Exhibit 10.1


 




 





 


AGREEMENT AND PLAN OF MERGER


 


 


among


 


 


BASF AKTIENGESELLSCHAFT,


 


IRON ACQUISITION CORPORATION


 


 


and


 


 


ENGELHARD CORPORATION


 


 


Dated as of May 30, 2006


 




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  
	
   

  
	
  The Merger

  
	
  SECTION 1.01

  	
   

  	
  The Offer

  	
   

  	
  1

  
	
  SECTION 1.02

  	
   

  	
  Company Actions

  	
   

  	
  3

  
	
  SECTION 1.03

  	
   

  	
  Directors

  	
   

  	
  4

  
	
  SECTION 1.04

  	
   

  	
  The Merger

  	
   

  	
  5

  
	
  SECTION 1.05

  	
   

  	
  Closing

  	
   

  	
  5

  
	
  SECTION 1.06

  	
   

  	
  Effective Time

  	
   

  	
  6

  
	
  SECTION 1.07

  	
   

  	
  Effects of the Merger

  	
   

  	
  6

  
	
  SECTION 1.08

  	
   

  	
  Certificate of Incorporation and Bylaws

  	
   

  	
  6

  
	
  SECTION 1.09

  	
   

  	
  Directors

  	
   

  	
  6

  
	
  SECTION 1.10

  	
   

  	
  Officers

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  
	
   

  
	
  Effect of
  the Merger on the Capital Stock of the

  
	
  Constituent
  Corporations

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.01

  	
   

  	
  Effect on Capital Stock

  	
   

  	
  6

  
	
  SECTION 2.02

  	
   

  	
  Payment to Company Stockholders

  	
   

  	
  8

  
	
  SECTION 2.03

  	
   

  	
  Treatment of Options, Restricted Stock and
  other Equity Awards

  	
   

  	
  9

  
	
  SECTION 2.04

  	
   

  	
  Adjustments.

  	
   

  	
  10

  
	
  SECTION 2.05

  	
   

  	
  Lost Certificates

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  
	
   

  
	
  Representations
  and Warranties of the Company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.01

  	
   

  	
  Organization, Standing and Corporate Power

  	
   

  	
  10

  
	
  SECTION 3.02

  	
   

  	
  Significant Subsidiaries

  	
   

  	
  11

  
	
  SECTION 3.03

  	
   

  	
  Capital Structure

  	
   

  	
  11

  
	
  SECTION 3.04

  	
   

  	
  Authority; Noncontravention

  	
   

  	
  12

  
	
  SECTION 3.05

  	
   

  	
  Governmental Approvals and Consents

  	
   

  	
  13

  
	
  SECTION 3.06

  	
   

  	
  Company Documents

  	
   

  	
  13

  
	
  SECTION 3.07

  	
   

  	
  Absence of Certain Changes or Events

  	
   

  	
  14

  
	
  SECTION 3.08

  	
   

  	
  Employee Benefits

  	
   

  	
  14

  
	
  SECTION 3.09

  	
   

  	
  Brokers and Other Advisors

  	
   

  	
  15

  
	
  SECTION 3.10

  	
   

  	
  Fairness Opinions

  	
   

  	
  15

  



 


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  SECTION 3.11

  	
   

  	
  Information in the Offer Documents and the Schedule 14D-9

  	
   

  	
  15

  
	
  SECTION 3.12

  	
   

  	
  Sole Representations and Warranties

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  
	
   

  
	
  Representations
  and Warranties of Parent and Merger Sub

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 4.01

  	
   

  	
  Organization, Standing and Corporate Power

  	
   

  	
  16

  
	
  SECTION 4.02

  	
   

  	
  Authority; Noncontravention

  	
   

  	
  16

  
	
  SECTION 4.03

  	
   

  	
  Governmental Approvals

  	
   

  	
  17

  
	
  SECTION 4.04

  	
   

  	
  Brokers and Other Advisors

  	
   

  	
  17

  
	
  SECTION 4.05

  	
   

  	
  Financial Capacity

  	
   

  	
  17

  
	
  SECTION 4.06

  	
   

  	
  Information in the Offer Documents

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  
	
   

  
	
  Covenants
  Relating to Conduct of Business

  
	
   

  
	
  SECTION 5.01

  	
   

  	
  Conduct of Business

  	
   

  	
  18

  
	
  SECTION 5.02

  	
   

  	
  Action by Written Consent

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  
	
   

  
	
  Additional
  Agreements

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.01

  	
   

  	
  Reasonable Best Efforts

  	
   

  	
  20

  
	
  SECTION 6.02

  	
   

  	
  Indemnification, Exculpation and Insurance

  	
   

  	
  20

  
	
  SECTION 6.03

  	
   

  	
  Fees and Expenses

  	
   

  	
  22

  
	
  SECTION 6.04

  	
   

  	
  Public Announcements

  	
   

  	
  22

  
	
  SECTION 6.05

  	
   

  	
  Notification of Certain Matters

  	
   

  	
  22

  
	
  SECTION 6.06

  	
   

  	
  Access to Information

  	
   

  	
  22

  
	
  SECTION 6.07

  	
   

  	
  Employee Benefits Matters

  	
   

  	
  23

  
	
  SECTION 6.08

  	
   

  	
  NYSE Listing

  	
   

  	
  24

  
	
  SECTION 6.09

  	
   

  	
  Further Assurances

  	
   

  	
  24

  
	
  SECTION 6.10

  	
   

  	
  Confidentiality Agreement

  	
   

  	
  24

  
	
  SECTION 6.11

  	
   

  	
  Adjourn Annual Meeting; Terminate
  Self-Tender; Consent Solicitation; Rights Agreement

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  
	
   

  
	
  Conditions
  Precedent

  
	
   

  
	
  SECTION 7.01

  	
   

  	
  Conditions to Each Party’s Obligation to
  Effect the Merger

  	
   

  	
  25

  
	
  SECTION 7.02

  	
   

  	
  Frustration of Closing Conditions

  	
   

  	
  25

  



 


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  ARTICLE VIII

  
	
   

  
	
  Termination,
  Amendment and Waiver

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.01

  	
   

  	
  Termination

  	
   

  	
  26

  
	
  SECTION 8.02

  	
   

  	
  Intentionally Omitted

  	
   

  	
  27

  
	
  SECTION 8.03

  	
   

  	
  Effect of Termination

  	
   

  	
  27

  
	
  SECTION 8.04

  	
   

  	
  Amendment

  	
   

  	
  27

  
	
  SECTION 8.05

  	
   

  	
  Extension; Waiver

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  
	
   

  
	
  General
  Provisions

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 9.01

  	
   

  	
  Nonsurvival of Representations and
  Warranties

  	
   

  	
  28

  
	
  SECTION 9.02

  	
   

  	
  Notices

  	
   

  	
  28

  
	
  SECTION 9.03

  	
   

  	
  Definitions

  	
   

  	
  29

  
	
  SECTION 9.04

  	
   

  	
  Interpretation

  	
   

  	
  33

  
	
  SECTION 9.05

  	
   

  	
  Counterparts

  	
   

  	
  34

  
	
  SECTION 9.06

  	
   

  	
  Entire Agreement; No Third-Party
  Beneficiaries

  	
   

  	
  34

  
	
  SECTION 9.07

  	
   

  	
  Governing Law

  	
   

  	
  34

  
	
  SECTION 9.08

  	
   

  	
  Assignment

  	
   

  	
  34

  
	
  SECTION 9.09

  	
   

  	
  Specific Enforcement; Consent to
  Jurisdiction; Service of Process

  	
   

  	
  34

  
	
  SECTION 9.10

  	
   

  	
  Waiver of Jury Trial

  	
   

  	
  35

  
	
  SECTION 9.11

  	
   

  	
  Severability

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Annex I

  	
   

  	
  Conditions to the Offer

  	
   

  	
   

  



 


iii

















 


AGREEMENT AND PLAN OF MERGER 


 


This AGREEMENT
AND PLAN OF MERGER (this “Agreement”), dated as of May 30, 2006, is
made by and among BASF AKTIENGESELLSCHAFT, a stock corporation organized under
the laws of the Federal Republic of Germany (“Parent”), IRON ACQUISITION
CORPORATION, a Delaware corporation and a wholly owned Subsidiary of Parent (“Merger
Sub”), and ENGELHARD CORPORATION, a Delaware corporation (the “Company”).
Capitalized terms used in this Agreement and not otherwise defined shall have
the meaning given to such terms in Section 9.03.


 


WHEREAS,
Merger Sub has commenced a tender offer (the “Offer”) to purchase all of
the issued and outstanding shares of common stock, par value $1.00 per share of
the Company, including the associated Series A Junior Participating
Preferred Stock Purchase Rights (collectively, the “Company Common Stock”)
for a price of $39.00 per share of Company Common Stock (such amount or any
greater amount per share of Company Common Stock paid pursuant to the Offer,
the “Offer Price”), subject to any required withholding of Taxes, net to
the seller in cash, and on the terms and subject to the conditions set forth in
this Agreement;


 


WHEREAS, the
Board of Directors of the Company has, on the terms and subject to the
conditions set forth herein, approved the Offer and adopted this Agreement, and
is recommending that the Company’s stockholders accept the Offer, tender their
shares of Company Common Stock to Merger Sub and approve this Agreement;


 


WHEREAS, the
respective Boards of Directors of Parent, Merger Sub and the Company have
approved and declared advisable the merger of Merger Sub with and into the
Company (the “Merger”), upon the terms and subject to the conditions set
forth in this Agreement; and


 


WHEREAS,
Parent, Merger Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Offer and the
Merger and also to prescribe various conditions to the Offer and the Merger.


 


NOW,
THEREFORE, in consideration of the foregoing and the representations, warranties,
covenants and agreements contained in this Agreement and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:


 


ARTICLE I



The Merger


 


SECTION 1.01                    The Offer.


 


(a)                                  Provided
that this Agreement shall not have been terminated in accordance with Section 8.01,
as promptly as practicable and in any event within one Business Day following
the date hereof (or such later date as the parties may mutually agree in
writing), Merger Sub (i) shall amend the Offer to reflect the execution of
this Agreement, (ii) shall file an amendment to its Schedule TO,
which amendment shall include an amended offer to purchase, 


 

















 


form of transmittal letter, form of
notice of guaranteed delivery and all other necessary documents and exhibits
with the Securities and Exchange Commission (the “SEC”) and make all
deliveries, filings, publications, mailings and telephonic notices required to
be made in connection with the Offer under the Federal securities laws,
including Regulations 14D and 14E of the Securities Exchange Act of 1934, as
amended (including the rules and regulations promulgated thereunder, the “Exchange
Act”) (such documents filed or required to be filed with the SEC and such
other filings, deliveries, mailings and notices, collectively and together with
any amendments, exhibits or supplements thereto, the “Offer Documents”)
and (iii) shall use its reasonable best efforts to consummate the Offer.
Parent will cause Merger Sub to accept for payment and pay for any shares of
Company Common Stock tendered pursuant to the Offer, subject only to the
condition that there shall be validly tendered and not withdrawn prior to the
expiration of the Offer such number of shares of Company Common Stock that,
when added to the shares of Company Common Stock already owned by Parent or any
of its Subsidiaries, would constitute at least a majority of the shares of
Company Common Stock outstanding determined on a Fully Diluted Basis on the
date of expiration of the Offer (the “Minimum Condition”) and to the
other conditions set forth in Annex I hereto (together with the Minimum
Condition, collectively, the “Tender Offer Conditions”).


 


(b)                                 Without
the prior written consent of the Company, Merger Sub shall not (and Parent
shall cause Merger Sub not to) decrease the Offer Price or change the form of
consideration payable in the Offer, decrease the number of shares of Company
Common Stock sought to be purchased in the Offer, impose additional conditions
to the Offer or amend any other term of the Offer in a manner that is adverse
to the holders of shares of Company Common Stock, except as provided in this
Agreement. The Offer shall remain open until the date that is five Business
Days after the amendment of the Offer (the “Expiration Date”), unless
the period of time for which the Offer is open shall have been extended as may be
required by applicable Law or in accordance with the immediately following
sentence, in which event the term “Expiration Date” shall mean the latest time
and date as the Offer, as so extended, may expire; provided, however,
that Merger Sub may (or, at the Company’s option, if at least 80% of the
outstanding shares of Company Common Stock on a Fully Diluted Basis have been
tendered and accepted for payment by Merger Sub, shall) provide for a
subsequent offering period after the Expiration Date, in accordance with Rule 14d-11
under the Exchange Act (including the obligations that Merger Sub immediately
accept and promptly pay for all shares of Company Common Stock tendered during
the initial offering period and immediately accept and promptly pay for any
shares of Company Common Stock tendered during such subsequent offering
period). If, at any Expiration Date, any of the Tender Offer Conditions are not
satisfied or waived by Merger Sub, Merger Sub shall (and Parent shall cause
Merger Sub to) extend the Offer from time to time, each such extension not to
exceed such number of days that Merger Sub reasonably believes is necessary to
cause the Tender Offer Conditions to be satisfied (but in any event not more
than 15 Business Days for all such extensions, unless, in each case, the
parties shall otherwise mutually agree in writing). Under no circumstances
shall Parent or Merger Sub waive the Minimum Condition. Subject to the terms of
the Offer and this Agreement and the satisfaction of the Tender Offer
Conditions as of any Expiration Date, including the Minimum Condition, Parent
will cause Merger Sub to accept for payment and pay for any and all shares of
Company Common Stock validly tendered and not validly withdrawn pursuant to the
Offer promptly after such Expiration Date, regardless of the number of shares
of Company Common Stock tendered in the Offer (such date as Merger Sub shall be
obligated to accept for payment any and all shares of Company Common Stock
validly tendered and not validly withdrawn 


 


2

















 


pursuant to the Offer, the “Acceptance
Date”). For the avoidance of doubt, and notwithstanding anything in this
Agreement to the contrary, Merger Sub shall not (and Parent shall cause Merger
Sub not to) accept for payment any shares of Company Common Stock tendered
pursuant to the Offer unless the Minimum Condition shall have been satisfied.


 


(c)                                  Each
of Parent and Merger Sub, on the one hand, and the Company, on the other hand,
agrees to correct promptly any information provided by it for use in the Offer
Documents if and to the extent that it shall have become false or misleading in
any material respect and Merger Sub further agrees to take all steps necessary
to cause the Offer Documents as so corrected to be filed with the SEC and to be
disseminated to stockholders of the Company, in each case, as and to the extent
required by applicable Federal securities Laws. The Company and its counsel
shall be given a reasonable opportunity to review and comment on the Offer
Documents in advance of their filing with the SEC and dissemination to
stockholders of the Company. Parent and Merger Sub shall provide to the Company
and its counsel copies in writing of any comments and shall inform the
Company of any oral comments that Parent, Merger Sub or their counsel may receive
from the SEC or its staff with respect to the Offer Documents promptly after
receipt of such comments. The Company and its counsel shall be given a
reasonable opportunity to review any such written and oral comments and
proposed responses.


 


SECTION 1.02                    Company
Actions.


 


(a)                                  The
Company shall, after affording Parent and its counsel a reasonable opportunity
to review and comment thereon, file with the SEC, as promptly as practicable on
the date of the filing by Parent and Merger Sub of the Offer Documents, an
amendment to its Solicitation/Recommendation Statement on Schedule 14D-9
(together with the existing statement and any subsequent amendments or
supplements thereto, the “Schedule 14D-9”) reflecting the
recommendation of the Company’s Board of Directors that holders of shares of
Company Common Stock tender their shares into the Offer, and shall disseminate
the Schedule 14D-9 as required by Rule 14d-9 promulgated
under the Exchange Act. The Schedule 14D-9 will set forth that the
Company’s Board of Directors has (i) determined by unanimous vote of all
its members that each of the transactions contemplated hereby, including each
of the Offer and the Merger, is fair to and in the best interests of the
Company and its stockholders, (ii) approved the Offer and the Merger and
this Agreement in accordance with the Delaware General Corporation Law (“DGCL”)
and (iii) recommended acceptance and approval of the Offer and adoption of
this Agreement by the Company’s stockholders; provided, however,
that Parent and Merger Sub agree that such recommendations and the Schedule 14D-9
may be modified in a manner adverse to Parent and Merger Sub or withdrawn
after the date hereof if, but only if, after consultation with its outside
counsel, the Board of Directors determines that such action is advisable in
connection with its fiduciary duties under applicable Law.


 


(b)                                 Each
of the Company, on the one hand, and Parent and Merger Sub, on the other hand,
agrees to correct promptly any information provided by it for use in the Schedule 14D-9
if and to the extent that it shall have become false or misleading in any
material respect and the Company further agrees to take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the SEC
and to be disseminated to stockholders of the Company, in each case, as and to
the extent required by applicable Federal securities Laws. The Company 


 


3

















 


shall provide to Parent and its counsel
copies in writing of any comments and shall inform Parent of any oral
comments that the Company or its counsel may receive from the SEC or its
staff with respect to the Schedule 14D-9 promptly after receipt of
such comments. Parent and its counsel shall be given a reasonable opportunity
to review any such written and oral comments and proposed responses.


 


(c)                                  In
connection with the Offer, the Company will promptly furnish Merger Sub with
mailing labels, security position listings, any available non-objecting beneficial
owner lists and any available listing or computer list containing the names and
addresses of the record holders of the Company Common Stock as of the most
recent practicable date and shall furnish Merger Sub with such additional
available information (including, but not limited to, updated lists of holders
of the Company Common Stock and their addresses, mailing labels and lists of
security positions and non-objecting beneficial owner lists) and such other
assistance as Merger Sub or its agents may reasonably request in
communicating the Offer to the Company’s record and beneficial stockholders.
Subject to the requirements of applicable Law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent, Merger Sub and their Affiliates, associates,
agents and advisors shall keep such information confidential and use the
information contained in any such labels, listings and files only in connection
with the Offer and the Merger and, should the Offer terminate or if this
Agreement shall be terminated, will destroy all copies of such information then
in their possession.


 


SECTION 1.03                    Directors.


 


(a)                                  Promptly
upon the purchase of and payment for any shares of Company Common Stock by
Merger Sub pursuant to the Offer which represent at least a majority of the
shares of Company Common Stock outstanding on a Fully Diluted Basis and at all
times thereafter and subject to Section 1.03(b), Merger Sub shall be
entitled to elect such number of directors, rounded up to the next whole
number, on the Company’s Board of Directors as is equal to the product of the
total number of directors on the Company’s Board of Directors (giving effect to
the directors elected or designated by Merger Sub pursuant to this sentence)
multiplied by the percentage that the aggregate number of shares of Company
Common Stock beneficially owned by Merger Sub and any of its Affiliates bears
to the total number of shares of Company Common Stock then outstanding (such
directors which Merger Sub is entitled to elect pursuant to this sentence, the “Merger
Sub Designees”). The Company shall, upon Merger Sub’s request at any time
following the purchase of and payment for shares of Company Common Stock
pursuant to the Offer which represent at least a majority of the shares of
Company Common Stock outstanding on a Fully Diluted Basis, take such reasonable
actions, including promptly filling vacancies or newly created directorships on
the Company’s Board of Directors, promptly increasing the size of the Company’s
Board of Directors and/or promptly requesting the resignations of such number
of its incumbent directors as are necessary to enable the Merger Sub Designees
to be so elected or designated to the Company’s Board of Directors, and shall
use its best efforts to cause the Merger Sub Designees to be so elected or
designated at such time. The Company’s obligations under this Section 1.03(a) shall
be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly upon execution of this
Agreement take all actions required pursuant to Section 14(f) and Rule 14f-1
in order to fulfill its obligations under this Section 1.03(a), including
mailing to stockholders the 


 


4

















 


information required by Section 14(f) and
Rule 14f-1 as is necessary to enable the Merger Sub Designees to be
elected or designated to the Company’s Board of Directors. Merger Sub shall
supply the Company with, and be solely responsible for, information with
respect to the Merger Sub Designees and Parent’s and Merger Sub’s respective
officers, directors and Affiliates to the extent required by Section 14(f) and
Rule 14f-1.


 


(b)                                 In
the event that Merger Sub’s designees are elected or designated to the Company’s
Board of Directors pursuant to Section 1.03(a), then, until the Effective
Time, the Company and Parent shall cause the Company’s Board of Directors to
maintain as directors two directors who are members of the Company’s Board of
Directors on the date hereof (the “Continuing Directors”); provided,
however, that if any Continuing Director is unable to serve due to
death, disability or resignation, the remaining Continuing Director shall be
entitled to elect or designate another person to fill such vacancy, and such
person shall be deemed to be a Continuing Director for purposes of this
Agreement. If no Continuing Director then remains, the other directors shall designate
two persons to fill such vacancies and such persons shall be deemed Continuing
Directors for all purposes of this Agreement. Notwithstanding anything to the
contrary contained herein, neither Parent nor Merger Sub shall take any action
to cause any Continuing Director to be removed for cause. Notwithstanding
anything in this Agreement to the contrary, the affirmative vote of a majority
of the Continuing Directors shall (in addition to the approval rights of the
Board of Directors or the stockholders of the Company as may be required
by the Restated Certificate of Incorporation of the Company (as amended, the “Company
Articles”), the bylaws of the Company (as amended, the “Company Bylaws,”
and together with the Company Articles, the “Company Governing Documents”)
or applicable Law) be required (i) for the Company to amend or terminate
this Agreement, (ii) to exercise or waive any of the Company’s rights,
benefits or remedies hereunder, (iii) to amend the Company Governing
Documents or (iv) to take any other action of the Company’s Board of
Directors under or in connection with this Agreement. The Continuing Directors
shall have the authority to retain such counsel and other advisors at the
expense of the Company as determined appropriate by the Continuing Directors
and shall have the authority to institute any action on behalf of the Company
to enforce the performance of this Agreement.


 


SECTION 1.04                    The Merger.
Upon the terms and subject to the conditions set forth in this Agreement and in
accordance with the DGCL, Merger Sub shall be merged with and into the Company
at the Effective Time. Following the Effective Time, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation in the Merger (the “Surviving Corporation”) and
shall succeed to and assume all the rights and obligations of Merger Sub in
accordance with the DGCL.


 


SECTION 1.05                    Closing.
The closing of the Merger (the “Closing”) will take place at 10:00 a.m.
on a date to be specified by the parties (the “Closing Date”), which
shall be no later than the second Business Day after satisfaction or waiver of
the conditions set forth in Article VII (other than those conditions that
by their terms are to be satisfied at the Closing, but subject to the
satisfaction or waiver of those conditions), at the offices of Shearman &
Sterling LLP, 599 Lexington Avenue, New York, New York, unless another date or
place is agreed to in writing by the parties hereto.


 


5

















 


SECTION 1.06                    Effective
Time. Subject to the provisions of this Agreement, as soon as practicable
on the Closing Date, the parties shall file a certificate of merger (the “Certificate
of Merger”) executed in accordance with the relevant provisions of the DGCL
and shall make all other filings or recordings required under the DGCL. The
Merger shall become effective at such time as the Certificate of Merger is duly
filed with the Secretary of State of the State of Delaware, or at such other
time as Parent and the Company shall agree and shall specify in the Certificate
of Merger (the time the Merger becomes effective being the “Effective Time”).


 


SECTION 1.07                    Effects of
the Merger. The Merger shall have the effects set forth in Section 2.01
below and in the DGCL (including in Section 259 of the DGCL).


 


SECTION 1.08                    Certificate
of Incorporation and Bylaws.


 


(a)                                  The
Company Articles shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable Law; provided, however, that, at the Effective Time,
the Certificate of Incorporation of the Surviving Corporation shall be amended
in its entirety to be identical to the Certificate of Incorporation of Merger
Sub in effect immediately prior to the Effective Time, except that Article I
thereof shall read as follows:  “The name
of the corporation is Engelhard Corporation.”


 


(b)                                 The
Bylaws of the Merger Sub, as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable Law.


 


SECTION 1.09                    Directors.
The directors of Merger Sub immediately prior to the Effective Time shall be
the directors of the Surviving Corporation, each of such directors to hold
office, subject to the applicable provisions of the Certificate of
Incorporation and Bylaws of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.


 


SECTION 1.10                    Officers.
The officers of the Company immediately prior to the Effective Time shall be
the officers of the Surviving Corporation, such officers to hold office,
subject to the applicable provisions of the Certificate of Incorporation and
Bylaws of the Surviving Corporation, until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be.


 


ARTICLE II



Effect of the Merger on the Capital Stock of the

Constituent Corporations


 


SECTION 2.01                    Effect on
Capital Stock. As of the Effective Time, by virtue of the Merger and
without any action on the part of the holder of any shares of Company
Common Stock or any shares of capital stock of Merger Sub:


 


(a)                                  Common Stock of
Merger Sub. Each issued and outstanding share of common stock of Merger Sub
shall be converted into and become one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of the Surviving



 


6

















 


Corporation with the same rights, powers and privileges as the shares
so converted and shall constitute the only outstanding shares of capital stock
of the Surviving Corporation.


 


(b)                                 Cancellation of
Stock. Each share of Company Common Stock held by the Company as treasury
stock (other than shares, if any, in any Employee Benefit Plans) or owned by
Parent or any of its Subsidiaries immediately prior to the Effective Time shall
automatically be canceled and retired and shall cease to exist and no payment
shall be made with respect thereto.


 


(c)                                  Company Common
Stock; Determination of Merger Consideration. Each share of Company Common
Stock outstanding as of the Effective Time (other than the Dissent Shares and
shares cancelled pursuant to Section 2.01(b) and excluding shares of
Company Common Stock owned by Parent, Merger Sub or any other wholly owned
direct or indirect Subsidiary of Parent), by virtue of the Merger, shall be
converted into a right to receive the Offer Price in cash, without interest,
less the per share amount of any dividend that has, after the date hereof and
prior to the Effective Time, been paid to, or become payable to, holders of
Company Common Stock by the Company (the “Per Share Merger Consideration,”
the aggregate amount in cash into which all shares of Company Common Stock may be
converted pursuant to this Section 2.01, the “Aggregate Merger
Consideration”).


 


(d)                                 Dissenters’ Rights.
Notwithstanding anything in this Agreement to the contrary, shares of Company
Common Stock that are outstanding immediately prior to the Effective Time, that
are not held by Parent, Merger Sub or any other wholly owned direct or indirect
Subsidiary of Parent, and that are held by any Person who is entitled to
dissent from the Merger pursuant to Section 262 of the DGCL (the “Dissenters’
Rights Statute”), who did not vote in favor of the Merger or consent
thereto in writing and who complies in all other respects with the Dissenters’
Rights Statute (such shares, “Dissent Shares”) shall not be converted
into a right to receive the Per Share Merger Consideration as provided in Section 2.01(c),
but rather the holders of Dissent Shares shall be entitled to the right to
receive payment of the fair value of such Dissent Shares in accordance with the
Dissenters’ Rights Statute; provided, however, that if any such
holder shall fail to perfect or otherwise shall waive, withdraw or lose the
right to receive payment of the fair value under the Dissenters’ Rights
Statute, then the right of such holder to be paid the fair value of such holder’s
Dissent Shares shall cease and such Dissent Shares shall be deemed to have been
converted as of the Effective Time into, and to have become exchangeable solely
for, the right to receive the Per Share Merger Consideration, without interest,
as provided in Section 2.01(c). The Company shall give prompt notice to
Parent of any written demands and any other instruments served pursuant to the
Dissenters’ Rights Statute received by the Company relating to rights of
appraisal under the Dissenters’ Rights Statute, and Parent shall have the right
to direct all negotiations and proceedings with respect to such demands. Except
with the prior written consent of Parent, the Company shall not make any
payment with respect to, or offer to settle or settle, any such demands. Each
holder of Dissent Shares who becomes entitled to payment for such shares
pursuant to the Dissenters’ Rights Statute shall receive payment therefor from
the Surviving Corporation in accordance with the Dissenters’ Rights Statute.


 


7

















 


SECTION 2.02                    Payment to
Company Stockholders.


 


(a)                                  Prior
to the Effective Time, Merger Sub shall designate a bank or trust company to
act as agent (the “Exchange Agent”) for the purpose of exchanging for
the Merger Consideration (i) certificates representing Company Common
Stock (the “Certificates”) or (ii) uncertificated Company Common
Stock (the “Uncertificated Shares”). At the Effective Time, Parent shall
deposit with the Exchange Agent an amount in immediately available funds equal
to the Aggregate Merger Consideration to be paid in respect of all of the
Certificates and the Uncertificated Shares. Promptly after the Effective Time,
Parent shall send, or shall cause the Exchange Agent to send, to each holder of
Company Common Stock at the Effective Time a letter of transmittal and
instructions (which shall specify that the delivery shall be effected, and risk
of loss and title shall pass, only upon proper delivery of the Certificates or
transfer of the Uncertificated Shares to the Exchange Agent) for use in such
exchange.


 


(b)                                 Each
holder of shares of Company Common Stock that have been converted into the
right to receive the Merger Consideration shall be entitled to receive, upon (i) surrender
to the Exchange Agent of a Certificate, together with a properly completed
letter of transmittal or (ii) receipt of an “agent’s message” by the
Exchange Agent (or such other evidence, if any, of transfer as the Exchange
Agent may reasonably request) in the case of a book-entry transfer of
Uncertificated Shares, the Merger Consideration, without interest, payable for
each Company Common Share represented by a Certificate or for each
Uncertificated Share. Until so surrendered or transferred, as the case may be,
each such Certificate or Uncertificated Share shall represent after the
Effective Time for all purposes only the right to receive such Merger Consideration.


 


(c)                                  If
any portion of the applicable Merger Consideration is to be paid to a Person
other than the Person in whose name the surrendered Certificate or the
transferred Uncertificated Share is registered, it shall be a condition to such
payment that (i) either such Certificate shall be properly endorsed or
shall otherwise be in proper form for transfer or such Uncertificated
Share shall be properly transferred and (ii) the Person requesting such
payment shall pay to the Exchange Agent any transfer or other Taxes required as
a result of such payment to a Person other than the registered holder of such
Certificate or Uncertificated Share or establish to the satisfaction of the
Exchange Agent that such Tax has been paid or is not payable.


 


(d)                                 After
the Effective Time, there shall be no further registration of transfers of
shares of Company Common Stock. If, after the Effective Time, Certificates or
Uncertificated Shares are presented to the Surviving Corporation, they shall be
canceled and exchanged for the Merger Consideration provided for, and in
accordance with the procedures set forth, in this Article II.


 


(e)                                  Any
portion of the Merger Consideration deposited with the Exchange Agent pursuant
to Section 2.02(a) (and any interest or other income earned thereon)
that remains unclaimed by the holders of Company Common Stock one year after
the Effective Time shall be returned to Parent, upon demand, and any such
holder who has not exchanged such Company Common Stock for the Merger
Consideration in accordance with this Section 2.02 prior to that time
shall thereafter look only to Parent and the Surviving Corporation for payment
of the Merger Consideration in respect of such Company Common Stock without any
interest thereon. 


 


8

















 


Notwithstanding the foregoing, Parent, the
Surviving Corporation and the Exchange Agent shall not be liable to any holder
of Company Common Stock for any amount paid to a public official pursuant to
applicable abandoned property, escheat or similar Laws.


 


(f)                                    Any
portion of the Merger Consideration deposited with the Exchange Agent pursuant
to Section 2.02(a) to pay for Company Common Stock, for which
dissenters’ rights have been perfected and have not been withdrawn or lost 30
days after the Effective Time, shall be returned to Parent, upon demand.


 


(g)                                 Notwithstanding
anything to the contrary contained herein, the Exchange Agent, Parent or the
Company shall be entitled to deduct and withhold from the consideration
otherwise payable (i) to any holder of shares of Company Common Stock
pursuant to this Agreement, (ii) to any Person designated to receive
Merger Consideration pursuant to Section 2.02(c) or (iii) to any
Person pursuant to Section 2.03 hereof such amounts as may be
required to be deducted and withheld with respect to the making of such payment
under the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder, or under any provision of state, local or
foreign tax Law; provided, that no amount shall be withheld or deducted
under any provisions of foreign tax Law, except to the extent that a person is
subject to such withholding or deduction as a result of a connection between
such person and the foreign jurisdiction that imposes such withholding or
deduction (other than a connection arising solely from the receipt of consideration
pursuant to this Agreement). To the extent that amounts are so withheld and
paid over to the appropriate taxing authority by the Exchange Agent, Parent or
the Company, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of Company Common Stock in respect
of which such deduction and withholding was made.


 


SECTION 2.03                    Treatment
of Options, Restricted Stock and other Equity Awards.


 


(a)                                  Upon
the consummation of the Offer, each employee and director stock option to
purchase Company Common Stock outstanding under any stock option or
compensation plan or arrangement of the Company shall, with no action on the part of
the Company or holder thereof, become fully vested. At or immediately prior to
the Effective Time, the Company will cause any necessary action to be taken to
cause each such stock option to be canceled and the Company shall pay each
holder of any such option, at the Effective Time, for each such option
surrendered an amount in cash determined by multiplying (i) the excess, if
any, of the Merger Consideration over the applicable exercise price of such
option by (ii) the number of shares of Company Common Stock such holder
could have purchased (assuming full vesting of all options) had such holder
exercised such option in full immediately prior to the Effective Time.


 


(b)                                 Upon
the consummation of the Offer, each share of Company Common Stock subject to
restrictions on transfer and/or forfeiture outstanding under any stock or
compensation plan or arrangement of the Company shall, with no action on the part of
the Company or holder thereof, become fully vested. In addition, upon
consummation of the Offer, the Company will cause any necessary action to be
taken to cause each restricted stock unit and each other deferred right to
receive in the future shares or cash measured in reference to shares of 


 


9

















 


Company Common Stock granted pursuant to the
Company’s deferred compensation plans to vest and the maximum amount of shares
of Company Common Stock deliverable thereunder will be delivered as provided in
the applicable plan pertaining thereto.


 


(c)                                  Prior
to the Effective Time, the Company shall take all necessary action (i) such
that the disposition by each member of the Board of Directors and each employee
of the Company that is subject to Section 16 of the Exchange Act of
Company Common Stock, options to purchase Company Common Stock, restricted
stock units and other deferred rights to receive shares or cash measured in
reference to shares of Company Common Stock, in each case, pursuant to the
transactions contemplated by this Agreement, shall be exempt from Section 16(b) of
the Exchange Act pursuant to Rule 16b-3 thereunder and (ii) in order
to give effect to the transactions contemplated by Sections 2.03(a) and
2.03(b).


 


SECTION 2.04                    Adjustments.


 


If, during the
period between the date hereof and the Effective Time, any change in the
outstanding Company Common Stock shall occur, including by reason of any
reclassification, recapitalization, stock split or combination or exchange of
Company Common Stock, or stock dividend thereon with a record date during such
period or issuer tender or exchange offer or similar transaction (excluding any
such change as a result of any exercise of options outstanding as of the date
hereof to purchase Company Common Stock granted under the Company’s stock
option or compensation plans or arrangements), the Merger Consideration and any
other amounts payable pursuant to this Agreement shall be appropriately adjusted.


 


SECTION 2.05                    Lost
Certificates. If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and, if required by the Surviving
Corporation, the posting by such Person of a bond, in such reasonable amount as
the Surviving Corporation may direct, as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent shall pay,
in exchange for such lost, stolen or destroyed Certificate, the Merger
Consideration to be paid in respect of the Company Common Stock represented by
such Certificate, as contemplated by this Article II.


 


ARTICLE III



Representations and Warranties of the Company


 


Except as set
forth in the disclosure schedule of the Company attached to this Agreement
(the “Company Disclosure Schedule”) and except as the Company has
disclosed in public filings made prior to the date hereof with the SEC, the
Company represents and warrants to Parent and Merger Sub that:


 


SECTION 3.01                    Organization,
Standing and Corporate Power.


 


(a)                                  The
Company is duly organized, validly existing and in good standing under the Laws
of the jurisdiction in which it is incorporated or organized and has all
requisite corporate or other power and authority to own, operate and lease its
properties and to carry on its business as now being conducted.


 


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(b)                                 Each
of the Company and its Significant Subsidiaries is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the nature
of its business or the ownership, leasing or operation of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed, individually or in the aggregate,
would not reasonably be expected to have a Company Material Adverse Effect.


 


(c)                                  The
Company has made available to Parent complete and correct copies of the Company
Articles and Company Bylaws, each as amended to the date hereof. There have
been no amendments to the Certificate of Incorporation and Bylaws or other
similar documents of each Significant Subsidiary of the Company that had previously
been made available to Parent since such time as they were made available to
Parent.


 


SECTION 3.02                    Significant
Subsidiaries. Each “significant subsidiary” of the Company (as defined in Rule 1-02
of Regulation S-X of the SEC) (such Subsidiaries of the Company, the “Significant
Subsidiaries”) is duly organized, validly existing and in good standing
under the Laws of the jurisdiction in which it is incorporated or organized and
has all requisite corporate or other power and authority to own, operate and
lease its properties and to carry on its business as now being conducted,
except where the failure to have such power and authority or good standing
would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect. All the outstanding shares of capital stock
of, or other equity interests in, each Significant Subsidiary have been duly
authorized, validly issued and are fully paid and nonassessable and are owned
directly or indirectly by the Company free and clear of all pledges, claims,
liens, charges, encumbrances or security interests (collectively, “Liens”),
and free of any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other equity interests, other than, in each case, as would
not reasonably be expected to have a Company Material Adverse Effect. There are
no stock appreciation rights, stock options, “phantom” stock, profit
participation or similar rights outstanding with respect to the capital stock
of any direct or indirect Significant Subsidiary of the Company.


 


SECTION 3.03                    Capital
Structure. The authorized capital stock of the Company consists of
350,000,000 shares of Company Common Stock and 5,000,000 shares of preferred
stock, without par value (the “Company Preferred Stock”). As of May 25,
2006, (a) 124,080,451 shares of Company Common Stock (including the
associated Series A Junior Participating Preferred Stock Purchase Rights)
were issued and outstanding, (b) 23,212,490 shares of Company Common Stock
were held by the Company in its treasury, (c) 7,430,419 shares of Company
Common Stock were subject to outstanding options to acquire shares of Company
Common Stock granted pursuant to the Company’s 2002 Long-Term Incentive Plan,
the Stock Option Plan of 1999 for Certain Key Employees, the Company’s Stock
Option Plan of 1991 and the Directors Stock Option Plan, (d) restricted
stock units to acquire 21,470 shares of Company Common Stock were issued and
outstanding granted pursuant to the Company’s 2002 Long Term Incentive Plan, (e) 154,657
shares of Company Common Stock had been awarded under, and remain subject to,
the Company’s deferred compensation plans for directors and (f) no shares
of Company Preferred Stock were issued and outstanding. All outstanding shares
of capital stock of the Company are duly authorized, validly issued, fully paid
and nonassessable and not subject to or issued in violation of any preemptive
rights. There are not issued, reserved for issuance or outstanding (A) any
securities of the Company or any of its Significant


 


11

















 


Subsidiaries
convertible into or exchangeable or exercisable for shares of capital stock or
voting securities of the Company or any of its Significant Subsidiaries or (B) any
warrants, calls, options, subscriptions or other rights, agreements or
commitments to acquire from the Company or any of its Significant Subsidiaries,
or any obligation of the Company or any of its Significant Subsidiaries to
issue, any capital stock, voting securities or securities convertible into or
exchangeable or exercisable for capital stock or voting securities of the
Company or any of its Significant Subsidiaries (each, a “Company Option”).
Neither the Company nor any of its Significant Subsidiaries (i) has any
obligation to repurchase, redeem or otherwise acquire the securities described
in the preceding sentence or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities or (ii) is a party to any voting
agreement or proxy with respect to the voting of any such securities.


 


SECTION 3.04                    Authority;
Noncontravention.


 


(a)                                  The
Company has all requisite corporate power and authority to execute and deliver
this Agreement, perform its obligations hereunder and consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement by
the Company and the consummation by the Company of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action, other than the Stockholder Approval, on the part of the
Company, and no other corporate proceedings, other than the Stockholder
Approval, on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by each of the other parties hereto,
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms (subject to applicable
bankruptcy, solvency, fraudulent transfer, reorganization, moratorium and other
Laws affecting creditors’ rights generally from time to time in effect). The
Board of Directors of the Company, at a meeting duly called and held, duly
adopted resolutions (i) approving and declaring advisable this Agreement,
the Offer, the Merger and the other transactions contemplated by this
Agreement, (ii) resolving that the adoption of this Agreement be submitted
to the stockholders of the Company, but subject to Section 5.02 hereof and
(iii) recommending that the stockholders of the Company accept the Offer,
tender their shares of Company Common Stock to Merger Sub pursuant to the Offer
and adopt this Agreement (the “Company Board Recommendation”). The
affirmative vote (or written consent in lieu thereof) of the holders of a
majority of the outstanding Company Common Stock (the “Stockholder Approval”)
is the only vote of the holders of any of the Company’s capital stock necessary
in connection with the consummation of the Merger.


 


(b)                                 The
execution and delivery of this Agreement do not, and the consummation of the
Merger and the other transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, conflict with, require the
consent, waiver, approval or authorization from any party to, or result in any
violation or breach of, or default (with or without notice or lapse of time or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a benefit under, (i) the
Company Governing Documents, (ii) any note, bond, mortgage, indenture,
lease, license, permit, franchise, contract, agreement or other instrument to
which the Company or any Significant Subsidiary is a party or by which any of
them or their respective properties or assets is bound or


 


12

















 


affected or (iii) subject to the
Stockholder Approval and the governmental filings and other matters referred to
in Section 3.05 hereof, any Law applicable to the Company or any of its
Subsidiaries or their respective properties or other assets, other than, in the
case of clause (ii), any such conflicts, consents, waivers, approvals, authorizations,
violations, breaches, defaults, rights or losses that, individually or in the
aggregate, would not reasonably be expected to have a Company Material Adverse
Effect.


 


(c)                                  The
Board of Directors of the Company has taken all action necessary to render Article 7
of the Company Articles inapplicable to the Offer, the Merger, this Agreement
and the transactions contemplated hereby. The Company has made available to
Parent a complete and correct copy of the Company Rights Agreement, including
all current and proposed amendments and exhibits thereto. The Company has duly
executed an amendment to the Company Rights Agreement, as described herein, and
the Board of Directors of the Company has duly adopted a resolution to
irrevocably amend the Company Rights Agreement to provide that: (i) a
Distribution Date (as defined in the Company Rights Agreement) shall not occur,
the Rights (as defined in the Company Rights Agreement) shall not separate (to
the extent the Company Rights Agreement otherwise provides for such separation)
or become exercisable and neither Parent nor Merger Sub shall become an
Acquiring Person (as defined in the Company Rights Agreement) as a result of
the execution or delivery of this Agreement by Parent or Merger Sub, the public
announcement of such execution and delivery or, provided that this Agreement
shall not have been terminated in accordance with Section 8.01 hereof and
subject to the terms of this Agreement, the public announcement or the
commencement of the Offer or the consummation of the Offer and (ii) the
Rights shall cease to be exercisable and the Company Rights Agreement shall
terminate after the consummation of the Offer in accordance with the terms
thereof and the terms and conditions hereof, including the acceptance for payment
of, and the payment for all shares of Company Common Stock tendered pursuant to
the Offer.


 


SECTION 3.05                    Governmental
Approvals and Consents. No consent, waiver, approval, order, license or
permit of, or authorization of, action by or in respect of, or registration,
declaration or filing with or notification to, any Federal, state, local or
foreign government, any court, administrative, regulatory or other governmental
agency, commission or authority or any non-governmental self-regulatory agency,
commission or authority, whether Federal, state, local or foreign (each, a “Governmental
Authority”) is required with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the Merger or the other
transactions contemplated by this Agreement, except for (a) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware,
(b) any consent, waiver, approval, order, license, permit, authorization,
action, registration, declaration, filing or notification, the failure of which
to obtain, individually or in the aggregate, would not reasonably be expected
to have a Company Material Adverse Effect and (c) any filings made or approvals
received prior to the date hereof.


 


SECTION 3.06                    Company
Documents.


 


(a)                                  Since
January 1, 2004, the Company has filed all reports, schedules, forms,
statements and other documents (including exhibits and other information
incorporated therein) required to be filed by it with the SEC or the New York
Stock Exchange (the “NYSE”) 


 


13

















 


(such documents, as they have been amended
since the respective time of their filing, the “Company Documents”). As
of their respective dates, the Company Documents complied in all material
respects with the requirements of the Securities Act of 1933, as amended, the
Exchange Act or the Laws of any such jurisdiction, as the case may be, and
the rules and regulations promulgated thereunder applicable to such
Company Documents, and, as of their respective dates, or, if amended, the date
of such amendment, none of the Company Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that,
if the Company amends any of the Company Documents, the fact of the filing of
such amendment shall not, in and of itself, be deemed to mean or imply that any
representation or warranty in this Agreement was not true when made or became
untrue thereafter. No Subsidiary is required to file any form, report or other
document with the SEC.


 


(b)                                 The
financial statements of the Company included in the Company Documents were
prepared in accordance with generally accepted accounting principles in the
United States (“GAAP”), as then in effect, applied on a consistent basis
during the periods involved (except as may be indicated therein or in the
notes thereto or in the case of unaudited statements, as permitted by Form 10-Q)
and fairly presented in all material respects the financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments and any other adjustments described therein).


 


(c)                                  The
Company has timely filed all certifications and statements required by (i) Rule 13a-14
or Rule 15d-14 under the Exchange Act or (ii) 18 U.S.C. Section 1350
(Section 906 of the Sarbanes-Oxley Act of 2002) with respect to any
applicable Company Document.


 


SECTION 3.07                    Absence of
Certain Changes or Events. Except for actions undertaken in connection with
this Agreement and the transactions contemplated hereby, since May 1, 2006
(a) there have not been any events, circumstances or other occurrences
that, individually or in the aggregate, have had a Company Material Adverse
Effect and (b) none of the Company or any Subsidiary has taken any action
that, if taken after the date hereof, would constitute a breach of any of the
covenants set forth in Section 5.01 hereof (not including Section 5.01(c),
sales with respect to Section 5.01(e)(i)(A) in an aggregate amount of
less than $1,000,000, Section 5.01(e)(ii), Section 5.01(f) and Section 5.01(g)).


 


SECTION 3.08                    Employee
Benefits.


 


(a)                                  Section 3.08(a) of
the Company Disclosure Schedule sets forth each Employee Benefit Plan
under which as a result of the consummation of the transactions contemplated by
this Agreement, either alone or in combination with another event, (i) any
employee of the Company or its Subsidiaries may become entitled to
severance pay or any other payment, except as expressly provided in this
Agreement or (ii) any compensation due any such employee from the Company
or its Subsidiaries may be increased or the time of payment or vesting may become
accelerated.


 


14

















 


(b)                                 Except
in the ordinary course of business consistent with past practice, since December 1,
2005, none of the Company or any Subsidiary has (i) granted to any
director or executive officer of the Company (A) any increase in
compensation, bonus or other benefits or (B) any increase in severance or
termination pay, in each case except as required by any employment, severance
or termination agreement in effect as of the date hereof, (ii) amended any
provision of any Employee Benefit Plan or (iii) adopted or entered into
any arrangement that would be an Employee Benefit Plan, except (A) to the
extent required under the terms of any agreements, trusts, plans, funds or
other arrangements existing as of the date hereof that are required or (B) to
the extent required to comply with applicable Law.


 


SECTION 3.09                    Brokers and
Other Advisors. No broker, investment banker, financial advisor or other
person, other than Merrill Lynch & Co. and J.P. Morgan Securities
Inc., the fees and expenses of which will be paid by the Company, is entitled
to any broker’s, finder’s, financial advisor’s or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. The Company has
heretofore furnished to Parent a complete and correct copy of all agreements
between the Company and Merrill Lynch & Co. and J.P. Morgan Securities
Inc. pursuant to which such firms would be entitled to any payment relating to
the transactions contemplated by this Agreement.


 


SECTION 3.10                    Fairness Opinions. Merrill
Lynch & Co. and J.P. Morgan Securities Inc. have each delivered to the
Board of Directors of the Company an opinion, which will be confirmed promptly
in writing, to the effect that, as of the date hereof, on the basis of and
subject to the assumptions set forth therein, the consideration to be received
by the holders of Company Common Stock (other than Parent, Merger Sub and their
respective Affiliates) pursuant to each of the Offer and the Merger is fair to such
holders of Company Common Stock from a financial point of view.


 


SECTION 3.11                    Information
in the Offer Documents and the Schedule 14D-9. The information
supplied by the Company expressly for inclusion in the Offer Documents will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading. The Schedule 14D-9 will comply as to form in all material
respects with the provisions of Rule 14d-9 of the Exchange Act and any
other applicable Federal securities Laws and will not when filed with the SEC
or distributed or disseminated to the Company’s stockholders contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading,
except that the Company makes no representation or warranty with respect to
statements made in Schedule 14D-9 based on the information furnished by or
on behalf of Parent or Merger Sub for inclusion therein; and provided
that, if the Company amends the Schedule 14D-9, the fact of the filing of
such amendment shall not, in and of itself, be deemed to mean or imply that any
representation or warranty in this Agreement was not true when made or became
untrue thereafter.


 


SECTION 3.12                    Sole
Representations and Warranties.


 


(a)                                  Except
for the representations and warranties contained in this Article III, none
of the Company, or its Affiliates or their respective officers, directors,
employees, agents,


 


15

















 


advisors or representatives, or any other
Person makes any express or implied, whether oral or written, representation or
warranty on behalf of the Company, and the Company hereby disclaims any such
representation or warranty whether by the Company, or its Affiliates, or their
respective officers, directors, employees, agents, advisors or representatives
or by any other Person.


 


(b)                                 In
particular, without limiting the foregoing disclaimer, none of the following
shall be deemed to constitute a representation or warranty of any Person
referred to in paragraph (a) of this Section 3.12:  (i) any information set forth in any
documents distributed to any Person in connection with the proposed sale of the
Company; (ii) any financial projection or forecast relating to the
Company; or (iii) any oral or written information presented to Parent,
Merger Sub, their Affiliates or advisors during any management presentation,
including any question and answer session thereto or due diligence process.
With respect to any projection or forecast delivered by or on behalf of the
Company to Parent, Merger Sub, their Affiliates or advisors, Parent and Merger
Sub acknowledge that (A) there are uncertainties inherent in attempting to
make such projections and forecasts, (B) each is familiar with such
uncertainties, (C) each is taking full responsibility for making its own
evaluation of the adequacy and accuracy of all such projections and forecasts
so furnished to it and (D) each shall have no claim against any Person with
respect thereto other than a claim for fraud.


 


ARTICLE IV



Representations and Warranties of Parent and Merger Sub


 


Parent and
Merger Sub represent and warrant to the Company:


 


SECTION 4.01                    Organization,
Standing and Corporate Power. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the
Laws of the jurisdiction in which it is incorporated and has all requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as now being conducted.


 


SECTION 4.02                    Authority;
Noncontravention.


 


(a)                                  Each
of Parent and Merger Sub has all requisite corporate power and authority to
execute and deliver this Agreement, perform its obligations hereunder and,
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Parent and Merger Sub and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Parent and Merger Sub
and, assuming the due authorization, execution and delivery by the other party
hereto, constitutes a legal, valid and binding obligation of Parent and Merger
Sub enforceable against Parent and Merger Sub in accordance with its terms
(subject to applicable bankruptcy, solvency, fraudulent transfer,
reorganization, moratorium and other Laws affecting creditors’ rights generally
from time to time in effect).


 


16

















 


(b)                                 The
execution and delivery of this Agreement do not, and the consummation of the
Merger and the other transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, conflict with, require the
consent, waiver, approval or authorization from any party to, or result in any
violation or breach of, or default (with or without notice or lapse of time or
both) under (i) the organizational documents of Parent and Merger Sub, (ii) any
contract to which Parent or Merger Sub is a party or any of their respective
properties or other assets is subject or (iii) subject to the governmental
filings and other matters referred to in Section 4.03, any Law applicable
to Parent or Merger Sub or their respective properties or other assets other
than, in the case of clause (ii) or (iii), any such violations, breaches
or defaults which would not, individually or in the aggregate, prevent or
materially delay consummation of any of the transactions contemplated by this
Agreement or otherwise prevent Parent or Merger Sub from performing its obligations
under this Agreement.


 


SECTION 4.03                    Governmental
Approvals. No consent, approval, order or authorization of, action by or in
respect of, or registration, declaration or filing with, any Governmental
Authority is required by or with respect to Parent or Merger Sub in connection
with the execution and delivery of this Agreement by Parent and Merger Sub or
the consummation by Parent and Merger Sub of the Merger or the other
transactions contemplated by this Agreement, except for (a) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
and (b) any consent, approval, order, authorization, action, regulation,
declaration or filing that has been obtained prior to the date hereof or that,
individually or in the aggregate, would prevent or materially delay
consummation of any transaction contemplated by this Agreement or otherwise
prevent Parent or Merger Sub from performing its obligations under this
Agreement.


 


SECTION 4.04                    Brokers and
Other Advisors. No broker, investment banker, financial advisor or other
person, other than Lehman Brothers, Inc., the fees and expenses of which
will be paid by Parent, is entitled to any broker’s, finder’s, financial
advisor’s or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent.


 


SECTION 4.05                    Financial
Capacity. Parent has, and as of the Acceptance Date and as of the Effective
Time, will have sufficient funds to consummate the transactions contemplated by
this Agreement.


 


SECTION 4.06                    Information
in the Offer Documents. The Offer Documents (and any amendment thereof or
supplement thereto) will not, when filed with the SEC or at the time of
distribution or dissemination thereof to the stockholders of the Company,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading,
except that no representation or warranty is made by Parent or Merger Sub with
respect to statements made therein based on information supplied by the Company
for inclusion in the Offer Documents. The Offer Documents will comply as to form in
all material respects with applicable Federal securities Laws and the rules and
regulations thereunder.


 


17

















 


ARTICLE V



Covenants Relating to Conduct of Business


 


SECTION 5.01                    Conduct of
Business. During
the period from the date hereof to the Acceptance Date, the Company shall, and
shall cause each of its Subsidiaries to, carry on its business in the ordinary
course consistent with past practice. The Company shall, and shall cause each
of its Subsidiaries to, use their respective reasonable best efforts to
preserve intact the business organization of the Company and its Subsidiaries,
to keep available the services of their respective present officers and key
employees and to preserve the goodwill of those having business relationships
with the Company and its Subsidiaries. Without limiting the generality of the
foregoing, during the period from the date hereof to the Acceptance Date,
except as provided in Section 5.01 of the Company Disclosure Schedule or
as contemplated by this Agreement or as required by Law, the Company shall not,
and shall not permit any of its Subsidiaries to, without Parent’s prior written
consent:


 


(a)                                  (i) declare,
set aside or pay any dividends on, or make any other distributions (whether in
cash, stock or property) in respect of, any of its capital stock, other than (A) dividends
or distributions by a direct or indirect wholly owned Subsidiary of the Company
to its parent in the ordinary course of business consistent with past practice
and (B) the Company’s quarterly dividend to be paid on June 30, 2006
to its stockholders of record as of June 15, 2006 in the amount of $0.12
per share of Company Common Stock or (ii) split, combine or reclassify any
of its capital stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital stock;


 


(b)                                 issue,
deliver, sell, grant, pledge or otherwise encumber any shares of its capital
stock, any other voting securities or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting securities or
convertible securities, or any “phantom” stock, “phantom” stock rights, stock
appreciation rights or stock based performance units other than shares issued
pursuant to option exercise or settlement of stock-based awards, in each case
outstanding as of the date hereof (including issuances of shares pursuant to
employee stock ownership programs to the extent such shares are issued from
treasury shares);


 


(c)                                  amend
the Company Governing Documents or the comparable charter or organizational
documents of any of its Subsidiaries;


 


(d)                                 acquire
in any manner any assets of any Third Party, except for (i) acquisitions
of properties, inventory or other assets in the ordinary course of business
consistent with past practice and (ii) pursuant to contracts existing as
of the date hereof and described in Section 5.01 of the Company Disclosure
Schedule;


 


(e)                                  (i) sell,
transfer, pledge, guarantee, lease, license, mortgage, sell and leaseback or
otherwise subject to any Lien or otherwise dispose of any of its properties or
other assets to a Third Party, except for (A) sales of properties,
inventory or other assets in the ordinary course of business consistent with
past practice and (B) pursuant to contracts existing as of the date hereof
and described in Section 5.01 of the Company Disclosure Schedule; (ii) incur,
assume or modify any indebtedness for money borrowed or guarantee thereof,
including


 


18

















 


capitalized lease obligations, except for
drawdowns or borrowings under the credit facilities of the Company in effect on
the date hereof in the ordinary course of business consistent with past
practice and in an amount not to exceed (A) $30,000,000 in the aggregate
in connection with the operations of the Company, other than operations of the
materials services business and other than to pay the estimated expenses described
by the Company to Parent prior to the date hereof and (B) $75,000,000 in
the aggregate in connection with the operations of the materials services
business; or (iii) redeem, purchase or otherwise acquire directly or
indirectly, by repurchase or otherwise any shares of the capital stock of the
Company or any Subsidiary except (A) for shares acquired by the Company
from the holder of a stock option or other stock-based award in satisfaction of
the exercise price of a stock option or Taxes or withholding obligations in
case of a stock-based award in each case outstanding as of the date hereof, (B) for
shares acquired in the open market for the benefit of any employee stock plan
in the ordinary course of business consistent with past practice or (C) as
contemplated by this Agreement;


 


(f)                                    grant
to any director or officer of the Company or any of its Subsidiaries (i) any
increase in compensation, bonus or other benefits or (ii) any increase in
severance or termination pay, in each case except as required by any
employment, severance or termination agreement in effect as of the date hereof;


 


(g)                                 (i) amend
any provision of any Employee Benefit Plan or (ii) adopt or enter into any
arrangement that would be an Employee Benefit Plan, except (A) to the
extent required under the terms of any agreements, trusts, plans, funds or other
arrangements existing as of the date hereof or (B) to the extent required
to comply with applicable Law;


 


(h)                                 change
any of the Company’s accounting methods or principles, except as required by
GAAP or applicable Law;


 


(i)                                     commence
or settle (i) any suit, action or proceeding relating to the transactions
contemplated by this Agreement or (ii) any other suit, action or
proceeding involving payments by or to the Company or any of its Subsidiaries
in excess of $2,000,000; or


 


(j)                                     authorize
any of, or commit, propose or agree to take any of, the foregoing actions.


 


SECTION 5.02                    Action by
Written Consent.


 


(a)                                  The
Company shall use its best efforts to prepare an information statement relating
to the Merger and this Agreement and obtain and furnish the information
required to be included by the Exchange Act, including Regulation 14C thereof
(such information statement, the “Information Statement”) and respond
promptly to any comments made by the SEC with respect to the Information
Statement and cause the Information Statement to be mailed to its stockholders.


 


(b)                                 As
soon as practicable following the purchase of and payment for a majority of the
outstanding shares of Company Common Stock on a Fully Diluted Basis by Merger
Sub in connection with the Offer, Merger Sub shall deliver its consent,
representing a majority of the outstanding shares of Company Common Stock on a
Fully Diluted Basis, to approve the Merger by written consent in lieu of a
meeting in accordance with Section 288 of the DGCL.


 


19

















 


(c)                                  Notwithstanding
Section 5.02(a), but subject to Article VII hereof, in the event that
Parent, Merger Sub or any other Subsidiary of Parent shall acquire at least 90%
of the outstanding Company Common Stock following the completion of the Offer,
the parties hereto agree to take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after the acceptance for
payment of and payment for Company Common Stock by Merger Sub pursuant to the
Offer without a meeting of stockholders of the Company, in accordance with Section 253
of the DGCL.


 


ARTICLE VI



Additional Agreements


 


SECTION 6.01                    Reasonable
Best Efforts. Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties agrees to use its reasonable best efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by this
Agreement, including using reasonable best efforts to accomplish the
following:  (a) the taking of all
acts necessary to cause the conditions to Closing to be satisfied as promptly
as practicable, (b) the obtaining of all necessary actions, waivers,
consents and approvals from Governmental Authorities and the making of all
necessary registrations and filings (including filings with Governmental
Authorities, if any) and the taking of all steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Authority with respect to the transactions contemplated hereunder,
(c) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental
Authority vacated or reversed and (d) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated
by, and to fully carry out the purposes of, this Agreement.


 


SECTION 6.02                    Indemnification,
Exculpation and Insurance.


 


(a)                                  Parent
agrees that the Surviving Corporation shall, and shall cause the Surviving
Corporation to, perform all of the obligations of the Surviving
Corporation with respect to all rights of the individuals who on or prior to
the Effective Time were directors, officers or employees of the Company or any
of its Subsidiaries (collectively, the “Indemnitees”) to indemnification
and exculpation from liabilities for acts or omissions occurring at or prior to
the Effective Time as provided in the Company Governing Documents or other
agreements of the Company or in comparable organizational documents or other
agreements of any of its Subsidiaries as now in effect and such obligations
shall survive the Merger and shall continue in full force and effect in
accordance with their terms.


 


(b)                                 Each
of Parent, the Surviving Corporation and the applicable Indemnitee shall
cooperate, and cause their respective Affiliates to cooperate, in the defense
of any claim and shall provide access to properties and individuals as
reasonably requested and furnish or


 


20

















 


cause to be furnished records, information
and testimony, and attend such conferences, discovery proceedings, hearings,
trials or appeals, as may be reasonably requested in connection therewith.


 


(c)                                  As
of the Acceptance Date, the Company shall have obtained, and for a six-year
period thereafter, the Surviving Corporation shall maintain in effect, a
so-called “tail” policy for such six-year period covering acts or omissions
occurring at or prior to the Effective Time, including all acts or omissions
relating to this Agreement and the transactions contemplated herein, with
respect to those Persons who are currently covered by the Company’s directors’
and officers’ liability insurance policy on terms with respect to such coverage
and amount no less favorable to the Company’s directors and officers currently
covered by such insurance than those of such policy in effect on the date
hereof (the “Minimum Insurance); provided, however, that
in no event shall the Surviving Corporation be required to expend pursuant to
this Section 6.02(c) more than $5,000,000.


 


(d)                                 The
provisions of this Section 6.02 are intended to be for the benefit of, and
shall be enforceable by, each Indemnitee, his or her heirs and his or her
representatives.


 


(e)                                  In
the event that the Surviving Corporation or any of its successors or assigns (i) consolidates
with or merges into any other Person and is not the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers or
conveys all or substantially all of its properties and assets to any Person,
then, and in each such case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation shall assume all of the
obligations thereof set forth in this Section 6.02.


 


(f)                                    The
obligations of Parent and the Surviving Corporation under this Section 6.02
shall not be terminated or modified in such a manner as to adversely affect any
Indemnitee to whom this Section 6.02 applies without the written consent
of the affected Indemnitee (it being expressly agreed that the Indemnitees to
whom this Section 6.02 applies shall be third party beneficiaries of this Section 6.02).


 


(g)                                 Parent,
from and after the Acceptance Date, shall unconditionally guarantee the timely
payment of all funds owed by, and the timely performance of all other
obligations of, the Surviving Corporation under this Section 6.02. Parent
agrees that its payment obligations hereunder are unconditional, irrespective
of the validity or enforceability of this Agreement against the Surviving
Corporation or any other circumstance which might otherwise constitute a legal
or equitable discharge or defense of a guarantor (other than the defenses of
statute of limitations, which are not waived). Parent hereby acknowledges that
its obligations under this Section 6.02 constitute a guaranty of payment
and not merely of collectability and Parent hereby waives (i) promptness,
diligence, presentment, demand of payment, protest and order in connection with
this guarantee and (ii) any requirement that any party enforcing the
guarantee exhaust any right to take any action against the Surviving
Corporation or any other Person prior to or contemporaneously with proceeding
to exercise any right against Parent hereunder.


 


SECTION 6.03                    Fees and
Expenses. Except as otherwise provided herein, all fees and expenses
incurred in connection with this Agreement, the Merger and the other transactions
contemplated by this Agreement shall be paid by the party incurring such fees
or


 


21

















 


expenses,
whether or not the Merger is consummated. All transfer, documentary, sales,
use, real property transfer, stock transfer, stamp, registration and other
similar Taxes and fees (including any penalties and interest) incurred in
connection with the transaction contemplated by this Agreement shall be borne
equally by the Company and Parent.


 


SECTION 6.04                    Public
Announcements. Parent and the Company shall consult with each other before
issuing, and give each other the opportunity to review and comment upon, any
press release or other public statements with respect to the transactions
contemplated by this Agreement, including the Merger, and shall not issue any
such press release or make any such public statement prior to such
consultation, except as may be required by applicable Law or court
process. The parties agree that the initial press release to be issued with
respect to the transactions contemplated by this Agreement shall be in the form heretofore
reasonably agreed to by the parties.


 


SECTION 6.05                    Notification
of Certain Matters. From the date hereof to the Acceptance Date, the
Company shall give prompt notice to Parent, and each of Parent and Merger Sub
shall give prompt notice to the Company, of (i) any notice or other
communication received by such party from any Governmental Authority in
connection with the Offer, the Merger or the transactions contemplated thereby
or from any Person alleging that the consent of such Person is or may be
required in connection with the Offer, the Merger or the other transactions
contemplated thereby if the subject matter of such communication or the failure
of such party to obtain such consent purports to materially affect the
consummation of the transactions contemplated thereby, (ii) any actions,
suits, claims, investigations or proceedings commenced or, to such party’s
knowledge, threatened against, relating to or involving or otherwise affecting
such party or any of its Subsidiaries which relate to the Offer, the Merger or
the other transactions contemplated thereby, (iii) to the knowledge of the
Company, the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty contained in
this Agreement and required to be made by the notifying party to be untrue or
inaccurate such that the condition in paragraph (b)(ii) of Annex I would
not be satisfied or the Company would have a termination right under Section 8.01(d)(ii),
as the case may be and (iv) any failure to comply with or satisfy a
covenant, condition or agreement to be complied with or satisfied by it
hereunder, such that the condition in paragraph (b)(ii) of Annex I would
not be satisfied or the Company would have a termination right under Section 8.01(d)(ii),
as the case may be.


 


SECTION 6.06                    Access to
Information.


 


(a)                                  From
the date hereof until the Acceptance Date, the Company shall, and shall cause
its Subsidiaries, and each of their respective officers, directors and
employees, counsel, advisors, accountants, financial advisors, lenders and
representatives to, provide Parent and Merger Sub and their respective
officers, employees, counsel, advisors, accountants, financial advisors,
financial sources, affiliates and representatives reasonable access during
normal business hours and upon reasonable notice, to the officers, directors,
employees, accountants, properties, offices and other facilities and to the
books and records of the Company and its Subsidiaries, as will permit Parent
and Merger Sub to make inspections of such as either of them may reasonably
require. The parties acknowledge that all legal, accounting and business due
diligence has been completed prior to the date hereof.


 


22

















 


(b)                                 Prior to the
Acceptance Date, except in the ordinary course of Parent’s business, each of
Parent and Merger Sub shall not, and shall cause the representatives of
Parent and Parent’s Affiliates to not, contact or otherwise communicate with
the employees (other than executive officers), customers and suppliers of the
Company and its Subsidiaries regarding the business of the Company without the
prior written approval of the general counsel of the Company, which approval
shall not be unreasonably withheld, conditioned or delayed.


 


SECTION 6.07                    Employee
Benefits Matters.


 


(a)                                  From
and after the Effective Time, each of the Surviving Corporation and its
Subsidiaries shall honor all of its respective compensation and benefits plans,
programs, agreements and arrangements of the Company and its Subsidiaries in
accordance with their terms as in effect immediately prior to the Effective
Time, provided that nothing in this sentence shall prohibit the
Surviving Corporation or its Subsidiaries from amending or terminating any such
plans, programs, agreements and arrangements in accordance with their terms.
The Surviving Corporation shall, for the period immediately following the
Effective Time through and including the first anniversary of the Effective
Time, provide each employee of the Company and the Subsidiaries as of the
Effective Time (each, an “Employee”), other than any Employee whose
employment is subject to a collective bargaining or other labor agreement, with
compensation and employee benefits, excluding equity, equity-based and similar
compensation, that are comparable in the aggregate to those provided by the
Company and its Subsidiaries (other than with respect to change of control
payments or other payments resulting from the Offer or the Merger) to such
Employees immediately prior to the Effective Time. Nothing herein shall be
deemed to be a guarantee of employment for any Employee or prohibit or restrict
the right of the Surviving Corporation to (i) make changes to salaries,
employee benefits and incentive compensation pursuant to negotiations in
connection with a collective bargaining agreement or (ii) amend and/or
eliminate any benefit program, subject to compliance with the first sentence of
this Section 6.07(a).


 


(b)                                 The
Employees shall receive credit for service with the Company and the
Subsidiaries for all purposes (including for purposes of eligibility to
participate, vesting, benefit accrual and eligibility to receive benefits, but
excluding benefit accruals under any defined benefit pension plan) under any
compensation or employee benefit plan, program or arrangement established or
maintained by Parent (to the extent an Employee is brought under any such
plan), the Surviving Corporation or any of their respective Affiliates under
which each Employee may be eligible to participate on or after the
Effective Time to the same extent recognized by the Company or any of the
Company’s Subsidiaries under comparable benefit plans immediately prior to the
Effective Time (or, if no comparable benefit plans exist, the Employee shall
receive service credit to the same extent credited under either the Company’s
Salary Deferral Savings Plan or Savings Plan for Hourly Paid Employees, as
applicable); provided, however, that such crediting of service
shall not operate to duplicate any benefit or the funding of any such benefit.


 


(c)                                  To
the extent that, after the Effective Time, the Surviving Corporation changes
the welfare benefit plans, programs and arrangements in which Employees
participate, Parent shall (i) waive, or use its reasonable best efforts to
cause its insurance carrier to waive, all limitations as to preexisting and
at-work conditions, if any, with respect to participation and coverage
requirements applicable to each Employee to the same extent waived under a


 


23





















 


comparable benefit plan and (ii) with
respect to the plan year in which the change was made, provide a credit to each
Employee for any co-payments, deductibles and out-of-pocket expenses paid by
such Employee under the benefit plans during the relevant plan year, up to and
including the Effective Time.


 


(d)                                 During
the period from the date hereof to the Acceptance Date, the Company shall not,
and shall not permit any of its Subsidiaries to, without Parent’s prior written
consent, make any payment or contribution to the Company’s Supplemental
Retirement Trust in an aggregate amount in excess of the amount set forth in Section 6.07(d) of
the Company Disclosure Schedule.


 


(e)                                  The
parties agree that the provisions of this Section 6.07 may be
modified without the consent of any Employee (it being understood and agreed
that the Employees to whom this Section 6.07 applies shall not be third
party beneficiaries of this Section 6.07).


 


SECTION 6.08                    NYSE
Listing. Parent and Merger Sub shall use their reasonable best efforts,
following the Acceptance Date and until the Effective Time to keep the Company
Common Stock quoted for trading on the NYSE, as long as the Company is required
to be registered under the Exchange Act and satisfies the NYSE listing
standards (other than standards entirely within the Company’s control).


 


SECTION 6.09                    Further
Assurances. At and after the Effective Time, the officers and directors of
the Surviving Corporation will be authorized to execute and deliver, in the
name and on behalf of the Company or Merger Sub, any deeds, bills of sale,
assignments or assurances and to take and do, in the name and on behalf of the
Company or Merger Sub, any other actions and things to vest, perfect or confirm
of record or otherwise in the Surviving Corporation any and all right, title
and interest in, to and under any of the rights, properties or assets of the
Company acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger.


 


SECTION 6.10                    Confidentiality Agreement.
Upon the acceptance for payment of Company Common Stock pursuant to the Offer,
the Confidentiality Agreement shall be deemed to have terminated without
further action by the parties thereto.


 


SECTION 6.11                    Adjourn
Annual Meeting; Terminate Self-Tender; Consent Solicitation; Rights Agreement.


 


(a)                                  The
Board of Directors of the Company has adopted a resolution to adjourn, and the
Company shall use all reasonable efforts to adjourn, the annual meeting of
holders of Company Common Stock scheduled for June 2, 2006 to June 30,
2006, prior to conducting any business at such meeting and to subsequently
adjourn such meeting in no more than 29-day increments (prior to conducting any
business) if the Effective Time shall not have occurred prior to the date of
such adjourned meeting.


 


(b)                                 No
later than two Business Days after the date hereof the Company shall terminate
its outstanding offer to purchase shares of the Company Common Stock by filing
an amendment to its Tender Offer Statement on Schedule TO in connection
therewith, issuing a


 


24

















 


press release with respect to such termination
and providing notice to the depositary of such termination.


 


(c)                                  Parent
shall not solicit written consents from any holder of Company Common Stock
prior to the earlier of the Acceptance Date and August 31, 2006.


 


(d)                                 As
promptly as practicable after the date hereof but in no event later than
midnight, New York City time, on June 2, 2006, the Company shall cause the
amendment of the Company Rights Agreement referred to in Section 3.04(c) hereof
to be duly executed by the Rights Agent and take all other action necessary to
render such amendment irrevocable.


 


ARTICLE VII



Conditions Precedent


 


SECTION 7.01                    Conditions
to Each Party’s Obligation to Effect the Merger. The respective obligations
of each party to effect the Merger are subject to the satisfaction or waiver on
or prior to the Effective Time of the following conditions:


 


(a)                                  Stockholder
Approval. If required by applicable Law, the Stockholder Approval shall
have been obtained.


 


(b)                                 No Injunctions or
Restraints. No temporary restraining order, preliminary or permanent injunction
or other judgment or order shall have been issued by or shall be pending before
any court of competent jurisdiction and no other statute, Law, rule, legal
restraint or prohibition (collectively, “Restraints”) shall be in effect
preventing or restraining the consummation of the Merger.


 


(c)                                  Purchase of
Company Common Stock in Offer. Merger Sub shall have accepted for payment
and purchased, or caused to be accepted for payment and purchased, all shares
of Company Common Stock validly tendered and not withdrawn pursuant to the
Offer; provided, however, that this condition shall be deemed to
have been satisfied with respect to the obligation of Parent and Merger Sub to
effect the Merger if Merger Sub fails to accept for payment or pay for shares
of Company Common Stock validly tendered and not withdrawn pursuant to the
Offer in violation of the terms of the Offer or of this Agreement.


 


SECTION 7.02                    Frustration
of Closing Conditions. None of the Company, Parent or Merger Sub may rely
on the failure of any condition set forth in Section 7.01 to be satisfied
if such failure was caused by such party’s failure to use its commercially
reasonable efforts to consummate the Merger and the other transactions contemplated
by this Agreement.


 


ARTICLE VIII



Termination, Amendment and Waiver


 


SECTION 8.01                    Termination.
This Agreement may be terminated by written notice by the terminating
party to the other party at any time prior to the Effective Time:


 


25

















 


(a)                                  by mutual written
consent of Parent and Merger Sub on the one hand and the Company on the other
hand;


 


(b)                                 by either Parent or
the Company:


 


(i)                                     if
the shares of Company Common Stock tendered in the Offer shall not have been
purchased on or before July 31, 2006; provided, however,
that the right to terminate this Agreement under this Section 8.01(b)(i) shall
not be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Merger to be consummated
on or before such date; or


 


(ii)                                  if
any Restraint having the effect set forth in Section 7.01(b) hereof
shall be in effect and shall have become final and nonappealable;


 


(c)                                  by Parent if at
any time prior to the purchase of the shares of Company Common Stock pursuant
to the Offer:


 


(i)                                     the Company shall
have breached or failed to perform any of its representations, warranties,
covenants or agreements set forth in this Agreement, which breach or failure to
perform (A) would give rise to the failure of a condition set forth
in paragraph (b)(ii) or (iii) of Annex I and (B) is not cured by
the Company within 10 Business Days following receipt of written notice of such
breach or failure to perform from Parent;


 


(ii)                                  there shall have been
a breach in any material respect of the representation and warranty set forth
in Section 3.08(b)(i) hereof;


 


(iii)                               the Company shall have
breached any of its obligations under Section 6.11(a) or (b) hereof;
or


 


(iv)                              any Third Party shall
have become the beneficial owner of more than 15% of the outstanding Company
Common Stock and the Company shall have terminated the Company Rights Agreement
in connection therewith or taken any action to amend or modify the Company
Rights Agreement to exempt such Third Party from the Company Rights Agreement
or render it inapplicable to such Third Party;


 


(d)                                 by the Company if
at any time prior to the purchase of the shares of Company Common Stock
pursuant to the Offer:


 


(i)                                   its
Board of Directors determines in good faith, after considering the advice from
outside legal Counsel to the Company, that it is required by its fiduciary
duties under applicable Law in order to enter into a binding written agreement
concerning a transaction that constitutes a Superior Proposal; provided
that any termination of this Agreement pursuant to this Section 8.01(d)(i) shall
not be effective until the Company has


 


26

















 


entered into a binding agreement with respect
to such Superior Proposal; or


 


(ii)                                if
Parent or Merger Sub shall have breached or failed to perform any of its
representations, warranties, covenants or agreements set forth in this
Agreement, which breach or failure to perform (A) would have a
material adverse effect on Parent’s or Merger Sub’s ability to purchase the
Company Common Stock tendered pursuant to the Offer and (B) is not cured
by Parent within 10 Business Days following receipt of written notice of such
breach or failure to perform from the Company.


 


SECTION 8.02                    Intentionally
Omitted.


 


SECTION 8.03                    Effect of
Termination. In the event of termination of this Agreement by either the
Company or Parent as provided in Section 8.01, this Agreement shall
forthwith become void and have no effect, without any liability or obligation
on the part of Parent, Merger Sub or the Company, other than the
provisions of Section 6.03 (and any other provision herein related to the
payment of expenses), Section 8.01, Section 8.02, this Section 8.03
and Article IX, which provisions shall survive such termination, and
except to the extent that such termination results from the willful breach by a
party of any of its representations, warranties, covenants or agreements set
forth in this Agreement. Nothing contained in this Section 8.03 shall
relieve any party from liability for any breach of this Agreement or alter the
provisions of the Confidentiality Agreement.


 


SECTION 8.04                    Amendment.
At any time prior to the Effective Time, this Agreement may be amended by
the parties hereto; provided, however, that there shall be made
no amendment that by Law requires further approval by the Company’s
stockholders or the


 


27

















 


approval of
the stockholders of Parent without such approval having been obtained. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.


 


SECTION 8.05                    Extension;
Waiver. At any time prior to the Effective Time, the parties may (a) extend
the time for the performance of any of the obligations or other acts of the
other parties, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto or (c) subject
to the proviso to the first sentence of Section 8.04, waive compliance
with any of the agreements of any other party or conditions to its obligations
contained herein. Any agreement on the part of a party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed
on behalf of such party. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise shall not constitute a
waiver of such rights.


 


ARTICLE IX



General Provisions


 


SECTION 9.01                    Nonsurvival
of Representations and Warranties. None of the representations and
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time. This Section 9.01 shall not
limit any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.


 


SECTION 9.02                    Notices.
Except for notices that are specifically required by the terms of this
Agreement to be delivered orally, all notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed given if
delivered personally (notice deemed given upon receipt), facsimiled (notice
deemed given upon confirmation of receipt) or sent by overnight courier (notice
deemed given upon proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):


 


if to Parent,
to:



BASF Aktiengesellschaft

67056 Ludwigshafen

Germany

Facsimile No:  +49-621-604-41789

Attention:  Dr. Jörg Buchmüller


 


if to Merger
Sub, to:



BASF Corporation

100 Campus Drive

Florham Park, NJ  07932

Facsimile No:  973-245-6711

Attention:  David M. Stryker, Esq.


 


28

















 


in either
case, with a copy to:



Shearman & Sterling LLP

599 Lexington Avenue

New York, New York  10022

Facsimile No:  212-848-7179

Attention:   Peter D. Lyons, Esq.

                   Alberto
Luzarraga, Esq.


 


if to the
Company, to:



Engelhard Corporation

101 Wood Avenue

Iselin, New Jersey 08830

Facsimile No.:  732-548-7835

Attention:  Arthur A. Dornbusch II, Esq.


 


with copies
to:



Cahill Gordon & Reindel LLP

80 Pine Street 

New York, NY  10005

Facsimile No.:  212-269-5420

Attention:  Kenneth W. Orce, Esq.


 


and


 


Wachtell,
Lipton, Rosen & Katz

51 West 52nd St.

New York, NY  10019

Facsimile No.:  212-403-2000

Attention:  Richard D. Katcher, Esq.


 


SECTION 9.03                    Definitions.
For purposes of this Agreement:


 


(a)                                  “Affiliate” of
any Person means another Person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, such first person.


 


(b)                                 “Business Day”
has the meaning set forth in Rule 14d-1(g)(3) under the Exchange Act.


 


(c)                                  “Company Material
Adverse Effect” means any event, circumstance, change or effect that,
individually or in the aggregate with any other events, circumstances, changes
and effects, is or is reasonably likely to (i) have a material adverse
effect on the business, financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole or (ii) prevent or
materially delay the consummation of any of the transactions


 


29

















 


contemplated hereby or the performance of the Company’s obligations
under this Agreement, other than any effect resulting from (A) any change
in conditions in the United States, foreign or global economy or capital or
financial markets generally, including any change in interest or exchange
rates, but only if such change or impact does not have a materially
disproportionate effect (relative to other industry participants) on the
Company or its Subsidiaries, (B) any change in conditions (including any
change in general legal, regulatory, political, economic or business conditions
or any change in GAAP) in or otherwise generally affecting the industries in which
the Company and its Subsidiaries conduct business but only if such change or
impact does not have a materially disproportionate effect (relative to other
industry participants) on the Company or its Subsidiaries, (C) the impact
of the announcement of the execution of this Agreement or the consummation of
the transactions contemplated by this Agreement on any relationships,
contractual or otherwise, between the Company and its landlords, suppliers,
vendors, customers, OEMs or employees or others having business relationships
with the Company or its Subsidiaries, (D) any act of terrorism or war
(whether or not threatened, pending or declared), but only if such act of
terrorism or war does not have a materially disproportionate effect (relative
to other industry participants) on the Company or its Subsidiaries, (E) any
action taken by the Company as required by this Agreement or (F) any
action taken by the Company with Parent’s consent.


 


(d)                                 “Company Proposal”
means any bona fide written proposal (i) for a merger, consolidation,
dissolution, recapitalization or other business combination of the Company, (ii) for
the issuance of any equity securities of the Company or any of its Subsidiaries
representing at least 15% of the equity securities of the Company or (iii) to
acquire in any manner, directly or indirectly, (A) at least 15% of the
equity securities of the Company or (B) at least 15% of the assets of the
Company and its Subsidiaries taken as a whole, in each case other than the
transactions contemplated by this Agreement and the agreements to be executed
in connection herewith.


 


(e)                                  “Company Rights
Agreement” means that certain rights agreement, dated as of October 1,
1998, between the Company and Chase Mellon Shareholder Services LLC.


 


(f)                                    “Employee
Benefit Plans” means any material compensation or benefit plan, fund,
program, agreement or arrangement, including each incentive compensation or
equity compensation plan; each material “welfare” plan, fund or program (within
the meaning of Section 3(1) of ERISA); each deferred compensation or “pension”
plan, fund or program (within the meaning of Section 3(2) of ERISA)
and each other material welfare, deferred compensation or pension plan, fund or
program; each employment, termination or severance agreement; and each other
material employee benefit plan, fund, program, agreement or arrangement, in
each case, that is sponsored, maintained or contributed to or required to be
contributed to by the Company or by any ERISA Affiliate, that together with the
Company would be deemed a “single employer” within the meaning of Section 4001(b) of
ERISA, or to which the Company, any of its Subsidiaries or an ERISA Affiliate
is party, for the benefit of any employee or director of the Company and its
Subsidiaries, including any such employee or director located outside the
United States.


 


(g)                                 “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended.


 


30

















 


(h)                                 “ERISA
Affiliate” means any trade or business, whether or not incorporated which
sponsors, maintains or contributes to or is required to contribute to any
Employee Benefit Plan.


 


(i)                                     “Fully Diluted
Basis” means, as of any applicable date, without duplication, the number of
shares of Company Common Stock outstanding together with the shares of Company
Common Stock which the Company may be required to issue pursuant to
obligations outstanding under the Company’s stock option plans, deferred
compensation plans, employee stock ownership plans or other similar benefit
plans, the conversion or exchange of all outstanding securities convertible or
exchangeable into, shares of Company Common Stock, or otherwise, in each case,
whether or not vested, exercisable, exercised or converted or subject to
restrictions at the time of determination.


 


(j)                                     “Laws”
means any statutes, laws, ordinances, rules, codes, regulations, judgments,
orders and decrees of any Governmental Authority.


 


(k)                                  “Person” means
an individual, corporation, partnership, limited liability company, joint
venture, association, trust, unincorporated organization or other entity.


 


(l)                                     a “Subsidiary”
of any Person means another Person, an amount of the voting securities, other
voting rights or voting partnership interests of which is sufficient to elect
at least a majority of its board of directors or other governing body (or, if
there are no such voting interests, 50% or more of the equity interests of
which) is owned directly or indirectly by such first Person.


 


(m)                               “Superior Proposal”
means any unsolicited bona fide, written Company Proposal for at least a
majority of the outstanding Company Common Stock or all or substantially all of
the assets of the Company and its Subsidiaries, taken as a whole, or a merger
or other business combination involving the Company, in each case which is
reasonably likely to be consummated on the terms proposed, taking into account
all financial, legal, regulatory and other aspects of such proposal, and which
the Board of Directors determines in good faith, after consultation with
outside legal counsel and taking into account the material terms and conditions
of such proposal, is more favorable to the Company’s stockholders (other than
Parent and its Affiliates) than as provided hereunder.


 


(n)                                 “Taxes” means
all taxes, assessments, charges, duties, fees, levies or other governmental
charges, including, without limitation, all Federal, state, local, foreign and
other income, franchise, profits, gross receipts, capital gains, capital stock,
transfer, property, sales, use, value-added, occupation, property, excise,
severance, windfall profits, stamp, license, payroll, social security,
withholding and other taxes, assessments, charges, duties, fees, levies or
other governmental charges of any kind whatsoever (whether payable directly or
by withholding and whether or not requiring the filing of a tax return), all
estimated taxes, penalties and interest.


 


(o)                                 “Third Party”
means any Person other than Parent, the Company or any of their respective
Affiliates.


 


(p)                                 Each of the following
terms is defined in the Section set forth opposite such term:


 


31

















 




	
  Term

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  
	
  Acceptance
  Date

  	
   

  	
  1.01(b)

  
	
  Affiliate

  	
   

  	
  9.03(a)

  
	
  Aggregate
  Merger Consideration

  	
   

  	
  2.01(c)

  
	
  Agreement

  	
   

  	
  Preamble

  
	
  Business Day

  	
   

  	
  9.03(b)

  
	
  Certificate
  of Merger

  	
   

  	
  1.06

  
	
  Certificates

  	
   

  	
  2.02(a)

  
	
  Closing

  	
   

  	
  1.05

  
	
  Closing Date

  	
   

  	
  1.05

  
	
  Company

  	
   

  	
  Preamble

  
	
  Company
  Articles

  	
   

  	
  1.03(b)

  
	
  Company
  Board Recommendation

  	
   

  	
  3.04(a)

  
	
  Company
  Bylaws

  	
   

  	
  1.03(b)

  
	
  Company
  Common Stock

  	
   

  	
  Recitals

  
	
  Company
  Disclosure Schedule

  	
   

  	
  Article III

  
	
  Company
  Documents

  	
   

  	
  3.06(a)

  
	
  Company
  Governing Documents

  	
   

  	
  1.03(b)

  
	
  Company
  Material Adverse Effect

  	
   

  	
  9.03(c)

  
	
  Company
  Option

  	
   

  	
  3.03

  
	
  Company
  Preferred Stock

  	
   

  	
  3.03

  
	
  Company
  Proposal

  	
   

  	
  9.03(d)

  
	
  Company
  Rights Agreement

  	
   

  	
  9.03(e)

  
	
  Confidentiality
  Agreement

  	
   

  	
  9.06

  
	
  Continuing
  Directors

  	
   

  	
  1.03(b)

  
	
  Dissent
  Shares

  	
   

  	
  2.01(d)

  
	
  Dissenters’
  Rights Statute

  	
   

  	
  2.01(d)

  
	
  DGCL

  	
   

  	
  1.02(a)

  
	
  Effective
  Time

  	
   

  	
  1.06

  
	
  Employee

  	
   

  	
  6.07(a)

  
	
  Employee
  Benefit Plans

  	
   

  	
  9.03(f)

  
	
  ERISA

  	
   

  	
  9.03(g)

  
	
  ERISA
  Affiliate

  	
   

  	
  9.03(h)

  
	
  Exchange Act

  	
   

  	
  1.01(a)

  
	
  Exchange
  Agent

  	
   

  	
  2.02(a)

  
	
  Expiration
  Date

  	
   

  	
  1.01(b)


  
	
  Fully
  Diluted Basis

  	
   

  	
  9.03(i)

  
	
  GAAP

  	
   

  	
  3.06(b)

  
	
  Governmental
  Authority

  	
   

  	
  3.05

  
	
  Hazardous
  Substances

  	
   

  	
  9.03(h)

  
	
  Indemnitees

  	
   

  	
  6.02(a)

  
	
  Information
  Statement

  	
   

  	
  5.02(a)

  
	
  Laws

  	
   

  	
  9.03(j)

  
	
  Merger

  	
   

  	
  Recitals

  
	
  Merger Sub

  	
   

  	
  Preamble

  
	
  Merger Sub
  Designees

  	
   

  	
  1.03(a)

  
	
  Minimum
  Condition

  	
   

  	
  1.01(a)

  
	
  Minimum
  Insurance

  	
   

  	
  6.02(c)

  
	
  NYSE

  	
   

  	
  3.06(a)

  
	
  Offer

  	
   

  	
  Recitals

  
	
  Offer
  Documents

  	
   

  	
  1.01(a)

  
	
  Offer Price

  	
   

  	
  Recitals

  
	
  Parent

  	
   

  	
  Preamble

  
	
  Per Share
  Merger Consideration

  	
   

  	
  2.01(c)

  
	
  Permit

  	
   

  	
  3.09

  
	
  Person

  	
   

  	
  9.03(k)

  
	
  Restraints

  	
   

  	
  7.01(b)

  
	
  Schedule 14D–9

  	
   

  	
  1.02(a)

  
	
  SEC

  	
   

  	
  1.01(a)

  
	
  Significant
  Subsidiary

  	
   

  	
  3.02

  
	
  Stockholder
  Approval

  	
   

  	
  3.04(a)

  
	
  Subsidiary

  	
   

  	
  9.03(l)

  
	
  Superior
  Proposal

  	
   

  	
  9.03(m)

  
	
  Surviving
  Corporation

  	
   

  	
  1.04

  
	
  Taxes

  	
   

  	
  9.03(n)

  
	
  Tender Offer
  Conditions

  	
   

  	
  1.01(a)

  
	
  Third Party

  	
   

  	
  9.03(o)

  
	
  Uncertificated
  Shares

  	
   

  	
  2.02(a)

  
	
   

  	
   

  	
   

  






 


32

















 


SECTION 9.04                    Interpretation.


 


(a)                                  When
a reference is made in this Agreement to an Article, a Section, Exhibit or
Schedule, such reference shall be to an Article of, a Section of, or
an Exhibit or Schedule to, this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words “include”, “includes” or “including”
are used in this Agreement, they shall be deemed to be followed by the words “without
limitation”. The words “hereof”, “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein.
The definitions contained in this Agreement are applicable to the singular as
well as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is
referred to herein means such agreement, instrument or statute as from time to
time amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession
of comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a Person are also to its permitted
successors and assigns.


 


33

















 


(b)                                 Any
information disclosed in any section of the Company Disclosure Schedule shall
be considered disclosed in each and every other Company Disclosure Schedule in
which the information is required to be included to the extent that such
disclosure sets forth facts in sufficient detail so that the relevance of the
disclosure would be reasonably apparent to a reader of such disclosure. Any
disclosure in any Company Disclosure Schedule of any contract, document,
liability, default, breach, violation, limitation, impediment or other matter,
although the provision for such disclosure may require such disclosure
only if such contract, document, liability, default, breach, violation,
limitation, impediment or other matter be “material” or shall have a Company
Material Adverse Effect, shall not be construed against the Company as an
assertion by the Company that any such contract, document, liability, default,
breach, violation, limitation, impediment or other matter is, in fact, material
or shall have a Company Material Adverse Effect.


 


SECTION 9.05                    Counterparts.
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties.


 


SECTION 9.06                    Entire
Agreement; No Third-Party Beneficiaries. This Agreement, including the
disclosure schedules hereto, and the confidentiality agreement, dated as of March 15,
2006, among Parent, BASF Corporation and the Company (the “Confidentiality
Agreement”), (a) constitute the entire agreement and supersede all
prior agreements, arrangements, undertakings and understandings, both written
and oral, among the parties with respect to the subject matter of this
Agreement, the Offer and the Merger and (b) except for the provisions of Section 1.03
and Section 6.02 are not intended to confer upon any Person other than the
parties any rights or remedies.


 


SECTION 9.07                    Governing
Law. This Agreement and the transactions contemplated hereby, and all
disputes between the parties under or related to this Agreement or the facts
and circumstances leading to its execution, whether in contract, tort or
otherwise, shall be governed by and construed in accordance with, the Laws of
the State of Delaware, without reference to conflict of laws principles.


 


SECTION 9.08                    Assignment.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned, in whole or in part, by operation of Law or
otherwise by any of the parties without the prior written consent of the other
parties, except that Parent and Merger Sub may assign this Agreement or
all or any of their rights, interests or obligations hereunder (including,
without limitation, the right to purchase Company Common Stock pursuant to the
Offer) to any Affiliate of Parent without the prior written consent of the
Company; provided, however, that no such assignment shall relieve
the assigning party of its obligations hereunder if such assignee does not perform such
obligations. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.


 


SECTION 9.09                    Specific
Enforcement; Consent to Jurisdiction; Service of Process. The parties agree
that irreparable damage would occur and that the parties would not have any
adequate remedy at Law in the event that any of the provisions of this
Agreement were


 


34

















 


not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or injunctions
to prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any Federal court located in the State of
Delaware or in any state court in the State of Delaware, this being in addition
to any other remedy to which they are entitled at Law or in equity. In
addition, each of parties hereto (a) consents to the sole and exclusive
jurisdiction of any Federal court located in the State of Delaware or of any
state court located in the State of Delaware in the event any dispute arises
out of or relates to this Agreement or the transactions contemplated by this
Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (c) agrees that it will not bring any action relating to this
Agreement or the transactions contemplated by this Agreement in any court other
than a Federal court located in the State of Delaware or a state court located
in the State of Delaware. Each of Merger Sub and the Company further agrees
that service of any process, summons, notice or document by U.S. registered
mail to its address set forth in Section 9.02 hereof (or such other
address given pursuant to Section 9.02) shall be effective service of
process for any action, suit or proceeding brought against it in any Federal
court located in the State of Delaware or of any state court located in the
State of Delaware. Parent further agrees that service of any process, summons,
notice or document in accordance with the Hague Convention on the Service
Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters
shall be effective service of process for any action, suit or proceeding
brought against it in any Federal court located in the State of Delaware or of
any state court located in the State of Delaware.


 


SECTION 9.10                    Waiver of
Jury Trial. To the extent not prohibited by applicable Law that cannot be
waived, the parties hereby waive, and covenant that they will not assert
(whether as plaintiff, defendant or otherwise), any right to trial by jury in
any action arising in whole or in part under or in connection with this
Agreement, whether existing or hereafter arising, and whether sounding in
contract, tort or otherwise. The parties agree that any of them may file a
copy of this Section 9.10 with any court as written evidence of the
knowing voluntary and bargained–for agreement among the parties irrevocably to
waive its right to trial by jury in any proceeding whatsoever between them relating
to this Agreement and its consent that any such proceeding will instead be
tried in a court of competent jurisdiction by a judge sitting without a jury.


 


SECTION 9.11                    Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable Law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.


 


[Remainder of Page Intentionally
Left Blank]


 


35

















 


IN WITNESS
WHEREOF, Parent, Merger Sub and the Company have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.


 


	
   

  	
   

  	
  BASF
  AKTIENGESELLSCHAFT

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Joerg
  Buchmueller

  	
   

  
	 	 	 	
	 
	
   

  	
   

  	
   

  	
  Name: Joerg
  Buchmueller

  	
   

  
	
   

  	
   

  	
   

  	
  Title:
  Attorney-in-fact

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  IRON
  ACQUISITION CORPORATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Hans-Ulrich
  Engel

  	
   

  
	 	 	 	
	 
	
   

  	
   

  	
   

  	
  Name:
  Hans-Ulrich Engel

  	
   

  
	
   

  	
   

  	
   

  	
  Title:
  President

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ENGELHARD
  CORPORATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Michael A. Sperduto
  	
   

  
	 	 	 	
	 
	
   

  	
   

  	
   

  	
  Name: Michael A. Sperduto
  	
   

  
	
   

  	
   

  	
   

  	
  Title: Vice President and Chief Financial Officer
  	
   

  



 

















 


Annex I


 


CONDITIONS OF THE OFFER


 


Capitalized
terms used in this Annex I but not defined herein have the meanings
assigned to such terms in the Agreement and Plan of Merger (this “Agreement”) of which this Annex I is a part.


 


Notwithstanding
any other provisions of the Offer or this Agreement, and in addition to (and
not in limitation of) Merger Sub’s rights to extend and amend the Offer at any
time in its sole discretion (subject to the provisions of this Agreement),
Merger Sub shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under
the Exchange Act (relating to Merger Sub’s obligation to pay for or return
tendered shares of Company Common Stock promptly after termination or
withdrawal of the Offer), pay for, and may delay the acceptance for
payment of or, subject to the restriction referred to above, the payment for,
any tendered shares of Company Common Stock, and may terminate or amend
the Offer as to any shares of Company Common Stock not then paid for, if:


 


(a)                                  the
Minimum Condition shall not have been satisfied immediately prior to the
expiration date of the Offer (as it may be extended in accordance with the
terms of this Agreement); or


 


(b)                                 on
or after the date of the Agreement and prior to the expiration date of the
Offer (as it may be extended in accordance with the terms of this
Agreement), any of the following conditions shall have occurred:


 


(i)                                     any Restraints
shall be in effect and not removed making illegal, restraining or prohibiting
the making of the Offer, the acceptance for payment of any Company Common Stock
by Parent, Merger Sub or any other Affiliate of Parent, or the consummation of
any other transaction contemplated by this Agreement;


 


(ii)                                  the representations
and warranties of the Company set forth in the Agreement shall not be true and
correct (without giving effect to any materiality or Company Material Adverse
Effect qualification contained therein except with respect to Section 3.07(a))
as of the Expiration Date of the Offer (except to the extent that any such
representation or warranty refers specifically to a particular date, in which
case such representation or warranty shall be true and correct as of such date)
except where the failure to be so true and correct, individually or in the
aggregate, does not and would not reasonably be expected to have a Company
Material Adverse Effect;


 


(iii)                               the Company shall have
failed to perform any obligation or to comply with any agreement or
covenant of the Company to be performed or complied with by it under the
Agreement, except where the failure to perform or comply, individually or
in the aggregate, does not have a Company Material Adverse Effect or would not
reasonably be likely to have a material adverse effect on Merger Sub’s ability
to purchase the shares of Company Common Stock pursuant to the Offer;


 

















 


(iv)                              it shall have been
publicly disclosed, or Parent or Merger Sub shall have otherwise learned, that
beneficial ownership (determined for the purposes of this paragraph as set
forth in Rule 13d-3 promulgated under the Exchange Act) of 15% or more of
the then-outstanding Company Common Stock has been acquired by any Third Party
and the Company shall have terminated the Company Rights Agreement in
connection therewith or taken any action to amend or modify the Company Rights
Agreement to exempt such Third Party from the Company Rights Agreement or
render it inapplicable to such Third Party;


 


(v)                                 there shall have
occurred (A) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or Germany or (B) any
limitation (whether or not mandatory) by any government or Governmental
Authority on the extension of credit by banks or other lending institutions
that materially and adversely affects the ability of Merger Sub to consummate
the Offer;


 


(vi)                              this Agreement shall have
been terminated in accordance with its terms; or


 


(vii)                           Merger Sub and the Company
shall have agreed that Merger Sub shall terminate the Offer or postpone the
acceptance for payment of Company Common Stock thereunder.


 


The foregoing
conditions are for the sole benefit of Parent and Merger Sub and may be
asserted by Parent and Merger Sub regardless of the circumstances giving rise
to any such condition and may be waived by Parent or Merger Sub (except
for the Minimum Condition), in whole or in part, at any time and from time to
time prior to the expiration of the Offer, in their respective sole discretion.
The failure by Parent or Merger Sub at any time to exercise any of the
foregoing rights will not be deemed a waiver of any such right, the waiver of
any such right with respect to any particular facts and circumstances shall not
be deemed a waiver with respect to any other facts and circumstances and each
such right will be deemed an ongoing right that may be asserted at any
time and from time to time.


 


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