Document:

Exhibit 10.49

 

STOCK OPTION AGREEMENT

 

THIS
AGREEMENT, dated as of February 2, 2001 is made by and between K-L
Holdings, Inc., a Delaware corporation (hereinafter referred to as the “Company”),
and «1», an employee of the Company or a
Subsidiary (as defined below) or Affiliate (as defined below) of the Company,
hereinafter referred to as “Optionee”.

 

WHEREAS, the
Company wishes to afford the Optionee the opportunity to purchase shares of its
common stock, par value $0.01 per share (the “Common Stock”);

 

WHEREAS, the
Company wishes to carry out the Plan (as hereinafter defined), the terms of
which are hereby incorporated by reference and made a part of this Agreement;
and

 

WHEREAS, the
Committee (as hereinafter defined), 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 Options provided for herein to the Optionee as an
incentive for increased efforts during his term of office with the Company or
its Subsidiaries or Affiliates, and has advised the Company thereof and
instructed the undersigned officers to issue said Options;

 

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 failure to perform duties,
which are within the control of the Optionee and consistent with such Optionee’s
title and position, that is not cured within 15 days following written notice
of such failure, (ii) the Optionee’s conviction of or plea of guilty or no
contest to a (x) felony or (y) crime involving moral turpitude, (iii) the
Optionee’s willful malfeasance or misconduct which is injurious to the Company
or its subsidiaries, other than in a manner that is insignificant or
inconsequential, (iv) a breach by Optionee of the material terms of the
Management Stockholder’s Agreement concerning any non-compete, non-solicitation
or confidentiality, following notice of such breach

 

 

(which notice may be oral or written) or (v) any violation by the
Optionee of any material written Company policy after written notice of such
breach, if such violation is shown by the Company to be reasonably expected to
result in material injury to the business, reputation or financial condition 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.                                   - Good Reason

 

“Good Reason”
shall mean (i) a reduction in the Optionee’s base salary or annual bonus
opportunity (other than a reduction in base salary that is offset by an
increase in bonus opportunity upon the attainment of reasonable financial
targets, which reduction may not exceed either (x) 10% of the Optionee’s base
salary in any 12 month period or (y) an aggregate of 20% of the Optionee’s base
salary immediately prior to November 20, 2000, (ii) a substantial
reduction in the Optionee’s duties and responsibilities, which continues beyond
15 days after written notice by the Optionee to the Company of such reduction, (iii) 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, (iv) a
transfer of the Optionee’s primary workplace by more than thirty-five (35)
miles from the current workplace, (v) any serious chronic mental or
physical illness of an immediate family member that requires the Optionee to
terminate his or he employment with the Company because of a substantial
interference with his or her duties at the Company or (vi) any failure by

 

2

 

the Company to
pay when due any payment owed to the Optionee within 15 days after the date
such payment becomes due.

 

Section 1.7.                                   - Grant Date

 

“Grant Date”
shall mean February 2, 2001, the date on which the Options provided for in
this Agreement are granted.

 

Section 1.8.                                   - 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 1.9.                                   - Initial Vesting
Date

 

“Initial
Vesting Date” shall mean November 20, 2000.

 

Section 1.10.                             - KKR

 

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

 

Section 1.11.                             - KKR Return

 

“KKR
Return” shall mean the threshold internal rate of return, realized by the KKR
Partnerships upon the occurrence of a Change of Control, on the shares of
Common Stock owned by the KKR Partnerships that is equal to at least 27% per
annum, which return shall be calculated on a fully diluted basis, taking into
account all outstanding shares of Common Stock (including, without limitation
all of the shares underlying the Time Option, which is at the time of, or which
would become exercisable in connection with, the Change of Control pursuant to Section 3.1(a)(ii),
and all of the shares underlying the Performance Option, which would otherwise
become exercisable pursuant to Section 3.1(b)(iii)).

 

Section 1.12.                             - Management
Stockholder’s Agreement

 

“Management
Stockholder’s Agreement” shall mean that certain Management Stockholder’s
Agreement dated as of February 2, 2001 between the Optionee and the
Company.

 

Section 1.13.                             - 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.

 

3

 

Section 1.14.                             - 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 1.15.                             - Performance Targets

 

“Performance
Targets” shall have the meaning as set forth on Exhibit A attached hereto.

 

Section 1.16.                             - Permanent Disability

 

“Permanent
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 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 days.

 

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 2000 Stock Purchase and Option Plan of K-L Holdings, Inc. and
Subsidiaries.

 

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 20, 2000.

 

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.

 

4

 

Section 1.23.                             - Vesting Date

 

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

 

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/or 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 $5.00 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.

 

5

 

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

  	
   

  	
  10

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  After the second anniversary of the Initial
  Vesting Date

  	
   

  	
  20

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  After the third anniversary of the Initial
  Vesting Date

  	
   

  	
  45

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  After the fourth anniversary of the Initial
  Vesting Date

  	
   

  	
  70

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  After the fifth anniversary of the Initial
  Vesting Date

  	
   

  	
  100

  	
  %

  

 

(ii)                                  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).

 

(iii)                               In
the event the Optionee’s employment is terminated as a result of the Optionee’s
death, Permanent Disability or Retirement, or is terminated by the Company
without Cause or by the Optionee for Good Reason, the vesting of the Time
Option shall accelerate such that the Time Option shall be exercisable as to
20% of the shares of Common Stock in respect of each Vesting Date through which
the Optionee has remained employed, which vesting schedule shall be in
lieu of the vesting schedule set forth in Section 3.1(a)(i).  For example and for the avoidance of doubt,
in the event that the Optionee’s employment is terminated by the Company
without Cause after the second anniversary of the Initial Vesting Date but
prior to the third anniversary of the Initial Vesting Date, the Time Option
shall be exercisable as to 40%, in total, of the shares of Common Stock subject
to the Time Option, in

 

6

 

lieu of the 30%, in total, of
the shares of Common Stock as to which the Time Option would otherwise be
exercisable in accordance with the vesting schedule set forth in Section 3.1(a)(i).

 

(b)                                 Performance Option.

 

(i)                                     The
Performance Option shall become exercisable with respect to 25% of the shares
of Common Stock subject to such Option commencing on the second anniversary of
the Grant Date and on each anniversary thereafter upon the achievement by the
Company of the Performance Targets established in respect of each fiscal year
of the Company and set forth on Exhibit A attached hereto (each, a “Plan
Year”).  If the Company does not achieve
its Performance Targets for any given Plan Year (a “Missed Year”), the Performance
Option shall not become exercisable in respect of such Plan Year; provided,
however, that if (x) the Company achieves its Cumulative EBITDA
Target (as set forth on Exhibit A) as of any Plan Year subsequent to a
Missed Year and (y) the KKR Partnerships achieve their ROGI Target (as set
forth on Exhibit A) in respect of the same Plan Year for which the
achievement of Performance Targets are being determined, then any prior
percentage of the Performance Option in respect of prior Missed Years shall
become exercisable (but only to the extent such Option has not otherwise
terminated or become exercisable).

 

(ii)                                  Notwithstanding
the foregoing, the Performance Option shall become exercisable as to 100% of
the shares of Common Stock subject to such Option on the eighth anniversary of
the Grant Date (but only to the extent such Option has not otherwise terminated
or become exercisable).

 

(iii)                               Notwithstanding the
foregoing, the Performance Option shall become immediately exercisable
immediately prior to a Change of Control (but only to the extent such Option
has not otherwise terminated or become exercisable) as to such percentage, if
any, of the shares of Common Stock subject to such Option which, after such
acceleration of exercisability, shall still result in the KKR Partnerships’
achievement of the KKR Return.  Upon the
occurrence of the Change of Control, all or any portion of the Performance
Option that, after the application of the foregoing sentence, remains
unexercisable, shall immediately terminate.

 

(c)                                  Notwithstanding the foregoing,
no Option shall become exercisable as to any additional shares of Common Stock
(which do not otherwise become exercisable in accordance with Section 3.1(a)(iii) above)
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, 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; or

 

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

 

7

 

(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 (10) 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.

 

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:

 

8

 

(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 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 or any of them 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
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.

 

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:

 

9

 

(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.

 

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.

 

10

 

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 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;
Legal Fees

 

(a)                                  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

 

11

 

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 (10) days of the petition therefore.  Either the Company or the Management
Stockholder 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 thirty (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 (6) hours.  Each side
may file with the arbitrator one brief note in excess of thirty (30) pages,
excluding exhibits.  Each side shall have
no more that eight (8) hours to present its position to the
arbitrator.  The hearing shall be no more
that three (3) 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.

 

(b)                                 In the event of any arbitration
or other disputes with regard to this Agreement or any other document or
agreement referred to herein, the party that does not prevail shall pay the
legal fees and disbursements of the prevailing party promptly upon presentation
of invoices thereof.

 

12

 

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

 

	
   

  	
  K-L HOLDINGS. INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONEE:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  «1»

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  
	
   

  	
   

  
	
   

  	
  Optionee’s
  Taxpayer Identification Number:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  

 

Aggregate
number of shares

of Common
Stock for which

the Time
Option granted

hereunder is
exercisable

(50% of total
number of shares):

 

«E»;
of which

 

«F»
shall be incentive stock options and

 

«G»
shall be non-qualified stock options.

 

Aggregate
number of shares

of Common
Stock for which

the
Performance Option granted

hereunder is
exercisable

(50% of total
number of shares):

 

«H»,
all of which shall be non-qualified stock options.

 

13Exhibit 10.50

 

FORM OF STOCK OPTION AGREEMENT

(Time Option/Performance Option)

 

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

 

WHEREAS, the
Committee (as defined in the Plan), 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.                                   - Annual
Performance Targets

 

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

 

Section 1.3.                                   - Cause

 

“Cause” shall
mean (i) the Optionee’s willful and continued failure to perform duties, which
are within the control of the Optionee and consistent with such Optionee’s
title and position, that is not cured within 15 days following written notice
of such failure, (ii) the Optionee’s conviction of or plea of guilty or no
contest to a (x) felony or (y) crime involving moral turpitude, (iii) the
Optionee’s willful malfeasance or misconduct which is injurious to the Company
or its Subsidiaries, other than in a manner that is insignificant or inconsequential,
(iv) a

 

 

breach by
Optionee of the material terms of the Management Stockholder’s Agreement
concerning any non-compete, non-solicitation or confidentiality, following
notice of such breach (which notice may be oral or written) or (v) any violation
by the Optionee of any material written Company policy after written notice of
such breach, if such violation is shown by the Company to be reasonably
expected to result in material injury to the business, reputation or financial
condition of the Company.

 

Section 1.4.                                   - 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 Kohlberg Kravis Roberts & Co. Ltd (“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 clauses (i), (ii) or (iii) above, the KKR Partnerships lose the ability,
without the approval of any Person (applicable to the respective foregoing
events in clauses (i), (ii) or (iii) above) who is not an affiliate of KKR, to
elect a majority of the Board of Directors (“Board”) of the Company (or the
resulting entity).  Notwithstanding the
foregoing, if any of the transactions described in clauses (i), (ii) or (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 1.5.                                   - Code

 

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

 

Section 1.6.                                   - Cumulative
Performance Targets

 

“Cumulative
Performance Targets” shall have the meaning set forth in Appendix A attached
hereto.

 

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 or the Applicable Division, as
appropriate.

 

2

 

Section 1.9.                                   - Good Reason

 

“Good Reason”
shall mean, without the Optionee’s consent, (i) a reduction in the Optionee’s
base salary or annual bonus opportunity (other than a reduction in base salary
that is offset by an increase in bonus opportunity upon the attainment of
reasonable financial targets, which reduction may not exceed 10% of the
Optionee’s base salary in any 12 month period), (ii) a substantial reduction in
the Optionee’s duties and responsibilities, which continues beyond 15 days
after written notice by the Optionee to the Company of such reduction, (iii)
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, (iv) a
transfer of the Optionee’s primary workplace by more than 35 miles from the
current workplace, (v) any serious chronic mental or physical illness of an
immediate family member that requires the Optionee to terminate his or her
employment with the Company because of a substantial interference with his or
her duties at the Company or (vi) 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.

 

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.

 

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 Management Stockholder’s
Agreement dated as of                    ,
2004 between the Optionee and the Company.

 

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 the
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.

 

3

 

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.                             - Permanent Disability

 

“Permanent
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 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 days.

 

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, as amended from time to time.

 

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.

 

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.

 

4

 

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/or 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.

 

5

 

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 Time Option immediately prior to
a Change of Control (but only to the extent such Time Option has not otherwise
terminated or become exercisable).

 

(b)                                 Performance Option.

 

(i)                                     The
Performance 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 applicable
division of the

 

6

 

Company (“Applicable Division”)
(as set forth on Exhibit A) of the Performance Targets established in respect
of each Fiscal Year of the Applicable Division and set forth on Exhibit 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 Applicable Division does
not achieve its Annual 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 Applicable Division achieves the Cumulative 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 Performance Option (to the extent such Performance 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 Performance 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 sole discretion (which must be
exercised in good faith) that, as of the date of the Change of Control, the
Applicable Division would, but for the Change of Control, have achieved the
Annual 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 sole discretion
(exercised in good faith), that, as of the date of the Change of Control, the
Applicable Division achieved the applicable Cumulative 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.

 

(c)                                  Notwithstanding the foregoing,
no Option which does not otherwise become exercisable in accordance with Section 3.1(a)(iii)
or 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(a)(iii) or 3.1(b)(i)) shall immediately be cancelled.

 

7

 

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
Permanent Disability;

 

(c)                                  The first anniversary of the
date of the Optionee’s termination of employment by reason of Retirement, by
the Company or any of its Subsidiaries without Cause (other than by reason of
Permanent Disability) or by the Optionee for Good Reason;

 

(d)                                 The date of an Optionee’s
termination of employment with the Company or any of its Subsidiaries by the
Optionee 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 of an Optionee’s
termination of employment by the Company or any of its Subsidiaries for Cause;

 

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

 

(g)                                 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 previously fully exercised nor become unexercisable under
this Section 3.2.

 

8

 

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 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;

 

9

 

(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.

 

10

 

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 that 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 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.

 

11

 

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 that
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 in New York
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
therefor.  Either the Company or the
Optionee may
institute such arbitration proceeding by giving written notice to the other
party.  The arbitrator 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.

 

[signatures on next page]

 

12

 

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

 

	
   

  	
  ROCKWOOD HOLDINGS. INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Its: 

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONEE:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  
	
   

  	
   

  
	
   

  	
  Optionee’s
  Taxpayer Identification Number:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
					

 

Aggregate
number of shares

of Common
Stock for which

the Time
Option granted

hereunder is
exercisable

(50% of total
number of shares):

 

          ,
of which

 

       
shall be incentive stock options and

 

       
shall be non-qualified stock options.

 

 

Aggregate
number of shares

of Common
Stock

for which the
Performance Option

granted
hereunder is exercisable

(50% of total
number of shares):

 

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

 

13

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