearing, each party may depose a maximum of four people.  Each such deposition shall last no more than
six hours.  Each side may file with the
arbitrator one brief, not in excess of 30 pages, excluding exhibits.  Each side shall have no more than eight
hours to present its position to the arbitrator.  The hearing shall be no more than three days in length.  The decision of the arbitrator shall be
final and binding upon all parties hereto and shall be rendered pursuant to a
written decision, which contains a detailed recital of the arbitrator’s
reasoning.  Judgment upon the award
rendered may be entered in any court having jurisdiction thereof.


 


13

















 


IN WITNESS
WHEREOF, this Agreement has been executed and delivered by the parties hereto.


 


	
   

  	
  ROCKWOOD
  HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Thomas J. Riordan

  	
   

  
	
   

  	
  Its:

  	
  Vice
  President, Law & Administration

  
	
   

  	
   

  	
   

  
	
   

  	
  OPTIONEE:

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Seifollah Ghasemi

  	
   

  
	
   

  	
  SEIFOLLAH
  GHASEMI

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  c/o Rockwood
  Holdings, Inc.

  	
   

  
	
   

  	
  100 Overlook
  Center

  	
   

  
	
   

  	
  Princeton,
  NJ 08540

  	
   

  
	
   

  	
  Address

  
	
   

  	
   

  	
   

  
	
   

  	
  Optionee’s
  Taxpayer Identification Number:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
									



 


Aggregate
number of shares


of Common
Stock for which


the Time
Option granted


hereunder is
exercisable


(40% of total
number of shares):


 


6,000, of
which


 


200 shall be
incentive stock options and


5,800 shall be
nonqualified stock options.


 


Aggregate
number of shares


of Common
Stock for which


the
Performance Option granted


hereunder is
exercisable


(60% of total
number of shares):


 


9,000, all of
which shall be non-qualified stock options.


 


14

















 


Appendix A


 


The Performance Targets are based on the Company’s achievement of the
following implied equity values calculated as 8.0x the applicable fiscal year’s
Consolidated EBITDA (as defined below), minus the year-end Consolidated Total
Debt (as defined below, and, with Consolidated EBITDA, “Equity Values”):


 




	
  Fiscal Year

  	
   

  	
  Equity
  Values

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2004:

  	
   

  	
  $

  	
  873.4 million

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2005:

  	
   

  	
  $

  	
  1,295.8 million

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2006:

  	
   

  	
  $

  	
  1,827.7 million

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2007:

  	
   

  	
  $

  	
  2,363.8 million

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2008:

  	
   

  	
  $

  	
  2,785.2 million

  	
   

  






 


For purposes
hereof, “Consolidated EBITDA” and “Consolidated Total Debt” are as defined in the Credit Agreement dated as of July 30,
2004 among Rockwood
Specialties Group, Inc., Rockwood Specialties Limited, Rockwood Specialties
International, Inc., the lenders party thereto, Credit Suisse First Boston,
acting through its Cayman Islands Branch, as administrative agent and
collateral agent, and UBS Securities LLC and Goldman Sachs Credit Partners
L.P., as co-syndication agents thereunder, filed as Exhibit 10.1 to Rockwood
Specialties Group, Inc.’s Current Report on Form 8-K filed with the Securities
and Exchange Commission on August 4, 2004.


 


The Board of Directors shall, in good faith, fairly and appropriately
adjust the effect(s) of any significant acquisitions, divestitures, foreign
exchange movements, and other non-recurring or extraordinary events that may
affect the Equity Values, based on an objective determination that such an
adjustment is reasonably necessary.  The
Board of Directors’ determination of such adjustment shall be based on the
Company’s accounting as set forth in its books and records and on the Company’s
financial plan pursuant to which the Equity Values were originally established.


 


15

















 


Exhibit I


 


Example


 


Assumptions:


 


(1)           100
shares of stock subject to the option (irrespective of whether such options
have previously been exercised).


 


(2)           FY
2004 Performance Target achieved, the option vested, and was exercised, as to
20 shares.


 


(3)           FY 2005 Performance
Target not achieved.


 


(4)           FY
2006:  Change of Control occurs
mid-year; Board of Directors determines the Company is on target to achieve FY
2006 Performance Target.


 


Result:


 


Based on the
special Change of Control vesting schedule, the proportion of the total shares
subject to the option (irrespective of any prior exercise) is determined as
follows:


 


	
  Total
  Shares subject to option

  	
   

  	
  Change of
  Control Vesting Fraction

  
	
   

  	
   

  	
   

  
	
  100

  	
   

  	
   

  	
  20 + 10

  	
   

  	
  =

  	
  60 shares 

  
	
   

  	
   

  	
   

  	
  50

  	
   

  



 


Since 20
shares have already vested, an additional 40 shares of the original 100 shares
would become vested upon the Change of Control.


 


16