Document:

Exhibit 10.3

 

Confidential

 

STOCKHOLDERS’ AGREEMENT

 

OF

 

NIAGARA HOLDINGS, INC.

 

 

February 11, 2005

 

 

TABLE OF CONTENTS

 

	
  SECTION 1.

  	
   

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
   

  	
  BOARD OF
  DIRECTORS AND VOTING

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (a)

  	
   

  	
  Board
  of Directors

  	
   

  
	
  (c)

  	
   

  	
  Voting
  Agreement

  	
   

  
	
  (d)

  	
   

  	
  Committees

  	
   

  
	
  (e)

  	
   

  	
  Chairman

  	
   

  
	
  (f)

  	
   

  	
  Payments to Directors; Reimbursements

  	
   

  
	
  (g)

  	
   

  	
  Competitive
  Opportunity

  	
   

  
	
  (h)

  	
   

  	
  Notice
  of Meetings

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
   

  	
  TRANSFERS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (a)

  	
   

  	
  Transfer
  of Shares

  	
   

  
	
  (b)

  	
   

  	
  Transfer
  Restrictions

  	
   

  
	
  (c)

  	
   

  	
  Transfer
  Notice

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
   

  	
  DRAG-ALONG
  RIGHTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (a)

  	
   

  	
  Drag-Along
  Right

  	
   

  
	
  (b)

  	
   

  	
  Notice

  	
   

  
	
  (c)

  	
   

  	
  Exercise

  	
   

  
	
  (d)

  	
   

  	
  Time
  Limitation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
   

  	
  TAG-ALONG
  RIGHTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (a)

  	
   

  	
  Notice

  	
   

  
	
  (b)

  	
   

  	
  Tag-Along
  Right

  	
   

  
	
  (c)

  	
   

  	
  Exercise

  	
   

  
	
  (d)

  	
   

  	
  Certain
  Restrictions

  	
   

  
	
  (e)

  	
   

  	
  Time
  Limitation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
   

  	
  LEGEND ON
  CERTIFICATES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (a)

  	
   

  	
  Legends

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
   

  	
  DURATION OF
  AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
   

  	
  INFORMATION
  RIGHTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (a)

  	
   

  	
  Financial Statements and Other Information

  	
   

  
	
  (b)

  	
   

  	
  Other
  Information

  	
   

  

 

 

	
  SECTION 9.

  	
   

  	
  REGULATORY
  MATTERS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (a)

  	
   

  	
  Cooperation of Other Stockholders

  	
   

  
	
  (b)

  	
   

  	
  Covenant
  Not to Amend

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
   

  	
  EFFECTIVENESS
  OF AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11.

  	
   

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (a)

  	
   

  	
  Successors, Assigns and Transferees

  	
   

  
	
  (b)

  	
   

  	
  Specific
  Performance

  	
   

  
	
  (c)

  	
   

  	
  Governing
  Law

  	
   

  
	
  (d)

  	
   

  	
  PQP, LLC

  	
   

  
	
  (e)

  	
   

  	
  Initial
  Public Offering

  	
   

  
	
  (f)

  	
   

  	
  Submission to Jurisdiction; Waiver of Jury Trial

  	
   

  
	
  (g)

  	
   

  	
  Descriptive
  Headings

  	
   

  
	
  (h)

  	
   

  	
  Notices

  	
   

  
	
  (i)

  	
   

  	
  Recapitalization, Exchange, Etc. Affecting the
  Company’s Shares

  	
   

  
	
  (j)

  	
   

  	
  Counterparts

  	
   

  
	
  (k)

  	
   

  	
  Severability

  	
   

  
	
  (l)

  	
   

  	
  Amendment

  	
   

  
	
  (m)

  	
   

  	
  Tax
  Withholding

  	
   

  
	
  (n)

  	
   

  	
  Integration

  	
   

  
	
  (o)

  	
   

  	
  Further
  Assurances

  	
   

  
	
  (p)

  	
   

  	
  No
  Strict Construction

  	
   

  
	
  (q)

  	
   

  	
  No Third Party Beneficiaries.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1

  	
  —

  	
  SCHEDULE
  OF INVESTORS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  A

  	
  —

  	
  FORM OF
  STOCKHOLDER JOINDER

  
	
   

  	
   

  	
   

  	
   

  
	
  B

  	
  —

  	
  REGULATORY SIDE
  LETTER

  
					

 

iii

 

NIAGARA HOLDINGS, INC.

STOCKHOLDERS’ AGREEMENT

 

This STOCKHOLDERS’
AGREEMENT (the “Agreement”), dated as of February 11, 2005 and effective
as of the Effective Time (defined below), is entered into by and among NIAGARA
HOLDINGS, INC., a Delaware corporation (the “Company”), and the
Investors (defined herein).  The
definitions of certain capitalized terms used herein are set forth in
Section 1 hereto.

 

RECITALS

 

WHEREAS, the
Company, Niagara Acquisition, Inc., a wholly-owned subsidiary of the Company (“Niagara”),
and PQ Corporation, a Pennsylvania corporation (“PQ”), are parties to
that certain Agreement and Plan of Merger, dated as of December 15, 2004 (the “Merger Agreement”), pursuant to
which Niagara will be merged with and into PQ, with PQ remaining as the
surviving entity and a wholly-owned subsidiary of the Company; and

 

WHEREAS, the
Company and the Investors are parties to those certain Subscription Agreements,
dated as of the date hereof (the “Subscription Agreements”), pursuant to
which the Company will, as of the Effective Time, issue, and each Investor
party thereto will, purchase the Shares as set forth opposite such Investor’s
name on Schedule 1 hereto; and

 

WHEREAS, the
Company and certain Investors are parties to those certain Restricted Stock
Agreements, dated as of the date hereof (the “Restricted Stock Agreements”),
relating to the vesting, sale and other matters involving the Shares received
by such Investors; and

 

WHEREAS, the
Investors and the Company desire to promote their mutual interests by agreeing
to certain matters relating to the operations of the Company and the transfer
of Shares; and

 

NOW, THEREFORE, in
consideration of the foregoing, and the mutual agreements set forth herein and
for other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Parties hereto, intending to be legally bound, hereby
agree as follows:

 

AGREEMENT

 

SECTION
1.         DEFINITIONS

 

(a)           As used in this Agreement, the
following terms have the following meanings:

 

“Affiliate” means with respect to a
specified Person, any Person that directly or indirectly controls, is
controlled by, or is under common control with, the specified Person.  As used in this definition, the term “control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through
ownership of voting securities, by contract or otherwise.

 

“Amended Drag-Along Notice” has the
meaning set forth in Section 4(b).

 

 

“Blockout
Period” has the meaning set forth in Section 3(b).

 

“Board” has the meaning set forth
in Section 2(a)(i).

 

“Business Day” means any day that
is not a Saturday, a Sunday or other day on which banks are required or
authorized by law to be closed in New York, New York.

 

“Change of
Control” means the first occurrence of any one of the
following:  (i) a change in the ownership or control of the Company
effected through a transaction or series of transactions (including by way of
merger, consolidation, business combination or similar transaction involving
the Company or any of its Subsidiaries) whereby any “person” or related “group”
of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the
Exchange Act) (other than the Company, any of its Subsidiaries, an employee
benefit plan maintained by the Company or any of its Subsidiaries, or a “person”
that, prior to such transaction, directly or indirectly controls, is controlled
by, or is under common control with, the Company) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act), of more than 50% of the total combined voting power of the
Company’s Shares outstanding, in either case immediately after such transaction
or series of transactions; or (ii) the sale, lease, transfer, conveyance or
other disposition (other than by way of a transaction that would not be deemed
a Change of Control pursuant to clause (i) above), in one or a series of
related transactions, of all or substantially all of the assets of the Company
and its Subsidiaries taken as a whole, to any “person” (as defined above).

 

“Class A Common Stock” shall mean
the Class A Common Stock, $0.01 par value per share, of the Company.

 

“Class B Common Stock” shall mean
the Class B Common Stock, $0.01 par value per share, of the Company.

 

“Company”
has the meaning set forth in the preamble.

 

“Competitive Opportunity” has the meaning set
forth in Section 2(j).

 

“Convertible
Securities” means any evidence of indebtedness, shares of stock or other
securities that are directly or indirectly convertible into or exchangeable or
exercisable for Shares.

 

“Drag-Along
Notice” has the meaning set forth in Section 4(b).

 

“Drag-Along Sellers” has the meaning set forth
in Section 4(a).

 

“Drag-Along
Transferee” has the meaning set forth in Section 4(a).

 

“Effective Time” has the meaning ascribed to
such term in the Merger Agreement.

 

“Eligible Shares” has the meaning set forth in
Section 5(b).

 

“Equivalent Shares” means, at any date of
determination, (a) as to any outstanding Shares, such number of Shares, (b) as
to any outstanding Convertible Securities, the maximum

 

2

 

number of Shares
for which or into which such Convertible Securities may at the time be
exercised, converted or exchanged (or which will become exercisable,
convertible or exchangeable on or prior to, or by reason of, the transaction or
circumstances in connection with which the number of Equivalent Shares is to be
determined) and (c) in respect of any Subsidiary of the Company, (i) as to any
outstanding shares of stock of any Subsidiary of the Company, such number of
shares of stock or (ii) as to any outstanding options, warrants or convertible
securities, the maximum number of shares of stock of any Subsidiary of the
Company for which or into which such options, warrants or convertible
securities may at the time be exercised, converted or exchanged (or which will
become exercisable, convertible or exchangeable on or prior to, or by reason
of, the transaction or circumstances in connection with which the number of
Equivalent Shares is to be determined).

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“Exit Sale” has the meaning set forth in
Section 4(a).

 

“Governmental
Approval” means, with respect to any Transfer of Shares, any consent
or other action by, or filing with, any governmental authority required in
connection with such Transfer and the expiration or early termination of any
applicable statutory waiting period in connection with such action or filing.

 

“Independent Directors” has the meaning set
forth in Section 2(a)(ii)(B).

 

“Independent Third Party” means (i) any Person
that did not directly or through one or more intermediaries own Shares
immediately after the Effective Time and (ii) any Affiliate of any such Person.

 

“Initial Public Offering” means the initial
public offering of Shares registered on Form S-1 (or any equivalent or
successor form under the Securities Act).

 

 “Investor” or “Investors”
means each of the entities or individuals listed on Schedule 1 attached hereto
and, upon the approval of the JPMP Representative, any other subsequent holder
of Shares who agrees to be bound by the terms of this Agreement in accordance
with the terms hereof.

 

 “IPO Date” means the date on which
the Company consummates an Initial Public Offering of the Company.

 

“JPMP BHCA”
means J.P. Morgan Partners (BHCA), L.P., a Delaware limited partnership.

 

“JPMP Global” means J.P. Morgan Partners Global Investors, L.P., a Delaware limited
partnership.

 

“JPMP Investors” means
JPMP BHCA, JPMP Global, J.P Morgan Partners Global Investors A, L.P., a
Delaware limited partnership, J.P. Morgan Partners Global Investors 

 

3

 

(Cayman), L.P., a Cayman Islands exempted limited partnership, J.P.
Morgan Partners Global Investors (Cayman) II, L.P., a Cayman Islands exempted
limited partnership, and JPMP Selldown.

 

“JPMP Representative” means JPMP BHCA or such
other representative selected by the JPMP Investors following the date hereof.

 

“JPMP Selldown” means J.P. Morgan Partners Global Investors (Selldown), L.P., a Delaware
limited partnership.

 

“Litigation” has the meaning set forth in
Section 11(d).

 

“Merger Agreement” has the meaning set forth in
the recitals.

 

“Offered
Shares” has the meaning set forth in Section 3(c).

 

“Party”
and “Parties” means each
of the signatories to this Agreement.

 

“Permitted
Transfer” means:  (i) a
Transfer by an Investor (other than the JPMP Investors) approved by the JPMP
Representative or (ii) a Transfer to an Affiliate of an Investor; provided
that such transferee remains an Affiliate of such transferor following the
Transfer; provided further that such transferee shall agree in writing
with the Parties to be bound by, and to comply with, all applicable provisions
of, and to be deemed to be an Investor for purposes of, this Agreement.  For the avoidance of doubt, (A) any Permitted
Transfer made pursuant to clause (i) of this definition is subject to the
provisions of Section 3, and (B) a transferee of Shares subsequent to the IPO
Date may, but shall not be required to, agree in writing with the Parties to be
bound by, and to comply with, all applicable provisions of this Agreement.

 

“Permitted Transferee” means any Person who
acquires Shares pursuant to the definition of “Permitted Transfer”.

 

“Person”
includes any individual, corporation, association, partnership (general or
limited), joint venture, trust, estate, limited liability company, or other
legal entity or organization.

 

“Regulatory Sideletter” has the meaning set
forth in Section 9(a).

 

“Restricted Stock Agreements” has the meaning
set forth in the Recitals.

 

“Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Shares” means (a) all shares of Class A
Common Stock and Class B Common Stock, whenever issued, including all
shares of Class A Common Stock and Class B Common Stock issued upon
the exercise, conversion or exchange of any Convertible Securities and (b) all
Convertible Securities (treating such Convertible Securities as a number of
Shares equal to the number of Equivalent Shares represented by such Convertible
Securities for all purposes of this Agreement except as otherwise specifically
set forth herein).

 

4

 

“Subscription Agreements” has the meaning set
forth in the Recitals.

 

“Subsidiary” or “Subsidiaries” of any
Person means any corporation, partnership, joint venture or other legal entity
of which such Person (either alone or through or together with any other
Person), owns, directly or indirectly, 50% or more of the stock or other equity
interests which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.

 

“Successor Entity” has the meaning set forth in
Section 11(j).

 

“Tag-Along Election Period” has the meaning set
forth in Section 5(b).

 

“Tag-Along
Rights” has the meaning set forth in Section 5(b).

 

“Tag-Along Seller” has the meaning set forth in
Section 5(a).

 

“Tag-Along Transferee”
has the meaning set forth in Section 5(b).

 

“Transfer”
means, with respect to the Shares or other securities, capital shares,
membership interests, partnership interests, units or other property, the
direct or indirect (through one or more intermediaries or otherwise) transfer,
sale, tender, conveyance, assignment, pledge, hypothecation or other
disposition or exchange of, or grant of any option or right (voting or
otherwise) or interest in, any of such Shares or other securities, capital shares,
membership interests, partnership interests, units or other property, whether
voluntary, involuntary, by operation of law (whether by merger, consolidation
or binding share exchange) or otherwise; and “Transferring” or “Transferred”
have correlative meanings.

 

“Transfer Notice” has the meaning set forth in
Section 3(c).

 

(b)           Unless the context of this Agreement
otherwise requires, (i) words of any gender include each other gender; (ii)
words using the singular or plural number also include the plural or singular
number, respectively; (iii) the terms “hereof,” “herein,” “hereby” and
derivative or similar words refer to this entire Agreement; (iv) the terms
“Article” or “Section” refer to the specified Article or Section of this
Agreement; (v) the word “including” shall mean “including, without limitation”,
and (vi) the word “or” shall be disjunctive but not exclusive.

 

(c)           References to agreements and other
documents shall be deemed to include all subsequent amendments and other
modifications thereto.

 

(d)           References to statutes shall include
all regulations promulgated thereunder and references to statutes or
regulations shall be construed as including all statutory and regulatory
provisions consolidating, amending or replacing the statute or regulation.

 

SECTION 2.                            BOARD OF DIRECTORS AND VOTING

 

(a)           Board
of Directors.  From and after the
Effective Time, at each annual or special meeting at which any directors of the
Company are to be elected, and whenever the stockholders of the Company act by
written consent with respect to the election of directors, each Investor,

 

5

 

severally and not jointly, agrees to vote or otherwise give such
Investor’s consent in respect of all Class B Common Stock (whether now or hereafter
acquired) held of record or beneficially owned by such Investor, and the
Company shall take all necessary and desirable actions within its control, in
order to cause:

 

(i)            the authorized number of directors
on the board of directors of the Company (the “Board”) to be at least four (4) but no greater than ten (10)
directors, provided, that the number of directors on the Board may be
increased or decreased at the direction of the JPMP Investors;

 

(ii)           Subject to Section 2(c) below, the
election to the Board of :

 

(A)          (i) the Chief Executive Officer of the
Company and (ii) that number of directors designated by the JPMP Investors
(the “JPMP Directors”); provided that the JPMP Investors shall
have the right to designate each successor JPMP Director and shall be entitled
to direct the removal from the Board of any director; provided, however,
that for as long as either JPMP Selldown or JPMP Global own any Shares, one
such JPMP Director shall be designated by JPMP Selldown (so long as JPMP
Selldown owns Shares) and one such JPMP Director shall be designated by JPMP
Global (so long as JPMP Global owns Shares). 
The JPMP Directors shall initially be Richard A. Aube, Stephen V.
McKenna, Tim C. Purcell and Timothy J. Walsh; and

 

(B)           that number of independent directors
designated (and the determination of independence to be made) by the JPMP
Investors (the “Independent Directors”) (it being understood that the
JPMP Investors shall have the right to designate each successor Independent
Director and shall be entitled to direct the removal from the Board of any
Independent Director).

 

(b)           Each designation of or any
proposal to remove from the Board any director shall be made by delivering to
the Board a notice signed by the party entitled to such designation or proposal.  As promptly as practicable, but in any event
within five (5) days after delivery of such notice, the Company, the Board and
the Investors shall take or cause to be taken such actions as may be reasonably
required to cause the designation or removal proposed in such notice.  Such actions may include calling a meeting or
soliciting a written consent of the Board, or calling a meeting or soliciting a
written consent of the Investors.  Each
Investor shall take all actions required on its behalf to give effect to the
agreements set forth in this Section 2.

 

(c)           Voting
Agreement.  In addition, prior to
an IPO Date, as to any matter or action that requires a vote or written consent
of the stockholders of the Company, whether by law or pursuant to any
agreement, each Investor (other than the JPMP Investors) agrees to vote its
shares of Class B Common Stock, or to provide its written consent, only as
directed by the JPMP Representative; provided, that no Investor shall be
required to vote in favor of, or provide its written consent to, any action
that would disproportionately affect such Investor relative to the other
Investors in any material and adverse manner. 
In the event that any Investor (other than the JPMP Investors) entitled
to vote on or provide its written consent with respect to a matter shall fail
at any time to vote or act by written consent with respect to any shares of
Class B Common

 

6

 

Stock
held of record or beneficially owned by such Investor or as to which such
Investor has voting control such Investor hereby irrevocably grants to and
appoints the JPMP Representative such Investor’s proxy and attorney-in-fact
(with full power of substitution), for and in the name, place and stead of such
Investor, to vote or act by written consent with respect to such shares of
Class B Common Stock and to grant a consent, proxy or approval in respect of
such shares, in each case in such manner as the JPMP Representative shall
determine in its sole and absolute discretion. 
Each Investor (other than the JPMP Representative) hereby affirms that
the irrevocable proxy set forth in this Section 2(c) will be valid for the
term of this Agreement and is given to secure the performance of the
obligations of such Investor under this Agreement.  Each such Investor (other than the JPMP
Investors) hereby further affirms that each proxy hereby granted shall, for the
term of this Agreement, be irrevocable and shall be deemed coupled with an interest.

 

(d)           Committees.  The Board may, by duly adopted action of the
Board, designate one or more committees, including compensation and audit
committees, of one or more directors, including alternates who may replace any
absent or disqualified member at any meeting of the committee.

 

(e)           Chairman.  A chairman may be appointed by the directors
from among themselves.  The Chairman, if
appointed, will preside over meetings of the Board but shall otherwise have no
greater authority than any other director.

 

(f)            Payments to Directors;
Reimbursements.  No director who
is an officer of the Company or otherwise employed by the Company or any of its
Subsidiaries shall be entitled to remuneration from the Company for services rendered
in his or her capacity as a director (other than for reimbursement of reasonable
out-of-pocket expenses of such director in accordance with Company policy and
as may be authorized by the Board).  The
Board may authorize Independent Directors to receive director fees in respect
of services rendered as a director of the Company.

 

(g)           Competitive Opportunity.  If any director who is not employed by the
Company or any of its Subsidiaries acquires knowledge of a potential transaction
or matter which may be an investment or business opportunity or prospective
economic or competitive advantage in which the Company could have an interest
or expectancy (a “Competitive Opportunity”) or otherwise is then
exploiting any Competitive Opportunity, the Company shall have no interest in,
and no expectation that, such Competitive Opportunity be offered to it, any
such interest or expectation being hereby renounced so that each director who
is not employed by the Company or any of its Subsidiaries (other than any such
director who is bound by any employment, consulting or noncompetition agreements
that prohibit such actions) shall (i) have no duty to communicate or present
such Competitive Opportunity to the Company and (ii) have the right to hold any
such Competitive Opportunity for such director’s (and its agents’, partners’ or
affiliates’) own account and benefit or to recommend, assign or otherwise
transfer or deal in such Competitive Opportunity to Persons other than the
Company or any Affiliate of the Company.

 

(h)           Notice of Meetings.  Regular meetings of the Board may be held
without notice.  Special meetings of the
Board may be called by any JPMP Director and may be held upon 48 hours’ notice
to each director, either personally, by mail, by telegram or by facsimile, or
such

 

7

 

shorter
period as approved by the Board; provided, that such notice requirement
shall be deemed waived for any special meeting if each director is present at
such special meeting.

 

(i)            Subsidiary
Directors.  The Parties agree to
take all necessary action, either directly through the Company or otherwise, to
cause the board of directors of PQ and each significant Subsidiary (as
determined by the Board) to have at all times a board composition that has the
same proportion of Board designees of each of the JPMP Investors as the
Company, unless otherwise determined by holders of a majority of outstanding
shares of Class B Common Stock, and the Parties further agree that the other
board rights set forth in this Section 1 shall be granted, mutatis mutandis, to each of the JPMP Investors in respect
of each significant Subsidiary’s boards of directors.

 

SECTION
3.         TRANSFERS

 

(a)           Transfer
of Shares.  No Investor shall
Transfer any Shares other than in accordance with and as expressly permitted by
the provisions of this Agreement or any Restricted Stock Agreement applicable
to such Investor.  Any Transfer or
purported Transfer made in violation of this Agreement should be null and void
and of no effect.

 

(b)           Transfer
Restrictions.  Each of the
Investors (other than the JPMP Investors) agrees and acknowledges that it will
not, directly or indirectly (through one or more of its Affiliates or
otherwise), from the date hereof until the IPO Date (such period, the “Blockout
Period”), Transfer any economic or voting interest in any Shares (or in any
other securities, capital shares, membership interests, partnership interests,
units or other property of an entity that directly or indirectly holds any such
Shares), unless such Transfer is a Permitted Transfer, a Transfer pursuant to
Sections 4 or 5 of this Agreement, or a Transfer expressly contemplated or
permitted by any Restricted Stock Agreement applicable to such Investor.  Notwithstanding the foregoing, no Investor
(other than the JPMP Investors) shall be permitted, without the prior written
consent of the JPMP Representative, to Transfer any Shares to any Person that
competes in any material respect with the businesses conducted by PQ at the
time of such proposed Transfer (as determined by the Board).  As a condition to any Transfer of Shares
prior to the IPO Date, the transferee of such Shares shall become a party to
this Agreement and shall be treated as an Investor hereunder (but not as a JPMP
Investor unless (A) the transferor was a JPMP Investor, and (B) each JPMP
Investor consents in its respective sole discretion) with the same rights and
obligations of an Investor (but not as a JPMP Investor unless (A) the
transferor was a JPMP Investor, and (B) each JPMP Investor consents in its
respective sole discretion) for all purposes of this Agreement.  No holder of Shares shall grant any proxy or
become party to any voting trust or other agreement which is inconsistent with,
conflicts with or violates any provision of this Agreement.

 

(c)           Transfer
Notice.  Prior to any proposed
Transfer of any Shares, the Investor (other than the JPMP Investors in the
event of a Transfer to a Permitted Transferee) holding such Shares to be
Transferred shall give written notice to the Company and the other Investors of
its intention to effect such Transfer (the “Transfer Notice”).  Such Transfer Notice shall set forth in
reasonable detail the terms and conditions of such proposed Transfer, including
(i) the percentage of such Investor’s Shares that would be Transferred,
(ii) the number of Shares proposed to be Transferred (the “Offered Shares”), (iii) the
proposed amount and form of consideration to be paid for the

 

8

 

Offered
Shares and (iv) all other material terms of the proposed Transfer.  In the event that the terms and/or conditions
set forth in the Transfer Notice are thereafter amended in any material
respect, the Transfer Notice shall be of no further force and effect and the
transferring Investor shall give a new Transfer Notice containing such amended
terms and conditions.  Subject to
Sections 3, 4 and 5 herein (including any applicable time periods and
restrictions on Transfer set forth in those Sections), and subject to any
applicable Restricted Stock Agreement, the Investor holding such Shares to be
Transferred shall have the right, after receipt by the Company and the other
Investors of the Transfer Notice, to Transfer Shares in accordance with the
terms set forth in such Transfer Notice and this Agreement.

 

SECTION
4.         DRAG-ALONG RIGHTS

 

(a)           Drag-Along
Right.  Subject to
Section 4(d), if at any time (i) during the Blockout Period, the JPMP
Investors, or (ii) following the Blockout Period, any Investors owning, in
the aggregate, at least 50% of the then outstanding Shares (in the case of
either (i) and (ii), collectively, the “Drag-Along Sellers”) propose a
sale to any Independent Third Party (a “Drag-Along Transferee”) in a bona fide arm’s length
transaction or series of transactions (including pursuant to a purchase
agreement, tender offer, merger or other business combination transaction or
otherwise) of (A) a sufficient number of the Shares such Drag-Along Sellers own
to effect a Change of Control or (B) during the Blockout Period, all of the
Shares of the Drag-Along Sellers (in the case of either (A) or (B), an “Exit
Sale”), then the Drag-Along Sellers may elect to require each other
Investor (other than the JPMP Investors) to sell all, but not less than all, of
such other Investor’s Shares, as a part of the Exit Sale to such Drag-Along
Transferee, at the purchase price and upon the terms and subject to the
conditions of the Exit Sale (all of which shall be set forth in the Drag-Along
Notice as hereinafter defined) and may also require each other Investor (other
than the JPMP Investors) to vote in favor of such Exit Sale or act by written
consent approving the same with respect to all Shares owned by such Investor,
as necessary or desirable to authorize, approve and adopt the Exit Sale.  In the event that any Investor shall fail to
vote the Shares in favor of the Exit Sale, such Investor shall, upon such
failure to so vote, be deemed immediately to have granted the Drag-Along
Sellers a proxy to vote such Investor’s Shares in favor of the Exit Sale.  Such Investor acknowledges that each such
proxy granted hereby, including any successive proxy, if necessary, is being
given to secure the performance of an obligation hereunder, is coupled with an
interest, and shall be irrevocable until such obligation is performed.  Without limiting the foregoing, if an Exit
Sale requires the approval of the Company’s stockholders, each Investor (other
than the JPMP Investors) shall waive any dissenters’ rights, appraisal rights
or similar rights in connection with such Exit Sale.  In the event that an Exit Sale is proposed
pursuant to this Section 4, all outstanding proposals to Transfer Shares
shall immediately be withdrawn and no Transfer of Shares shall be consummated
until the expiration of the time period provided for in Section 4(e).

 

(b)           Notice.  The rights set forth in Section 4(a) shall be
exercised by the Drag-Along Sellers giving written notice (the “Drag-Along
Notice”) to each other Investor and the Company, at least ten (10) Business
Days prior to the date on which the Drag-Along Sellers expect to consummate the
Transfer giving rise to such Drag-Along Right. 
In the event that the terms and/or conditions set forth in the
Drag-Along Notice are thereafter amended in any material respect, the
Drag-Along Sellers shall give written notice (an “Amended Drag-Along Notice”) of the amended

 

9

 

terms
and conditions of the proposed Transfer to each other Investor.  Each Drag-Along Notice and Amended Drag-Along
Notice shall set forth:  (i) the name of
the Drag-Along Transferee and the number of Shares proposed to be purchased by
such Drag-Along Transferee, (ii) the proposed amount of consideration and
material terms and conditions of payment offered by the Drag-Along Transferee,
and (iii) a summary of any other material terms pertaining to the Transfer.

 

(c)           Exercise.  All Transfers of Shares to the Drag-Along
Transferee pursuant to this Section 4 shall be consummated simultaneously
at the offices of the Company, unless the Drag-Along Sellers elect otherwise,
on the later of (i) a Business Day not less than ten (10) or more than sixty
(60) days after the Drag-Along Notice is received by such other Investors and
the Company or (ii) the third Business Day following receipt of all
material Governmental Approvals, or at such other time and/or place as each of
the parties to such Transfers may agree. 
The delivery of stock certificates shall be made on such date, against
payment of the purchase price for such Shares, duly endorsed for Transfer or
with duly executed stock powers or similar instruments, or such other
instrument of Transfer of such Shares as may be reasonably requested by the
Drag-Along Sellers and the Company, with all stock transfer taxes paid and
stamps affixed.  Each other Investor
shall receive with respect to the sale of shares of Class B Common Stock the
same amount of consideration received by the Drag-Along Sellers per share of
Class B Common Stock (it being understood that shares of Class A Common Stock
may be valued by the Drag-Along Transferee at a lower price per share than the
Class B Common Stock to account for the different rights, powers, preferences
and privileges that the Class A Common Stock has compared to the Class B Common
Stock as set forth in the Company’s Certificate of Incorporation and other
agreements relating to the Shares, including, without limitation, the right of
the holders of shares of Class B Common Stock to receive distributions in
respect of their unreturned paid-in-capital of the Company prior the right of
the holders of shares of Class A Common Stock to receive distributions ratably
based on the number of outstanding Shares held by such holders).  To the extent that the Parties (or any
successors thereto) are to provide any indemnification or otherwise assume any
other post-closing liabilities, the Drag-Along Sellers and all other Investors
selling Shares in a transaction under this Section 4 shall do so severally
and not jointly (and on a pro rata basis in accordance with the Shares being
sold by each) and their respective potential liability thereunder shall not
exceed the proceeds received. 
Furthermore, each other Investor shall only be required to give
customary representations and warranties, including, but not limited to, title
to Shares conveyed, legal authority and capacity, and non-contravention of
other agreements to which it is a party. 
Each Investor shall be required to enter into any instrument,
undertaking or obligation necessary or reasonably requested and deliver all
documents necessary or reasonably requested in connection with such sale (as
specified in the Drag-Along Notice) in connection with this Section 4.

 

(d)           Time
Limitation.  If at the end of the
90th day after the receipt of the Drag-Along Notice the Drag-Along
Sellers have not completed the proposed Transfer, the Drag-Along Notice shall
be null and void, and it shall be necessary for a separate Drag-Along Notice to
be delivered, and the terms and provisions of this Section 4 separately
complied with, in order to consummate such Transfer pursuant to this Section 4;
provided, that such 90 day time period may be extended at the option of
the Drag-Along Sellers for a reasonable period of time not to exceed an
additional 90 days to the extent that the failure to complete the proposed
Transfer is cause by the failure to obtain the necessary Governmental
Approvals.

 

10

 

SECTION
5.         TAG-ALONG RIGHTS

 

(a)           Notice.  Subject to Section 5(d) if at any time the
JPMP Investors (referred to in this Section 6 as the “Tag-Along Seller”) propose to
Transfer 5% or more of the then outstanding Shares to an Independent Third
Party, then such Tag-Along Seller shall comply with the provisions of this
Section 5.  In addition to the
information required to be provided in the Transfer Notice pursuant to Section
3(c), the Tag-Along Seller shall provide additional information with respect to
the proposed sale as reasonably requested by the other Investors.

 

(b)           Tag-Along
Right.  The Investors (other than
the JPMP Investors) shall have the right, exercisable upon written notice to
the Tag-Along Seller within seven (7) Business Days after receipt of the
applicable Transfer Notice (the “Tag-Along Election Period”), to
participate in the proposed Transfer by the Tag-Along Seller to an Independent
Third Party (the “Tag-Along
Transferee”) on the terms and conditions set forth in such Transfer
Notice (such participation rights being hereinafter referred to as “Tag-Along Rights”).  Any Investor that has not notified the
Tag-Along Seller of its intent to exercise Tag-Along Rights within the
Tag-Along Election Period shall be deemed to have elected not to exercise such
Tag-Along Rights with respect to the sale contemplated by such Transfer
Notice.  Each other Investor may participate
with respect to the Shares owned by such Investor (excluding any non-vested
shares of Class A Common Stock so held) in an amount equal to the product
obtained by multiplying (i) the aggregate number of Shares (excluding any
non-vested shares of Class A Common Stock so held) owned by such other Investor
on the date of the sale by (ii) a fraction, the numerator of which is
equal to the number of Shares proposed to be sold by the Tag-Along Seller and
the denominator of which is the aggregate number of Shares owned by the
Tag-Along Seller (the “Eligible Shares”).  If one or more other Investors elects not to
include the maximum number of Eligible Shares in a proposed sale, the Tag-Along
Seller shall give prompt notice to each other participating Investor (including
the Tag-Along Seller) and such other participating Investors may sell in the
proposed sale a number of additional Shares owned by any of them equal to their
pro rata portion (based upon the aggregate number of Shares (excluding any
non-vested shares of Class A Common Stock so held) owned by such Investor
relative to the aggregate number of Shares (excluding any non-vested shares of
Class A Common Stock so held) owned by all Investors) of the number of Shares
eligible to be included in the proposed sale. 
Such additional Shares which any such Investor(s) proposes to sell shall
not be included in the calculation of Eligible Shares of such Investor.  To the extent that the total number of Shares
proposed to be sold by the Tag-Along Seller and the number of Eligible Shares
proposed to be sold by all of the other Investors collectively exceeds the
number of Shares that the Tag-Along Transferee is willing to purchase, the
number of Shares that the Tag-Along Seller and each other Investor proposes to
sell will be reduced pro rata based upon the relative number of Shares that the
Tag-Along Seller and each other Investor had proposed to sell.

 

(c)           Exercise.  At the closing of the sale to any Tag-Along
Transferee pursuant to this Section 5, the delivery of stock certificates
shall be made on such date by the Tag-Along Seller and such other Investors
exercising Tag-Along Rights, against payment of the purchase price for such
Shares, duly endorsed for Transfer or with duly executed stock powers or
similar instruments, or such other instrument of Transfer of such Shares as may
be reasonably requested by the Tag-Along Transferee and the Company, with all
stock transfer taxes paid and stamps

 

11

 

affixed.  The consummation of such proposed Transfer
shall be subject to the sole discretion of the Tag-Along Seller, who shall have
no liability or obligation whatsoever to any other Investor participating
therein in connection with such Investor’s Transfer of Shares.  Each other Investor shall receive with
respect to the sale of shares of Class B Common Stock the same amount of
consideration received by the Tag -Along Sellers per share of Class B Common
Stock (it being understood that shares of Class A Common Stock may be valued by
the Tag-Along Transferee at a lower price per share than the Class B Common
Stock to account for the different rights, powers, preferences and privileges
that the Class A Common Stock has compared to the Class B Common Stock as set
forth in the Company’s Certificate of Incorporation and other agreements
relating to the Shares, including, without limitation, the right of the holders
of shares of Class B Common Stock to receive distributions in respect of their
unreturned paid-in-capital of the Company prior the right of the holders of
shares of Class A Common Stock to receive distributions ratably based on the
number of outstanding Shares held by such holders).  To the extent that the Parties (or any
successors thereto) are to provide any indemnification or otherwise assume any
other post-closing liabilities, the Tag-Along Seller and all other Investors
participating in a transaction under this Section 5 shall do so severally
and not jointly (and on a pro rata basis in accordance with the Shares being
sold by each), and their respective potential liability thereunder shall not
exceed the proceeds received.  If any
Governmental Approval is required in connection with any such Transfer of
Shares and such Governmental Approval has not been completed or obtained on or
prior to the date scheduled for closing, the closing of Transfer of Shares
shall take place on the third Business Day after such Governmental Approval has
been completed or obtained.  Each
participating Investor shall be required to enter into any instrument,
undertaking, obligation or make any filing necessary or reasonably requested
and deliver all documents necessary or reasonably requested in connection with
such sale (as specified in the Transfer Notice) as a condition to the exercise
of such holder’s rights to Transfer Shares under this Section 5.

 

(d)           Certain
Restrictions.  Notwithstanding
the foregoing, no Tag-Along Rights of any Investor shall apply hereunder with
respect to any sales pursuant to (i) any Permitted Transfer or (ii) any
drag-along sale pursuant to Section 4.

 

(e)           Time
Limitation.  If at the end of the
90th day after the end of the Tag-Along Election Period, the
Tag-Along Seller has not completed the proposed Transfer, the Transfer Notice
shall be null and void, and it shall be necessary for a separate Transfer
Notice to be delivered, and the terms and provisions of this Section 5
separately complied with, in order to consummate such Transfer pursuant to this
Section 5.

 

SECTION
6.         LEGEND ON CERTIFICATES

 

(a)           Legends.  To the extent applicable, each certificate
representing Shares shall bear each of the following legends (in addition to
any legends required under the Subscription Agreements or the Restricted Stock
Agreement) until such time as the Shares represented thereby are no longer
subject to the provisions hereof.

 

(i)            “THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN

 

12

 

CONNECTION
WITH, THE SALE OR DISTRIBUTION THEREOF. 
NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.”

 

(ii)           “THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF OR EXCHANGED UNLESS SUCH TRANSFER, SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OR EXCHANGE COMPLIES WITH THE
PROVISIONS OF THE STOCKHOLDERS’ AGREEMENT AND THE RESTRICTED STOCK AGREEMENT
(AS APPLICABLE), EACH DATED AS OF FEBRUARY 11, 2005, AS AMENDED FROM TIME TO
TIME, BETWEEN THE COMPANY AND THE INVESTORS PARTY THERETO, COPIES OF WHICH ARE
ON FILE WITH THE SECRETARY OF THE COMPANY.”

 

(iii)          Any legend required by the Blue Sky
laws of any state to the extent such laws are applicable to the shares
represented by the certificate so legended.

 

SECTION
7.         DURATION OF AGREEMENT

 

This Agreement shall terminate
and be of no further force or effect, except with respect to the provisions set
forth in Sections 1, 7, 8, 9, 10 and 11, upon the earliest to occur of
(i) the unanimous agreement of the Investors, (ii) an IPO Date, and
(iii) the date on which the JPMP Investors, together with their respective
Permitted Transferees, collectively own 5% or less of the then outstanding
Shares; provided, however, that notwithstanding the foregoing and
except as may be otherwise specified herein, in the event that this Agreement
is terminated pursuant to clause (ii) of this Section 7, the provisions set
forth in Section 4 shall also survive.

 

SECTION
8.         INFORMATION RIGHTS

 

(a)           Financial Statements and
Other Information.

 

(i)            The Company shall deliver to each
Investor that owns at least 10% of the Class B Common Stock then outstanding
with the following information:

 

(A)          as soon as is available and in any
event within 30 days after the end of each month of each fiscal year of the
Company, consolidated balance sheets of the Company and any Subsidiary of the
Company as of the end of such period, and consolidated statements of income and
cash flows of the Company and any Subsidiary of the Company for the period then
ended, prepared in conformity with generally accepted accounting principles in
the United States applied on a consistent basis, except as otherwise noted
therein, and subject to the absence of footnotes and to year-end adjustments;

 

13

 

(B)           as soon as is available and in any
event within 45 days after the end of each of the first three quarters of each
fiscal year of the Company, consolidated balance sheets of the Company and any
Subsidiary of the Company as of the end of such period, and consolidated
statements of income and cash flows of the Company and any Subsidiary of the
Company for the period then ended, prepared in conformity with generally
accepted accounting principles in the United States applied on a consistent
basis, except as otherwise noted therein, and subject to the absence of
footnotes and to year-end adjustments;

 

(C)           as soon as is available and in any
event within 90 days after the end of each fiscal year of the Company, a
consolidated balance sheet of the Company and any Subsidiaries of the Company
as of the end of such year, and consolidated statements of income and cash
flows of the Company and any Subsidiary of the Company for the year ended
prepared in conformity with generally accepted accounting principles in the
United States applied on a consistent basis, except as otherwise noted therein,
together with an auditor’s report thereon of a firm of established national
reputation; and

 

(D)          to the extent the Company is required
by law or pursuant to the terms of any of the Company’s or any of the Company’s
Subsidiaries’ material debt agreements, indentures and other agreements or
instruments evidencing material indebtedness of the Company or any of its
Subsidiaries to prepare such reports, any annual reports, quarterly reports and
other periodic reports pursuant to Section 13 or 15(d) of the Exchange
Act, as amended, such reports actually prepared by the Company as soon as
available.

 

(ii)           From and after the date hereof, the Investors shall not and, in each
case, shall cause each of their respective Permitted Transferees and other
representatives not to, directly or indirectly, disclose, reveal, divulge or
communicate to any Person other than authorized representatives of the Company
or use or otherwise exploit for its own benefit or for the benefit of anyone
other than the Company, any confidential information of or relating to the
business conducted by the Company, unless (i) compelled to disclose by judicial
or administrative process or by other requirements of law or governmental
authorities or (ii) disclosed in an action brought by a party hereto in pursuit
of its rights or in the exercise of its remedies hereunder; provided, however,
that in the event disclosure is required by applicable law, the Investors
shall, to the extent reasonably possible, provide the Company with prompt
notice of such requirement prior to making any disclosure so that the Company
may seek an appropriate protective order. 
For purposes of this Section 8(a)(ii), “confidential information”
does not include, and there shall be no obligation hereunder with respect to,
information that (i) is generally available to the public on the date of this
Agreement or (ii) becomes generally available to the public other than as a
result of a disclosure not otherwise permissible thereunder.

 

(b)           Other
Information.  The Company and any
Subsidiary of the Company shall provide to each of the JPMP Investors, and as
applicable create and/or generate, any information as a JPMP Investor may
reasonably request, including true and correct copies of all documents,
reports, financial data and other information.

 

14

 

SECTION
9.         REGULATORY MATTERS

 

(a)           Cooperation of Other
Stockholders.  Each Investor
agrees to cooperate with the Company in all reasonable respects in complying
with the terms and provisions of the letter agreement between the Company and
the JPMP Investors, a copy of which is attached hereto as Exhibit B,
regarding regulatory matters (the “Regulatory Sideletter”), including
without limitation, voting to approve amending the Company’s certificate of
incorporation, the Company’s bylaws or this Agreement in a manner reasonably
acceptable to the Parties and the JPMP Investors entitled to make such request
pursuant to the Regulatory Sideletter in order to remedy a Regulatory Problem
(as defined in the Regulatory Sideletter).

 

(b)           Covenant
Not to Amend.  The Company and
each Party agrees not to amend or waive the voting or other provisions of the
Company’s certificate of incorporation, the Company’s bylaws or this Agreement
if such amendment or waiver would cause the JPMP Investors to have a Regulatory
Problem.  The JPMP Investors agree to
notify the Company as to whether or not it would have a Regulatory Problem promptly
after the JPMP Investors have notice of such amendment or waiver.

 

SECTION
10.       EFFECTIVENESS OF AGREEMENT

 

This Agreement shall become effective at the Effective
Time.  Prior to the Effective Time, this
Agreement shall have no force or effect, and no Investor shall have any rights,
obligations or claims against or with respect to the Company or any other
Investor, except as may be set forth in such Investor’s subscription agreement
with the Company.  At the Effective Time,
the Company shall, as applicable, (i) revise Schedule 1 attached hereto to
reflect the identity of any additional JPMP Investors designated by JPMP BHCA
to the Company in writing prior to the Effective Time and accept signature
pages including the signatures of such JPMP Investors; provided, that
such additional JPMP Investors are Affiliates of JPMP BHCA, (ii) revise
Schedule 1 attached hereto to reflect the ownership of Shares of each Investor
at such time, (iii) with the consent of the JPMP Representative, amend this
Agreement to reflect the addition of any other Investors, and (iv) promptly
thereafter, deliver a copy of this Agreement to each Investor.

 

SECTION
11.       MISCELLANEOUS

 

(a)           Successors, Assigns and
Transferees.  This Agreement
shall be binding upon and inure to the benefit of the Parties and their
respective legal representatives, heirs, legatees, successors, and permitted
assigns and any other permitted Transferee of Shares hereunder and shall also
apply to any Shares acquired by Investors after the date hereof.  Prior to the IPO Date, in the event that any
Investor Transfers all or any portion of its Shares to any other Person, as
permitted herein, such Transferee shall execute a counterpart of this agreement
in the form attached as Exhibit A hereto and agree to be bound by
the terms hereof for all purposes hereunder. 
Any such Transfer by an Investor will be void ab initio unless such Transfer is effectuated in accordance
with this Agreement.  Any Affiliate of
the JPMP Investors that receives Shares hereunder shall be considered one of
the JPMP Investors for all purposes hereunder.

 

(b)           Specific
Performance.  Each Party, in
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, shall be entitled to

 

15

 

specific
performance of each other Party’s obligations under this Agreement, and each
Party agrees to waive any requirement for the security or posting of any bond
in connection with such remedy. The Parties agree that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by any
of them of the provisions of this Agreement and each hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.

 

(c)           Governing
Law.  This Agreement shall be
governed by and construed in accordance with the internal laws, and not the law
of conflicts which would result in the application of the laws of another
jurisdiction, of the State of Delaware.

 

(d)           PQP, LLC.  PQP, LLC and Michael R. Boyce hereby
represent and warrant to the other Parties hereto that Mr. Boyce is the
managing member of PQP, LLC and has the power to direct or cause the direction
of the management and policies of PQP, LLC, whether through the ownership of
membership interests, by contract or otherwise. 
PQP, LLC and Michael R. Boyce hereby covenant and agree that PQP, LLC
(and any successor thereto) shall not engage in or otherwise conduct any
business other than the business of holding the Shares and taking such other
actions as expressly contemplated by any agreement between the Company and PQP,
LLC.

 

(e)           Initial
Public Offering.  In the event
the Company determines to effect an Initial Public Offering, the Investors will
take all necessary and desirable actions in connection with the consummation of
the Initial Public Offering.  Prior to
the consummation of the Initial Public Offering, the Board, with the assistance
of the managing underwriters of the Initial Public Offering, shall (i)
determine in its reasonable opinion the fair value of the Company, taking into
account such factors it considers fair and reasonable under the circumstances
and (ii) following such determination of the fair value of the Company,
calculate the amount that would be paid to each holder of shares of the Class A
Common Stock and Class B Common Stock if an amount equal to such fair value of
the Company was distributed on the anticipated IPO Date by the Company in
complete liquidation of the Company pursuant to the rights and preferences set
forth in the Company’s Certificate of Incorporation (giving effect to
applicable orders of priority and the provisions of agreements relating to the
Shares).  The Company and the Investors
shall take all actions reasonably necessary, including the voting of, or providing
its written consent with respect to, the Shares, to effect any redemption,
recapitalization or exchange of Shares immediately prior to the IPO Date as
determined by the Board to implement an Initial Public Offering.  Each Investor agrees (if so required by the
managing underwriters of an Initial Public Offering) that it will not offer for
public sale any capital stock of the Company during a period not to exceed 180
days after the effective date of any registration statement filed by the
Company in connection with an Initial Public Offering (except as part of such
underwritten registration or as otherwise permitted by such managing
underwriters).

 

(f)            Submission to Jurisdiction;
Waiver of Jury Trial.  Each of
the Parties hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the Court of Chancery of the State of Delaware and of
the United States of America sitting in Delaware for any action, proceeding or
investigation in any court or before any governmental authority (“Litigation”)
arising out of or relating to this Agreement, (and agrees not to commence any
Litigation relating thereto except in such court), and further agrees that
service of any process, summons, notice or document by U.S. registered mail to
its respective notice address, as provided 

 

16

 

for in
this Agreement, shall be effective service of process for any Litigation
brought against it in any such court. 
Each of the Parties hereby irrevocably and unconditionally waives any
objection to the laying of venue of any Litigation arising out of this
Agreement or the transactions contemplated hereby in the Court of Chancery of
the State of Delaware or the United States of America sitting in Delaware and
hereby further irrevocably and unconditionally waives and agrees not to plead
or claim in any such court that any such Litigation brought in any such court
has been brought in an inconvenient forum. 
Each of the Parties irrevocably and
unconditionally waives, to the fullest extent permitted by applicable law, any
and all rights to trial by jury in connection with any Litigation arising out
of or relating to this Agreement or the transactions contemplated hereby.

 

(g)           Descriptive
Headings.  The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.

 

(h)           Notices.  All notices, requests or consents provided
for or permitted to be given under this Agreement shall be in writing and shall
be given either by depositing such writing in the United States mail, addressed
to the recipient, postage paid and certified with return receipt requested, or
by depositing such writing with a reputable overnight courier for next day
delivery, or by delivering such writing to the recipient in person, by courier
or by facsimile transmission.  A notice,
request or consent given under this Agreement shall be deemed received when
actually received if personally delivered, when transmitted, if transmitted by
facsimile with electronic confirmation, the day after it is sent, if sent for
next day delivery and upon receipt, if sent by mail.  All such notices, requests and consents shall
be delivered as follows:

 

(i)            if to the Company, addressed to it
at:

 

Niagara Holdings, Inc.

c/o J.P. Morgan Partners (BHCA), L.P.

1221 Avenue of the Americas

39th Floor

New York, New York 10020

Attn:  Timothy J. Walsh

Richard A. Aube

Stephen V. McKenna

Facsimile: (212) 899-3401

 

with a copy to:

 

Latham & Watkins LLP

885 Third Avenue

Suite 1000

New York, NY 10022

Attn:  Samuel A. Fishman

David S. Allinson

Facsimile: (212) 751-4864

 

17

 

(ii)           if to the JPMP Investors, addressed
as follows:

 

J.P. Morgan Partners (BHCA), L.P. and affiliated funds

1221 Avenue of the Americas

39th Floor

New York, New York 10020

Attn:  Timothy J. Walsh

Richard A. Aube

Stephen V. McKenna

 

with a copy to:

 

Latham & Watkins LLP

885 Third Avenue

Suite 1000

New York, NY 10022

Attn:  Samuel A. Fishman

David S. Allinson

 

(iii)          if to any other Investor, in
accordance with the address of each such Investor set forth on Schedule 1
hereto or set forth on any signature page to this Agreement.

 

(i)            Recapitalization, Exchange,
Etc. Affecting the Company’s Shares.  The provisions of this Agreement shall apply,
to the full extent set forth herein, with respect to any and all Shares of the
Company or any successor or assign of the Company (whether by merger,
consolidation, sale of assets, conversion to a corporation or otherwise) that
may be issued in respect of, in exchange for, or in substitution of, the Shares
and shall be appropriately adjusted for any dividends, splits, reverse splits,
combinations, recapitalizations, and the like occurring after the date hereof.

 

(j)            Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to constitute one and the same agreement.

 

(k)           Severability.  In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal, or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any
way impaired thereby.

 

(l)            Amendment.  This Agreement may be amended only by written
agreement approved by (i) the JPMP Investors or (ii) if the JPMP Investors hold
less than 10% of the then outstanding shares of Class B Common Stock, the
Investors owning, in the aggregate, at least a majority of the then outstanding
Shares owned by Investors; provided, that the written consent of each
other Party or Parties shall be required, in addition to the approval required
in (i) or (ii) above, as the case may be, for any such amendment that
disproportionately affects in any material and adverse manner such Party or
Parties or their rights or obligations hereunder relative to the other
Parties.  At any time hereafter, Persons
acquiring Shares may be made parties hereto by

 

18

 

executing
a signature page in the form attached as Exhibit A hereto, which
signature page shall be countersigned by the Company and shall be attached to
this Agreement and become a part hereof without any further action of any other
Party hereto.  Except as otherwise
provided herein, in the event that (A) the Company or any successor or
assign consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity in such consolidation or merger,
(B) the Company or any successor or assign transfers all or substantially all
of its properties and assets to any Person, or (C) a sale of the Company
is consummated pursuant to Section 4 and the Investors receive non-publicly
traded equity securities in connection with such transaction, then in the case
of either (A) or (B), proper provision shall be made and all Investors shall
execute such documents and agreements as reasonably requested by the JPMP
Investors so that this Agreement shall be given full force and effect with
respect to such surviving corporation or entity or such Person that acquires
all or substantially all of the properties and assets of the Company or any successor
or assign (any such surviving corporation, entity or Person, a “Successor
Entity”), as the case may be, and the rights and obligations of each Party
hereto shall continue in full force and effect such that each Party shall have
the same rights and obligations with respect to the applicable Successor Entity
and its securities as it has with respect to the Company and the Shares, and in
the case of (C) proper provision shall be made and all Investors shall execute
such documents and agreement as reasonably requested by the JPMP Investors so
that the provisions of Sections 4 and 5 shall survive (as may be amended as
reasonably determined by the JPMP Investors) with respect to such non-publicly
traded equity securities.

 

(m)          Tax
Withholding.  The Company shall
be entitled to require payment in cash or deduction from other compensation
payable to any Investor of any sums required by federal, state or local tax law
to be withheld with respect to the issuance, vesting, exercise, repurchase or
cancellation of any Shares.

 

(n)           Integration.  This Agreement, the Subscription Agreements,
the Restricted Stock Agreements, the Regulatory Sideletter and any side letters
by any Investor or group of Investors, on the one hand, and the Company, on the
other, regarding board observer rights and such related matters, constitute the
entire agreement among the Parties hereto pertaining to the subject matter
hereof and supersede all prior agreements and understandings pertaining
thereto.

 

(o)           Further
Assurances.  In connection with
this Agreement and the transactions contemplated thereby, each Investor shall
execute and deliver any additional documents and instruments and perform any
additional acts that may be necessary or appropriate to effectuate and perform
the provisions of this Agreement and such transactions.

 

(p)           No
Strict Construction.  This
Agreement shall be deemed to be collectively prepared by the Parties, and no
ambiguity herein shall be construed for or against any Party based upon the
identity of the author of this Agreement or any provision hereof.

 

(q)           No Third Party Beneficiaries.  Neither this Agreement, nor any provision
contained herein, shall create a third-party beneficiary relationship or
otherwise confer any right, entitlement or benefit upon any Person other than
the Parties to this Agreement and their permitted assigns.

 

19

 

IN WITNESS WHEREOF, the Parties have executed this
Stockholders Agreement as of the date first above written.

 

	
   

  	
  NIAGARA
  HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy Walsh

  	
   

  
	
   

  	
  Name:

  	
  Timothy Walsh

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
  J.P.
  MORGAN PARTNERS (BHCA), L.P.

  
	
   

  	
   

  	
  BY: JPMP MASTER
  FUND MANAGER, L.P.,

  
	
   

  	
   

  	
  ITS GENERAL
  PARTNER

  
	
   

  	
   

  	
  BY: JPMP CAPITAL
  CORP.,

  
	
   

  	
   

  	
  ITS GENERAL
  PARTNER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy C. Purcell

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Timothy C.
  Purcell

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Managing Partner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  J.P.
  MORGAN PARTNERS GLOBAL

  INVESTORS, L.P.

  
	
   

  	
   

  
	
   

  	
   

  	
  BY:  JPMP GLOBAL INVESTORS, L.P.,

  
	
   

  	
   

  	
  ITS GENERAL PARTNER

  
	
   

  	
   

  	
  BY:  JPMP CAPITAL CORP.,

  
	
   

  	
   

  	
  ITS GENERAL PARTNER

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy C. Purcell

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Timothy C.
  Purcell

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Managing Partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  J.P.
  MORGAN PARTNERS GLOBAL

  INVESTORS A, L.P.

  
	
   

  	
   

  
	
   

  	
   

  	
  BY:  JPMP GLOBAL INVESTORS, L.P.,

  
	
   

  	
   

  	
  ITS GENERAL PARTNER

  
	
   

  	
   

  	
  BY:  JPMP CAPITAL CORP.,

  
	
   

  	
   

  	
  ITS GENERAL PARTNER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy C. Purcell

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Timothy C.
  Purcell

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Managing Partner

  	
   

  
										

 

 

	
   

  	
  J.P.
  MORGAN PARTNERS GLOBAL

  INVESTORS (CAYMAN), L.P.

  
	
   

  	
   

  
	
   

  	
   

  	
  BY:  JPMP GLOBAL INVESTORS, L.P.,

  
	
   

  	
   

  	
  ITS GENERAL PARTNER

  
	
   

  	
   

  	
  BY:  JPMP CAPITAL CORP.,

  
	
   

  	
   

  	
  ITS GENERAL PARTNER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy C. Purcell

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Timothy C.
  Purcell

  
	
   

  	
   

  	
  Title:

  	
  Managing Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  J.P.
  MORGAN PARTNERS GLOBAL

  INVESTORS (CAYMAN) II, L.P.

  
	
   

  	
   

  
	
   

  	
   

  	
  BY:  JPMP GLOBAL INVESTORS, L.P.,

  
	
   

  	
   

  	
  ITS GENERAL PARTNER

  
	
   

  	
   

  	
  BY:  JPMP CAPITAL CORP.,

  
	
   

  	
   

  	
  ITS GENERAL PARTNER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy C. Purcell

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Timothy C.
  Purcell

  
	
   

  	
   

  	
  Title:

  	
  Managing Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  J.P.
  MORGAN PARTNERS GLOBAL

  INVESTORS (SELLDOWN), L.P.

  
	
   

  	
   

  
	
   

  	
   

  	
  BY:  JPMP GLOBAL INVESTORS, L.P.,

  
	
   

  	
   

  	
  ITS GENERAL PARTNER

  
	
   

  	
   

  	
  BY:  JPMP CAPITAL CORP.,

  
	
   

  	
   

  	
  ITS GENERAL PARTNER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy C. Purcell

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Timothy C.
  Purcell

  
	
   

  	
   

  	
  Title:

  	
  Managing Partner

  
					

 

 

	
   

  	
  PQP,
  LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Scott Randolph

  	
   

  
	
   

  	
  Name:

  	
  Scott Randolph

  
	
   

  	
  Title:

  	
  Vice President
  and Chief Financial

  Officer

  

 

 

SCHEDULE 1

 

 

SCHEDULE OF INVESTORS

 

 

EXHIBIT
A

 

SIGNATURE PAGE

TO THE

STOCKHOLDERS AGREEMENT

 

By execution of this signature page,                                                                      
hereby agrees to become a party to, be bound by the obligations of and receive
the benefits of that certain Stockholders Agreement, dated as of February 11,
2005, by and among Niagara Holdings Inc., a Delaware corporation, J.P. Morgan
Partners (BHCA), L.P., and the other parties thereto, as amended from time to
time thereafter, and shall be deemed to be an “Investor” for all purposes
thereunder.

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Notice Address:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Accepted:

  	
   

  	
   

  
	
  NIAGARA HOLDINGS, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							

 

 

EXHIBIT
B

 

 

Regulatory
Sideletter

 

 

[Attached hereto]Exhibit
10.4

 

Confidential

 

EXECUTIVE CHANGE IN CONTROL AGREEMENT

 

THIS EXECUTIVE CHANGE IN CONTROL AGREEMENT (the “Agreement”) is made by and between PQ
Corporation and its wholly owned subsidiary, Potters Industries, Inc.
(collectively the “Employer”), and Michael R. Imbriani (the “Employee”), dated
as of the 15th day of
August, 2000.

 

The Board of Directors of PQ Corporation (the “Board”) has determined
that it is in the best interests of Employer and its shareholders to assure
that Employer and its subsidiaries will have the continued dedication of
Employee in his capacity as Executive Vice President, notwithstanding the
possibility, threat or occurrence of a Change in Control (as defined below) of
Employer. The Board believes it is imperative to diminish the inevitable
distraction of Employee by virtue of the personal uncertainties and risks
created by a pending or threatened Change in Control, to encourage Employee’s
full attention and dedication to Employer currently and in the event of any
threatened or pending Change in Control, and to provide Employee with
compensation arrangements upon a Change in Control that offer Employee
individual financial security competitive with those of other corporations. In
order to accomplish these objectives, the Board has caused Employer to enter
into this Agreement.

 

NOW, THEREFORE,
the parties hereto, intending to be legally bound, agree as follows:

 

1.             Change in Control. For the purpose of this Agreement, a “Change
in Control” shall mean any one or more of the conditions described in
subsections (b) through (d) below:

 

(a)           Definitions: For purposes of this section,
the following words and phrases shall have the meanings set forth herein:

 

(i)            “Group” shad have the meaning prescribed by Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”),
excluding, for this purpose, PQ Corporation, its subsidiaries, any employee
benefit plan of PQ Corporation or its subsidiaries, and any purchaser or group
of purchasers who are members of, or entities controlled by members of, the
Elkinton and/or Evans families, which acquires Beneficial Ownership of voting
securities of PQ Corporation.

 

 

(ii)           “Beneficial Ownership” shall have the meaning
prescribed by Rule 13d-3 promulgated under the Exchange Act.

 

(b)           The acquisition, directly or indirectly,
other than from PQ Corporation, by any person, entity or Group (a “Third Party”)
of Beneficial Ownership of 35% or more of either the then outstanding shares of
common stock or the combined voting power of the PQ Corporation’s then
outstanding voting securities entitled to vote generally in the election of
directors; or

 

(c)           Individuals who, as of the date first written
above, constitute the Board (the “Incumbent Directors”) cease for any reason to
constitute at least a majority of the Board, provided that any person becoming
a director subsequent to the date hereof whose election, or nomination for
election by PQ Corporation’s shareholders, was approved by a vote of at least a
majority of the Incumbent Directors who are directors at the time of such vote
shall be, for purposes of this Agreement, an Incumbent Director; or

 

(d)           Consummation of: (i) a reorganization, merger
or consolidation, in each case, with respect to which persons who were the
shareholders of the PQ Corporation immediately prior to such reorganization, merger
or consolidation do not, immediately thereafter, own more than 50% of the
combined voting power of the reorganized, merged or consolidated company’s then
outstanding voting securities entitled to vote generally in the election of
directors, provided that if the acquiror is a shareholder prior to the
transaction, he will be excluded from the group of shareholders for purposes of
the 50% determination; (ii) a liquidation or dissolution of PQ Corporation; or
(iii) the sale of all or substantially all of the assets of PQ Corporation (whether
such assets are held directly or indirectly) to a Third Party.

 

2.             Effective Date and Employment
Period.

 

(a)           The “Effective Date” of this Agreement shall
be the closing date of an acquisition, reorganization, merger, consolidation,
liquidation, dissolution or change in Incumbent Directors, as described in
section 1 hereof, provided however that each of the following conditions has
been met:

 

(i)            Employee has executed the General Release of Claims set forth in Appendix A hereto, and
incorporated herein, coincidental with such Change in Control;

 

(ii)           Immediately prior to the Effective Date,
Employee has been continuously employed by Employer in the position he held
when this Agreement was made as set forth above; provided, however, that should
a Change in Control occur within the twelve (12) month period following the
date of Employee’s termination from employment other than for Cause (as defined
herein) or for voluntary resignation, and if Employer had entered into
discussions with the third party or parties who are

 

2

 

bringing about the Change in Control prior to such termination, then
Employee shall be granted the same treatment hereunder as if he had been
continuously employed by Employer through the date of such Change in Control.

 

(b)           Prior to the Effective Date, Employee shall
continue to be “at will” such that either Employer or Employee may terminate Employee’s
employment without regard to any provision of this Agreement and without any
obligation, or consequence hereunder, with or without advance notice, warning
or cause. Further, during such period, Employee’s terms and conditions of
employment shall continue to be determined in the sole discretion of Employer.
Provided, however, that any termination of Employee’s employment prior to the
Effective Date of this Agreement shall be subject to Employer’s termination
policies and practices in effect on such date.

 

(c)           Upon the Effective Date, Employer hereby
agrees to continue Employee in its employ, and Employee hereby agrees to remain
in the employ of Employer, for the Employment Period unless such employment is
terminated pursuant to section 6 hereof. For purposes of this Agreement, the “Employment
Period” is the three (3) year period commencing on the Effective Date and
ending on the third anniversary of such date.

 

3.             Position and Duties during Employment Period.

 

(a)           During the Employment Period, for so long as
Employee shall remain employed hereunder:

 

(i)            Employee’s position (including status,
offices and reporting relationships), authority, duties and responsibilities
shall be at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time during the 90-day
period immediately preceding the Effective Date.

 

(ii)           Employee’s services shall be performed at the
location where Employee was employed immediately preceding the Effective Date
or any office or location less than twenty-five (25) miles from such location.

 

(iii)          Employee agrees to devote reasonable
attention and time during normal business hours to the business and affairs of
Employer and, to the extent necessary to discharge the responsibilities
assigned to Employee hereunder, to use Employee’s reasonable best efforts to
perform faithfully, diligently and efficiently such responsibilities. It shall
not be a violation of this Agreement for Employee to continue to serve on
existing corporate, civic or charitable boards or committees; deliver lectures,
fulfill speaking engagements or teach at educational institutions; and to
manage personal investments; provided, however, that such activities do not
significantly interfere with the performance of Employee’s responsibilities as
an employee of Employer in accordance with this Agreement.

 

3

 

4.             Compensation and Benefits. During the Employment Period, for so long as
Employee shall remain employed hereunder:

 

(a)           Base Salary. Employee shall receive a “Base Salary” at a monthly
rate at least equal to the highest monthly base salary paid or payable to Employee
by Employer during the twelve (12) month period immediately preceding the month
in which the Effective Date occurs, During the Employment Period, the Base Salary
shall be reviewed at least annually, and shall be increased from time to time, consistent
with increases in base salary awarded in the ordinary course of business to other
key executives of Employer and its subsidiaries. Once increased, the Base Salary
paid to Employee shall not be reduced thereafter.

 

(b)           Annual Bonus. Employee shall be awarded an annual bonus
under the Annual Results Compensation Plan (“ARC Plan”), or a Comparable bonus
plan offered by Employer’s successor, at a level no less than Employee’s highest
“percentage of aggregate salary,” as that term is used in the ARC Plan, in the five
(5) year period preceding the Effective Date of this Agreement.

 

(c)           Retirement, Savings and Incentive
Programs. Employee shall be entitled to participate in
retirement, savings, profit sharing and stock option plans, including without
limitation a supplemental executive retirement plan, which are Comparable to
those retirement and incentive programs in which he participated in the ninety
(90) day period preceding the Effective Date.

 

(d)           Health and Welfare Benefits. Employee and his qualifying dependents shall
be entitled to participate in health and other welfare programs, including
without limitation medical, dental, vision, prescription, life insurance, ‘short
and long-term disability plans, which are Comparable to those health and
welfare programs in which they participated in the ninety (90) day period
preceding the Effective Date.

 

(e)           Fringe Benefits. Employee shall be entitled to fringe
benefits, including without limitation holiday pay, sick leave, vacation,
automobile lease, club dues and financial planning assistance, which are
Comparable to such fringe benefits offered by Employer in the ninety (90) day
period preceding the Effective Date. The value of the automobile lease and club
dues shall be grossed up to offset any tax liability to Employee for such
fringe benefits.

 

(f)            Comparable Benefits or
Perquisites. For purposes of this section 4, the term “Comparable”
shall mean that the benefits or perquisites in each of the foregoing
subsections, in the aggregate, are the same or substantially the same in all
material respects as those offered by Employer in the ninety (90) day period
preceding the Effective Date. If such benefits or perquisites are the same or
substantially the same in value, but differ in the form of benefit offered,
then the benefits or perquisites shall be deemed “Comparable” for purposes of
this Agreement.

 

4

 

If, following the Effective Date, Employer’s successor shall offer any
benefit or group of benefits to key executives which are more favorable than
those offered by Employer in the ninety (90) day period preceding the Effective
Date, then Employee shall be entitled to the more favorable benefits or
perquisites.

 

(g)           Benefit Terms and Conditions. Except as expressly modified herein, all
other terms and conditions of Employer’s benefit plans, practices, policies and
programs shall govern Employee’s eligibility for, participation and vesting in,
and accrual and receipt of all employee benefits thereunder. Employer and any
successor shall retain all rights as plan sponsor to amend, modify or terminate
any such plan, practice, policy or program, in its sole discretion, which
changes shall apply to Employee as they do to other key executives of Employer
and its subsidiaries.

 

5.             Stock Options. Notwithstanding paragraph 3(h) of the PQ Corporation
1995 Stock Option Plan, as amended (“Stock Option Plan”), or any other Employer
plan, practice, policy, agreement or program, on the calendar date immediately
preceding the Effective Date, Employee shall be fully vested in all outstanding
stock options, without regard to the vesting time periods set forth in the Stock
Option Plan; provided, however, that in order to vest, the Total Shareholder Return
between the time of the grant and the calendar date immediately preceding the Effective
Date must equal or exceed the specified targets in the Stock Option Plan. All such
vested options shall be immediately exercisable.

 

6.             Termination. Employee’s employment and this Agreement
shall terminate during the Employment Period upon the occurrence of any one or
more of the following events itemized in subsections (a) through (d) of this
section:

 

(a)           Death. This Agreement shall terminate immediately
upon Employee’s death.

 

(b)           Disability. If Employer determines in good faith that
the Disability of Employee has occurred (pursuant to the definition of “Disability”
set forth below), it may give to Employee written notice of its intention to
terminate Employee’s employment. In such event, Employee’s employment with
Employer and this Agreement shall terminate effective on the 30th day after
receipt of such notice by Employee (the “Disability Effective Date”), provided
that, within 30 days after such receipt, Employee has not returned to work to
perform all essential functions of his position. For purposes of this
subsection, “Disability” means a physical or mental impairment which renders
Employee unable to perform each of the material duties of his regular
occupation for a period of at least twenty-six (26) weeks, even with reasonable
accommodation (as defined and interpreted under the Americans with Disabilities
Act).

 

(c)           Cause. Employer may terminate Employee’s employment
immediately for “Cause.” For purposes of this Agreement, “Cause” means any one
or

 

5

 

more of the reasons set forth in subsections (i) through (iv) hereof. A
termination by Employer for any other purpose, except for death or Disability,
constitutes termination other than for Cause.

 

(i)            An act or acts of dishonesty undertaken by
Employee and intended to result in substantial enrichment, at the expense of
Employer, of Employee, his family or acquaintances;

 

(ii)           An act or acts involving moral turpitude,
fraud or theft, or any act which results in the conviction of Employee of a
felony;

 

(iii)          Repeated violations by Employee of his
obligations under section 3 of this Agreement which are willful and deliberate
on Employee’s part and which are not remedied in a reasonable period of time
after receipt of written notice from Employer; or

 

(iv)          A violation by Employee of his covenants
under section 8 of this Agreement relating to confidentiality and
non-competition.

 

(d)           Good Reason. Employee may terminate Employee’s employment immediately for “Good Reason.” For
purposes of this Agreement, “Good Reason” means any one or more of the reasons
set forth in subsections (i) through (v) hereof. A termination by Employee for
any other purpose, except death or Disability, constitutes termination other
than for Good Reason.

 

(i)            The assignment to Employee of any duties, inconsistent with Employee’s position
(including status, offices and reporting relationships), authority, duties or
responsibilities as contemplated by section 3 of this Agreement, or another
action by Employer which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose isolated or immaterial
actions; provided, however, that prior to giving Notice of Termination under
this subsection, Employee shall provide notice to Employer of the specific
deficiency under section 3 which purports to give rise to Good Reason for
termination and shall provide Employer with a period of thirty (30) calendar days to cure such deficiency;

 

(ii)           A failure by Employer to comply with any of
the provisions of section 4 of this Agreement, excluding for this purpose
isolated or immaterial actions; provided, however, that prior to giving Notice
of Termination under this subsection, Employee shall provide notice to Employer
of the specific deficiency under section 4 which
purports to give rise to Good Reason for termination and shall provide Employer
with a period of thirty (30) calendar days to cure such deficiency; and
provided, further, that Employee’s acceptance and continued employment with
Employer’s successor for a period of ninety (90) days shall be deemed
acceptance of Comparable benefits, as defined in section 4(f) hereof, so long
as the successor shall not reduce such benefits subsequent to the ninety (90)
day period;

 

6

 

(iii)          Employer’s requiring Employee to be based at any
location other than that described in section 3(a)(ii) hereof, except for
travel reasonably required in the performance of Employee’s responsibilities;

 

(iv)          Any purported termination by Employer of
Employee’s employment other than for Cause, Disability or death, as permitted
by this Agreement; or

 

(v)           Any failure by Employer to comply with and
satisfy section 9(c) of this Agreement relating to successorship.

 

(e)           Notice of Termination. Any termination by Employer of Employee’s
employment for Cause, or by Employee for Good Reason, shall be communicated by
Notice of Termination to the other party hereto, after all conditions precedent
stated in the preceding subsection have been met, and shall be given in accordance
with the Notice provisions of this Agreement. A “Notice of Termination” means a
written notice which includes all of the following: (i) the specific
termination provision in this Agreement relied upon, (ii) the facts and
circumstances, set forth in reasonable detail, claimed to provide a basis for
termination of Employee’s employment under the provision so indicated, and
(iii) the Date of Termination (as defined below).

 

(f)            Date of Termination. “Date of Termination” means:

 

(i)            In the case of death, immediately upon the
death of the Employee;

 

(ii)           In the case of termination for Disability,
the Disability Effective Date;

 

(iii)          In the case of termination by Employer for
Cause, the date Employee receives the Notice of Termination or such later date
as may be specified therein; or

 

(iv)          In the case of termination by Employee for
Good Reason, the date Employer receives the Notice of Termination or such later
date as may be specified therein.

 

7.             Obligations of Employer upon
Termination.

 

(a)           If Employee’s employment is terminated upon
the Effective Date or at any time during the Employment Period, the
consequences of such termination shall be as follows:

 

7

 

(i)            Termination for Death, Disability
or Cause; Termination by Employee Other than for Good Reason. If Employee’s employment is terminated by
reason of Employee’s death or Disability, by Employer for Cause or by Employee
other than for Good Reason, then this Agreement shall terminate, and Employee
shall be entitled only to those benefits set forth in Appendix B hereto.

 

(ii)           Termination for Good Reason;
Termination by Employer Other than for Death, Disability or Cause. If Employee’s employment is terminated by
Employee for Good Reason or by Employer other than for death, Disability or
Cause, then Employee shall be entitled to those benefits set forth in Appendix
C hereto.

 

(b)           This Agreement shall expire, and all
entitlement to benefits hereunder shall cease, upon the earlier of: (i) the end
of the Employment Period, provided that Employee remains employed on that date
(subject to the provisions of subsection (c) of this section); (ii) the payment
to Employee of the benefits described in the applicable Appendix B or C,
provided that Employee’s employment has been terminated prior to the end of the
Employment Period; or (iii) the first day of the calendar month coincident with
or immediately following Employee’s sixty-fifth (65th ) birthday.

 

(c)           In the event Employee’s employment continues
through the entire Employment Period, and subsequently is terminated after the
Employment Period has expired, Employee shall be entitled to benefits under the
successor’s termination policies and practices then in effect, if any, which
are applicable to similarly situated executives, and, to the extent years of
service are used to determine such entitlement, the entitlement shall be based
on Employee’s years of service in the employ both of Employer and Employer’s
successor.

 

8.             Employee’s Covenants.

 

(a)           Basis for Covenants. Executive agrees and acknowledges that he
occupies a position of substantial confidence and trust with Employer and, in such
position, that he has access to Confidential Information. Employee further
agrees and acknowledges that the nature and periods of restrictions imposed by
the following covenants are fair, reasonable and necessary to protect and
preserve for Employer its legitimate and protectible interests and that such
restrictions will not prevent Employee from earning a livelihood. Employee
agrees that Employer would sustain an irreparable loss and damage if Employee
were to breach the covenants and that the covenants are made as an inducement
to enter, and have been relied upon by Employer in entering, this Agreement.

 

(b)           Covenant to Maintain Confidential
Information. Employee shall hold in a fiduciary capacity
for the benefit of Employer all Confidential Information which shall have been
obtained by Employee during Employee’s

 

8

 

employment by Employer. At no time after termination of Employee’s
employment with Employer, shall Employee, without the prior written consent of
Employer, communicate or divulge any Confidential Information to anyone other
than Employer and those designated by it. For purposes of this section, “Confidential
Information” means any information relating to PQ Corporation or its business
or to any of its parents, subsidiaries or affiliates, whether proprietary or
otherwise, and treated as confidential, including without limitation, research,
marketing, financial data, customer lists, financing sources and business and
manufacturing methods, techniques and systems.

 

(c)           Confidentiality of Agreement. Employee understands and agrees he shall
treat this Agreement as confidential and that he shall not disclose or divulge
the terms of this Agreement to any third party, with the exception of his immediate
family, his accountant or financial advisor, his attorney or the Internal Revenue
Services; provided, however, that before any disclosure permitted by this subsection
is undertaken, Employee shall secure the agreement of such third party to maintain
this Agreement as confidential as provided herein.

 

(d)           Covenant Not to Compete. Employee hereby covenants and agrees that
during the Employment Period and during the Severance Period, as described in
Appendix C, without the prior written consent of Employer, he shall not engage,
directly or indirectly, in a Competitive Activity either for his own benefit or
as an officer, director, shareholder (of more than one percent), partner,
proprietor, employee, agent, consultant, or independent contractor of any
person or entity. For purposes of this section, “Competitive Activity” shall
mean any business activity when such activity involves substantial and direct
competition with any business activity or significant fine of business of
Employer or its subsidiaries; provided, however, the term “Competitive Activity”
shall not include Employee rendering services exclusively to a division,
business unit, or affiliate of a company where such division, business unit, or
affiliate is not engaged in substantial and direct competition with Employer’s
business as of the date of change of control or businesses of the successor in
which Employee has been employed, even if other divisions, business units, or
affiliates of such company are engaged in business activities that involve such
substantial and direct competition.

 

9.             Successors.

 

(a)           This Agreement is personal to Employee and,
without the prior written consent of Employer, shall not be assignable by Employee
other than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by Employee’s legal
representatives in accordance with its terms.

 

(b)           This Agreement shall inure to the benefit of
and be binding upon Employer and its successors and assigns.

 

9

 

(c)           Employer will require any successor, or the
successor to any successor, in a Change in Control to assume expressly and
agree to perform this Agreement in the same manner and to the same extent that
Employer would be required to perform it if no such succession had taken place.
As used in this Agreement, “Employer” shall mean Employer as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law or otherwise.

 

10.           Governing Law. The Agreement shall be governed by the laws
of the Commonwealth of Pennsylvania, without giving effect to the choice of law
provisions of that state or any other state. The parties acknowledge that they
have determined that this Agreement shall not be treated as an employee welfare
benefit plan as that term is defined under Employee Retirement Income Security
Act, as amended, 29 U.S.C. § 1002 (“ERISA”).

 

11.           Adjudication of Controversy or
Claims. Any controversy or claim arising out of or
relating to this Agreement, or any breach hereof, shall be settled in
accordance with the terms of this section.

 

(a)           Claims for Employee Benefits. Any controversy or claim relating to an
employee benefit plan governed by ERISA referenced in section 4 or Appendices B
or C of this Agreement initially shall be submitted pursuant to the
administrative claims procedures established by the plan sponsor of the employee
benefit plan in question. Such claims procedures shall be fully exhausted, and
the determination thereunder shall be final and binding, subject to any right
of review hereunder. If Employee desires further review of the final and
binding administrative determination, his sole and exclusive recourse shall be
pursuant to the Arbitration Procedures herein, and Employee hereby expressly
waives any right of review in state or federal court or pursuant to any agency
rules or regulations, including without limitation those established by the
Department of Labor. Adjudication of any claim for benefits under this
subsection in arbitration shall be under the arbitrary and capricious standard
of review mandated by ERISA, without regard to any claim or assertion by
Employee for de novo review.

 

(b)           All Other Claims. In the event of any controversy or claim
hereunder, other than one relating to an employee benefit as set forth in the
preceding subsection, the parties’ sole and exclusive recourse shall be
pursuant to the Arbitration Procedures herein, and the parties hereby expressly
waives any right of review in state or federal court or pursuant to any agency
rules or regulations, including without limitation those established by the
Department of Labor.

 

(c)           Arbitration Procedures. Appeals of claims under subsection (a)
above, or claims or disputes initiated under subsection (b) above, shall be
shall be settled by arbitration in accordance with Employment Dispute
Resolution Rules of the American Arbitration Association (or such other rules
as may be agreed upon by

 

10

 

Employee and Employer). The place of the arbitration shall be
Philadelphia, Pennsylvania, or such other location as may be mutually agreed by
the parties. Judgment upon the award rendered by the arbitrator(s) may be
entered by any court having jurisdiction thereof. Such an award shall be
binding and conclusive upon the parties hereto.

 

12.           Legal Expenses. Employer agrees to pay, to the full extent
permitted by law, all reasonable attorneys’ fees and costs which Employee may
reasonably incur as a result of any contest of the validity or enforceability
of, or Employer’s liability under, any provision of this Agreement; provided,
however, that such payment shall be made after, and only if, Employee prevails
on at least one material issue raised in the proceeding following exhaustion of
all rights of appeal or review.

 

13.           Miscellaneous.

 

(a)           The headings of this Agreement are not part
of the provisions hereof and shall have no force or effect.

 

(b)           Except as otherwise provided herein, this
Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.

 

(c)           All notices and other communications
hereunder shall be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:

 

	
  If to Employee:

  	
   

  	
  Michael R. Imbriani

  
	
   

  	
   

  	
  195 Daylesford Blvd.

  
	
   

  	
   

  	
  Berwyn, PA 19312

  

 

	
  If to Employer:

  	
   

  	
  PQ Corporation

  
	
   

  	
   

  	
  Southpoint Corporate
  Headquarters

  
	
   

  	
   

  	
  P.O. Box 840

  
	
   

  	
   

  	
  Valley Forge, PA 19482

  
	
   

  	
   

  	
  Attention: General Counsel

  

 

 

or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications shall be
effective when actually received by the addressee.

 

(d)           The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.

 

(e)           Employer may withhold from any amounts
payable under this Agreement such Federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.

 

11

 

(f)            Employee’s failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of such
provision or any other provision hereof.

 

(g)           Except as expressly stated otherwise herein,
this Agreement contains the entire understanding of Employer and Employee with
respect to the subject matter hereof and supersedes any and all agreements,
whether oral or written, between Employee and Employer regarding employment,
terms and conditions of employment and termination of employment, including
without limitation the Compensation Plan for Primary Executives and any
compensation program approved by the Board of Directors for Employee.

 

IN WITNESS WHEREOF, Employee has hereunto set his hand and, pursuant to the authorization
from its Board of Directors, Employer has caused these presents to be executed
in its name and on its behalf, all as of the day and year first above written.

 

 

	
   

  	
  /s/ Michael R. Imbriani

  	
   

  
	
   

  	
  Michael R. Imbriani

  
	
   

  	
  Date: 8/18/00

  
	
   

  	
   

  
	
   

  	
  PQ
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  Richard D. Wood

  	
   

  
	
   

  	
  Richard
  D. Wood

  
	
   

  	
  Chairman
  Board of Directors

  
	
   

  	
  Date:
  8/15/00

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
  /s/ [ILLEGIBLE]

  	
   

  
	
   

  	
  Secretary

  	
   

  
						

 

12

 

APPENDIX A

 

GENERAL RELEASE OF CLAIMS

 

This
General Release of Claims (“Release Agreement”) is entered into between PQ
Corporation, a corporation with its principal place of business at Southpoint
Corporate Headquarters, P.O. BOX 840, Valley Forge, PA 19482, and Michael a
Imbriani, an individual residing at 195 Daylesford Blvd., Berwyn, PA 19312 (hereinafter
referred to as “Employee”), on this                day
of                   ,
20     :

 

In
consideration of the mutual promises and covenants contained herein and in the
Executive Change in Control Agreement to which this Release Agreement is
attached and incorporated by reference, and other good and valuable
consideration, the receipt of which hereby is acknowledged, the parties agree
as follows:

 

1.     General Release of Claims and Covenant Not to Sue. Employee for himself and his respective
administrators, executors, agents, beneficiaries and assigns, does waive,
release and forever discharge the Company (as defined below) of and from any
and all Claims (as defined below). Employee agrees not to file a lawsuit to assert
any such Claim. This release covers all Claims arising from the beginning of time
through and including the date of a Change in Control, as defined in the
Executive Change in Control Agreement, but does not cover Claims relating to
the validity or enforcement of this Release Agreement.

 

2.     Definition of “Claims”.
“Claims” includes without limitation all actions or demands of any kind that
Employee now has, or may have or claim to have in the future, but excluding
Claims arising out of the Executive Change in Control Agreement. More
specifically, Claims include rights, causes of action, damages, penalties,
losses, attorneys’ fees, costs, expenses, obligations, agreements, judgments
and all other liabilities of any kind or description whatsoever, either in law
or in equity, whether known or unknown, suspected or unsuspected.

 

The
nature of Claims covered by this Release Agreement includes without limitation
all actions or demands in any way based on Employee’s employment with the
Company, the terms and conditions of such employment or Employee’s separation
from employment. More specifically, all of the following are among the types of
Claims which will be barred by this Release Agreement:

 

•                  Contract Claims (whether express or implied);

 

•                  Tort Claims, such as for defamation or
emotional distress;

 

•                  Claims under federal, state and municipal
laws, regulations, ordinance or court decisions of any kind;

 

 

•                  Claims of discrimination, harassment or
retaliation, whether based on race, color, religion, gender, sex, age, sexual
orientation, handicap and/or disability, national origin or any other legally
protected class;

 

•                  Claims under the AGE DISCRIMINATION IN
EMPLOYMENT ACT, Title VII of the Civil Rights Act of 1964, as amended, the
Americans with Disabilities Act and similar federal and state statutes and
municipal ordinances governing civil rights;

 

•                  Claims under the Employee Retirement Income
Security Act, the Family and Medical Leave Act, Fair Labor Standards Act, and
state laws governing payment of wages, wages and hours, family or medical
leave; and

 

•                  Claims for wrongful discharge.

 

3.     Definition of “Company”. For purposes of this Release Agreement, “Company” includes without
limitation PQ Corporation, and its respective past, present and future parents,
affiliates, subsidiaries, divisions, predecessors, successors, assigns,
employee benefit plans and trusts. It also includes all past, present and
future managers, directors, officers, partners, agents, employees, attorneys,
representatives, consultants, associates, fiduciaries, plan sponsors,
administrators and trustees of each of the foregoing.

 

4.     Employee’s Acknowledgment of Scope of Release. Employee declares and agrees that any Claims
he may have incurred or sustained may not be fully known to him and may be more
numerous and more serious than he now believes or expects. Further, in entering
into this Release Agreement, Employee relies wholly upon his own judgment of
the future development, progress and result of said Claims, both known and unknown, and acknowledges that he has not been influenced to any extent
whatsoever in the making of this Release Agreement by any representations or statements
regarding said Claims made by individuals or entities who are within the definition
of Company above. Employee further acknowledges that he accepts the terms
herein in full settlement and satisfaction of all such Claims.

 

5.     Effect of Release and Covenant Not to Sue. Employee is barred from asserting any of the
Claims described above against the Company. If Employee does commence, join in,
continue or in any other manner attempt to assert a Claim in violation of this
Release Agreement, or otherwise breaches any promise made in this Release Agreement, he agrees to indemnify and hold harmless the
Company from and against all losses incurred by the Company, including without
limitation the Company’s costs and attorneys’ and expert fees, in defending
such Claim or pursuing its rights hereunder.

 

6.     Acceptance of Release Agreement. Employee understands and agrees that to accept this Release Agreement,
he will be required to deliver a signed and notarized copy of the Release
Agreement to the General Counsel of

 

2

 

PQ Corporation on the date that a Change in Control occurs, as set
forth in the Executive Change in Control Agreement. Employee further
understands that accepting this Release Agreement is one of the conditions
precedent to the Effective Date of the Executive Change in Control Agreement.

 

7.     Consideration Period. Employee
acknowledges that he has been provided with a period of forty-five (45) days to
consider the terms of this offer. The 45- day period will run from the date
this Release Agreement first was presented to him in connection with the
Executive Change in Control Agreement on July 5, 2000, Employee agrees that any
changes to this offer, whether material or immaterial will not restart the
running of the 45-day period. Employee may take the entire 45-day period to
return this Release Agreement, or a lesser period only if his decision to
shorten the consideration period is knowing and voluntary and was not induced
in any way by the Company.

 

By
signing and returning this Release Agreement, Employee acknowledges that the
consideration period afforded Employee a reasonable period of time to consider fully each and every term of this Release Agreement and that Employee
has given the terms full and complete consideration.

 

8.     Revocation Period.
Employee acknowledges that he shall have a period of seven (7) days after
signing this Release Agreement to revoke it if he chooses to do so. If Employee elects to revoke this Release Agreement, he shall give
written notice of such revocation by delivering it to the General Counsel of PQ
Corporation, in such a manner that it is actually received within the seven-day
period.

 

9.     Advice to Consult Legal Representative. Employee acknowledges that he has been
advised to consult with legal counsel of his choosing regarding
the meaning and binding effect of the Executive Change in Control Agreement and
this Release Agreement and each and every term thereof.

 

10.  Certification of Understanding and Competence. Employee, intending to be legally bound
hereby, certifies and warrants that he has read carefully this Release Agreement
and has executed it voluntarily and with full knowledge and understanding of
its significance, meaning and binding effect. Employee further declares that he
is competent to understand the content and effect of this Release Agreement.

 

3

 

11.  Effective Date. This
Release Agreement shall take effect on the first business day following the
expiration of the Revocation Period, provided that Employee chooses not to
revoke it.

 

IN WITNESS WHEREOF, and with the intention of being legally bound hereby, Employee has
executed this Release Agreement.

 

 

	
   

  	
   

  	
  Signed and Attested Before

  
	
  Michael R. Imbriani

  	
  Me This                         Day

  
	
   

  	
  Of                               ,
  in the

  
	
   

  	
  Year

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Notary
  Public

  	
   

  

 

4

 

APPENDIX B

 

SCHEDULE OF BENEFITS:

TERMINATION FOR DEATH. DISABILITY OR CAUSE;

OR
TERMINATION
BY EMPLOYEE OTHER THAN FOR GOOD REASON

 

1.     Compensation. To the extent not theretofore paid, Employee
or his estate shall be paid his full Base Salary through the Date of
Termination at the rate in effect on the Date of Termination.

 

2.     Expenses. To the extent not already paid, any expenses
incurred by Employee prior to the Date of Termination shall be paid to him or
his estate.

 

3.     Vacation. Any accrued and unused vacation pay for the
vacation year in which the Date of Termination occurs shall be paid to Employee
or his estate. All other fringe benefits shall cease on the Date of
Termination, including without limitation holiday pay, sick leave, automobile
lease, club dues and financial planning assistance.

 

4.     ARC Plan. Any bonus payment to which Employee is
entitled, pursuant to the terms of the ARC Plan, shall be paid to Employee or
his estate in accordance with the terms of that Plan.

 

5.     Severance. Employee shall be ineligible for any
severance benefit under the Severance Plan of PQ Corporation, Plan Number 509.

 

6.     Retirement, Savings and Incentive
Programs. Employee and/or his beneficiaries in
accordance with Employee’s legally valid elections and beneficiary
designations, as the case may be, shall be entitled to all vested and accrued
benefits through the Date of Termination under the terms of the then applicable
retirement, savings, profit sharing and stock option plans, including without
limitation a supplemental executive retirement plan.

 

7.     Health and Welfare Benefits. Employee’s participation, and that of his dependents,
shall cease on the Date of Termination subject to any rights of conversion and
continuation coverage which Employer shall be legally required to extent to Employee
and/or his dependents pursuant to the terms and conditions of the then applicable
health and welfare programs, including without limitation medical, dental, vision,
prescription, life insurance, short and long-term disability plans.

 

8.     Benefit Terms and Conditions. Except as expressly modified herein, all terms
and conditions of Employer’s benefit plans, practices, policies and programs shall
govern Employee’s eligibility for, participation and vesting in, and accrual
and receipt of all employee benefits thereunder, and Employer and any successor
shall retain all rights as plan sponsor to amend, modify or terminate any such
plan, practice.

 

 

policy or program, in its sole discretion, which changes shall apply to
Employee as they do to other key executives of Employer and its subsidiaries.

 

9.     No Other Obligation. Except as set forth in this Schedule of
Benefits, Employer shall have no further obligation to Employee or to his
dependents, heirs, beneficiaries, descendants and legal representatives.

 

2

 

APPENDIX C

 

SCHEDULE OF BENEFITS:

TERMINATION
BY EMPLOYEE FOR GOOD REASON;
OR
TERMINATION OTHER THAN FOR DEATH, DISABlLITY OR CAUSE

 

1.      Compensation. To the extent not theretofore paid, Employee
shall be paid his Base Salary through the Date of Termination at the rate in
effect on the Date or Termination.

 

2.      Severance. If Employee’s Date of Termination occurs
upon the Effective Date of this Agreement or at any time during the Employment
Period, then Employee shall receive a payment equal to the product of (a)
Employee’s Base Salary on the Date of Termination and (b) the lesser of
thirty-six (36) months or the number of months between the Date of Termination
and the first day of the calendar month coincident with or immediately
following. Employee’s sixty-fifth (65th) birthday (defined as the “Severance
Period”).

 

The
foregoing severance benefits shall be paid in lieu of any severance payment for
which Employee otherwise may be eligible under the Severance Plan of PQ
Corporation, Plan Number 509 (the “Severance Plan”), it is agreed that
severance benefits paid under this Schedule of Benefits shall constitute a “separate
policy” disallowing severance pay under the Severance Plan, as provided in
section 2.1(b)(6) thereof.

 

3.     Expenses. To the extent not already paid, any expenses
incurred by Employee prior to the Date of Termination shall be paid to him.

 

4.     Fringe Benefits. Employee shall be paid for any accrued and
unused vacation time for the calendar year in which the Date of Termination
occurs. In addition, during the Severance Period, Employee shall be permitted
to continue the automobile lease and to continue receiving payment for club
dues and financial planning assistance, in effect on the Date of Termination,
as if Employee had continued in active employment. The value of the automobile
lease and club dues shall continue to be grossed up to offset any tax liability
to Employee for these fringe benefits.

 

5.    ARC Plan. Notwithstanding
any other provision of the ARC Plan or a Comparable bonus plan offered by
Employer’s successor, Employee shall receive a bonus payment for the calendar
year in which the Date of Termination falls and any succeeding calendar year
during the Severance Period on a pro-rated basis, based on Employee’s highest “percentage
of aggregate salary,” as that term is used in the ARC Plan, in the five (5)
year period preceding the Date of Termination of this Agreement.

 

 

6.     Profit Sharing, Retirement and Savings Plans. During the Severance Period, Employee shall
continue to be entitled to participate in and earn service credit under
Employer’s profit sharing, retirement and savings plans, including without
limitation a defined benefit pension plan, a retirement savings plan (including
the employer matching contribution) and a supplemental executive retirement
plan, or such comparable plans that may be maintained by Employer’s successor,
as if Employee had continued in active employment.

 

If
and to the extent that such participation and service credit under the
aforementioned plans shall not be payable or provided for the Severance Period,
or any portion thereof, because Employee no longer is an active employee or for
any other reason, Employer itself shall, to the extent necessary, provide for
payment of such benefit to Employee. The benefit payable hereunder may be paid
by Employer, at its option, in a single payment equal to the present value of
such benefits and, assuming for retirement purposes, that Employee retired at
age 55 or such later age as Employee may have attained on the Date of Termination.

 

If,
at the end of the Severance Period, Employee shall be eligible to retire under
the terms of the then applicable retirement and savings plans, he shall be
deemed to have retired and shall be eligible for any and all benefits and
rights provided to retirees under Employer’s retirement and health and welfare programs.

 

7.     Stock Incentive. Upon the Date of Termination, Employee shall have all rights and entitlements then available to him under the
applicable stock option plan.

 

8.     Health and Welfare Benefits. During the Severance Period, Employee’s participation,
and that of his eligible dependents, shall continue in Employer’s health and other welfare plans, including without limitation medical,
dental, vision, prescription, life insurance, short and long-term disability
plans, or such comparable plans that may be maintained by Employer’s successor,
as if Employee had continued in active employment.

 

If
and to the extent that continued participation shall not be permitted under the
terms of any such health and welfare plan for the Severance Period, or any
portion thereof, because Employee no longer is an active employee or for any other
reason, Employer itself shall, to the extent necessary, provide for payment to
Employee in an amount equivalent to Employee’s cost of obtaining such benefit
coverage. The benefit(s) payable hereunder may be paid by Employer, at its
option, in a single payment equal to the present value of such benefits.

 

9.     Payments Due. All payments under this Schedule of Benefits
shall be tendered to Employee in a single, lump sum payment within thirty (30)
calendar days of the Date of Termination. If any payment hereunder should
require additional time to determine, then all other payments shall be made
within the thirty (30) calendar day period, and such additional payment(s)
shall be tendered to Employee within five (5) calendar days of their
determination.

 

2

 

10.   Gross-Up Payments Pursuant to Internal
Revenue Code.

 

(a)           Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by Employer to or for the benefit of Employee (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise) (a “Payment”) would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or
any interest or penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively referred to
as the “Excise Tax”), then Employee shall be entitled to receive an additional
payment (a “Gross-Up Payment”) in an amount such that, after payment by
Employee of all taxes (including any interest or penalties imposed with respect
to such taxes and any Excise Tax imposed upon the Gross-Up Payment). Employee
shall retain an amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payment.

 

(b)           Subject to the provisions of subsection (e)
hereof, all determinations required to be made under this section, including
whether a Gross-Up Payment is required and the amount of such Gross-Up Payment,
shall be made by the accounting firm then used by PQ Corporation, or its
successor, or such other firm of independent accountants engaged to audit
Employer’s financial statements (the “Accounting Firm”), which shall provide detailed
supporting calculations both to Employer and Employee within fifteen (15)
business days after the Date of Termination or such earlier time as is requested
by Employer. Any determination by the Accounting Firm shall be binding upon
Employer and Employee.

 

(c)           The initial Gross-Up Payment, if any, as
determined pursuant to this section, shall be paid to Employee within five (5)
days of the receipt of the Accounting Firm’s determination. If the Accounting
Firm determines that no Excise Tax is payable by Employee, it shall furnish
Employee with an opinion that he has substantial authority not to report any
Excise Tax on his federal income tax return.

 

(d)           As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that a Gross-Up
Payment which will not have been made by Employer should have been made (“Underpayment”),
consistent with the calculations required to be made hereunder. In the event
that Employer exhausts its remedies pursuant to this section, and Employee
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by Employer to or for the benefit of Employee.

 

(e)           The Employee shall notify Employer in writing
of any claim by the Internal Revenue Service that, if successful, would require
the payment by Employer of the Gross-Up Payment. Such notification shall be
given as soon as practicable, but no later than ten (10) business days after
Employee knows of such claim, and shall advise Employer of the nature of such
claim and the date on which such claim is requested to

 

3

 

be paid. Employee shall not pay such claim prior to the expiration of
the thirty (30) day period following the date on which it gives such notice to
Employer (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If Employer notifies Employee in writing
prior to the expiration of such period that it desires to contest such claim,
Employee shall:

 

(i)    Give Employer any information reasonably
requested by Employer relating to such claim.

 

(ii)   Take such action in connection with
contesting such claim as Employer shall reasonably request in writing from time
to time, including without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by Employer.

 

(iii)  Cooperate with Employer in good faith in
order effectively to contest such claim, and

 

(iv)  Permit Employer to participate in any
proceedings relating to such claim;

 

provided, however, that Employer shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold Employee harmless, on
an after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this section, Employer shall control all proceedings taken in connection
with such contest and, in its sole discretion, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, in its sole discretion, either
direct Employee to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner. Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as Employer shall determine;
provided, however, that if Employer directs Employee to pay such claim and sue
for a refund, Employer shall advance the amount of such payment to Employee, on
an interest-free basis, and shall indemnify and hold Employee harmless, on an
after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment
of taxes for the taxable year of Employee with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, Employer’s control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder, and Employee
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.

 

4

 

(f)
If, after the receipt by Employee of an amount advanced by Employer pursuant to
subsection (e), Employee becomes entitled to receive any refund with respect to
such claim, Employee shall (subject to Employer’s complying with the
requirements of subsection (e)) promptly pay to Employer the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by Employee of an amount advanced by
Employer pursuant to subsection (e), a determination is made that Employee
shall not be entitled to any refund with respect to such claim, and Employer
does not notify Employee in writing of its intent to contest such denial of
refund prior to the expiration of thirty (30) days after such determination,
then such advance shall be forgiven and shall not be required to be repaid, and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.

 

11.   Benefit Terms and Conditions. Except as expressly modified herein, all terms
and conditions of Employees benefit plans, practices, policies and programs shall
govern Employee’s eligibility for, participation and vesting in, and accrual
and receipt of all employee benefits thereunder, and Employer and any successor
shall retain all rights as plan sponsor to amend, modify or terminate any such
plan, practice, policy or program, in its sole discretion, which changes shall
apply to Employee as they do to other key executives of Employer and its
subsidiaries.

 

12.   No Other Obligation. Except as set forth in this Schedule of Benefits,
Employer shall have no further obligation to Employee or to his dependents, heirs,
beneficiaries, descendants and legal representatives.

 

5

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