Engelhard Sends Letter to Shareholders

Dear Fellow Shareholder:

At the Annual Meeting to be held on June 2, 2006, you will havethe opportunity to elect Directors who will determine the future ofEngelhard.

As a shareholder of this company, you are being asked to cast yourvote for one of two slates of candidates: Directors supported byEngelhard who are committed to a recapitalization plan that your Boardof Directors unanimously believes will deliver greater value thanBASF's $38 per share offer by providing you with partial liquidity atan attractive price of $45 per share while preserving your ability toparticipate in the company's exciting future growth potential - or aslate hand picked by BASF which, to quote BASF, "would have the powerto terminate . . . the (r)ecapitalization" and "to take steps tofacilitate (the BASF) offer" that your Board of Directors hasunanimously rejected as inadequate and opportunistic.

By the design of the Engelhard Board of Directors, the decisionrests in your hands. We hope you will carefully consider theinformation in this letter and in our proxy statement in reaching yourconclusion and vote the BLUE proxy for the Engelhard Directors at theupcoming Annual Meeting.

WE BELIEVE BASF'S INADEQUATE OFFER FALLS SHORT OF THE VALUE OURPLAN WILL DELIVER FOR SHAREHOLDERS

On April 26, 2006, we announced that our Board of Directors hadunanimously approved a recapitalization plan consisting of aself-tender offer for up to 26 million shares for $45 per share incash, continued execution of the company's strategic business plan andincremental cost savings we believe will deliver $15 million annuallybeginning in 2007.

Your Board of Directors and management believe that thisrecapitalization plan represents the best value-creation alternativeavailable to you for the following reasons:

-- Superior Value to BASF's $38 Per Share Offer - We believe that our $45 per share self-tender offer; the company's continued ability to capitalize on our attractive growth opportunities and business strategy; and the $15 million in expected incremental annual cost savings will deliver greater value than BASF's inadequate $38 per share offer.

-- Accretion to Earnings and Earnings Growth - The purchase of shares pursuant to the $45 per share self-tender offer represents an attractive investment for the company. The recapitalization plan is expected to be accretive to earnings per share (EPS) by approximately six cents in 2007 and accretive to EPS growth.

-- Expected Strong Price-to-Earnings Multiple - BASF launched its hostile offer when Engelhard's stock was trading at a forward price-to-earnings (P/E) multiple that was meaningfully lower than the historical relationship that prevailed for several years to the forward P/E multiples of our key industry peers, Johnson Matthey and Umicore. The forward P/E multiple of Engelhard immediately prior to the unsolicited offer from BASF was 29.1% below that of Johnson Matthey. This compares to an average discount to Johnson Matthey of 6.9% for the 2003-2005 period. Immediately prior to the unsolicited offer from BASF, Engelhard's forward P/E was 11.3% below that of Umicore, which compares to an average premium of 19.3% for the 2003-2005 period. In addition, since the time of BASF's hostile offer, forward P/E multiples for Engelhard's industry peers overall have generally increased. While this increase could be related to other factors, such as increased acquisition speculation in the industry in general following BASF's offer for the company, we believe that to be unlikely given the number and diversity of the companies in our peer group. We believe that our forward P/E multiple should reflect a relationship to key industry peers more in line with historical levels and should benefit from (a) the strength of Engelhard's earnings performance in recent quarters, (b) the expected robust and sustained earnings growth for the years ahead, and (c) the general rise in industry multiples since BASF commenced its hostile offer.

-- Meaningful Liquidity at an Attractive Price of $45 Per Share - The recapitalization plan provides Engelhard shareholders with a substantial liquidity opportunity for some of your shares at the attractive price of $45 per share, while preserving your ability to realize the company's outstanding future growth potential through appreciation in the market price of the stock or a future sale of the company.

-- Continuing Investment-Grade Credit Profile - We do not believe that our financing of the $45 per share self-tender offer will interfere with our ability to maintain the financial capability needed to execute our strategic business plan and realize our growth opportunities. Implementation of the recapitalization plan is expected to result in continuance of investment-grade credit ratings for the company.

THE CHOICE IS YOURS - ENGELHARD'S VALUE-CREATION ALTERNATIVE ORBASF'S INADEQUATE OFFER

Throughout Engelhard's history we have maintained that ourshareholders - the true owners of this great company - are entitled todecide the future of their investment. Our Board of Directors'decision to expand the board from six to nine members at the upcomingAnnual Meeting, thereby giving you the ability to elect a majority ofthe newly enlarged board on June 2, is a testament to our commitmentto our shareholders. We are entrusting you with the power to choosewhich path best serves your interests - our recapitalization plan orBASF's inadequate offer.

By electing Engelhard's five highly-qualified nominees, whichinclude the two incumbent Class I Directors, Marion H. Antonini andHenry R. Slack, and three individuals nominated to fill the newlycreated vacancies, Alain Lebec, Howard L. Minigh and Michael A.Sperduto, you will ensure that Engelhard continues down the superiorvalue-creation path envisioned in our recapitalization plan.Alternatively, you could choose to vote for BASF's slate and handcontrol of your company over to a group of nominees chosen by BASF,the same company that is attempting to effect its inadequate $38 pershare offer for the benefit of its own shareholders at the expense ofEngelhard's shareholders.

As you may recall, BASF has said that it spent two years studyingand evaluating Engelhard. BASF chose to launch its hostile offer at apoint in time when our P/E multiple was at a historic low relative tothat of our closest peers, Johnson Matthey and Umicore.

Remember, too, that BASF previously indicated that it did notfactor synergies into its original $37 per share offer. BASF maintainsthat it sees only "modest synergies" resulting from an acquisition ofEngelhard, despite the fact that its U.S. headquarters in FlorhamPark, NJ is less than 30 miles away from our headquarters in Iselin,NJ. Additionally, it appears that BASF has very significant tax losscarry forwards - in excess of $2.5 billion primarily in North America- most of which we believe could be used to shield income generated byour company from U.S. taxation. This tax synergy would, in alllikelihood, allow BASF to avoid paying any significant cash taxes thatEngelhard would otherwise be paying on its U.S. operating income(which accounts for approximately 60% of Engelhard's total operatingincome) for many years to come.

Despite having performed extensive due diligence in March andApril of this year, BASF recently claimed that it can't yet quantifythe likely synergies. We believe that the synergies BASF would realizeby acquiring our company are significant, and that BASF's $38 pershare offer does not compensate Engelhard shareholders for thosesynergies.

It's worthwhile noting as well that the Euro has strengthenedsignificantly against the U.S. Dollar since BASF launched its hostiletakeover campaign against Engelhard in early January. This means thatthe same $38 per share that BASF could have offered in early Januaryis equivalent in Euro terms to more than $40 per share today.

The value inherent in this company belongs to you - the owners ofEngelhard. Don't let BASF get away with its attempt to buy Engelhardat an opportunistic price that doesn't reflect the company's currentvalue and future value-creation potential.

YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU REJECTBASF'S OFFER AND NOT TENDER YOUR SHARES TO BASF

The Engelhard Board of Directors unanimously determined thatBASF's $38 per share offer is opportunistic and undervalues Engelhard.In making its offer, BASF ignored Engelhard's strong fourth quarter2005 and first quarter 2006 earnings, which were both well above WallStreet research analyst expectations, and the clear evidence that ourbusiness strategy is just beginning to pay off. We have madesignificant investments in recent years in both organic growthinitiatives and strategic acquisitions. Our business plan, which wasdeveloped long before BASF made its intentions regarding Engelhardknown, reflects that these actions have positioned us to generatestrong earnings growth over the next several years.

As we continue to execute on our business strategy, therecapitalization plan gives shareholders partial liquidity at anattractive price of $45 per share while preserving your ability toparticipate in the company's exciting future growth potential. YourBoard of Directors has clearly demonstrated its commitment to you byrejecting BASF's offer, which undervalues Engelhard.

PROTECT THE VALUE OF YOUR INVESTMENT AND THE FUTURE OF YOURCOMPANY

Our long-term history of delivering value for our shareholders isstrong. Over the five-year period through December 31, 2005, the totalannualized return on Engelhard's stock was 9.85%, exceeding both theS&P 500 Index at 0.5% and the S&P Chemicals Index at 8.4%.

Your Board of Directors remains focused on doing the right thingfor our shareholders. Engelhard's Board of Directors has consistentlyacted in your best interests, appropriately and diligently reviewingBASF's initial and latest inadequate offers and undergoing a processaimed at ensuring fair value for your shares.

It is important to keep in mind that this is a fight for you, ourshareholders, to receive fair value for your shares, not a fight forindependence. Engelhard's Board of Directors urges you to vote theBLUE card FOR Engelhard's board nominees, thereby sending BASF themessage that you will not sell the company at an inadequate price.

We appreciate your continued support.
On behalf of the Board of Directors

Sincerely,

/s/ Barry W. Perry
Barry W. Perry
Chairman and Chief Executive Officer

Forward-Looking Statements. This letter contains forward-lookingstatements. These statements relate to analyses and other informationthat are based on forecasts of future results and estimates of amountsnot yet determinable. These statements also relate to futureprospects, developments and business strategies. These forward-lookingstatements are identified by their use of terms and phrases such as"anticipate," "believe," "could," "estimate," "expect," "intend,""may," "plan," "predict," "project," "will" and similar terms andphrases, including references to assumptions. These forward-lookingstatements involve risks and uncertainties, internal and external,that may cause Engelhard's actual future activities and results ofoperations to be materially different from those suggested ordescribed in this announcement. For a more thorough discussion ofthese factors, please refer to "Forward-Looking Statements" on page 6of the definitive proxy statement, dated May 12, 2006,"Forward-Looking Statements" (excluding the first sentence thereof),"Risk Factors" and "Key Assumptions" on pages 34, 35 and 38,respectively, of Engelhard's 2005 Annual Report on Form 10-K, datedMarch 3, 2006. Please also refer to "Forward-Looking Statements" and"Key Assumptions" contained in the investor presentation captioned"Recapitalization Plan" filed as an exhibit on Form 8-K, dated April26, 2006, and "Forward-Looking Statements" in the Offer to Purchasefiled as an exhibit to Schedule TO, dated May 5, 2006, for additionalinformation regarding such risks, uncertainties and contingencies.

Investors are cautioned not to place undue reliance on anyforward-looking statement, which speaks only as of the date made, andto recognize that forward-looking statements are predictions of futureresults, which may not occur as anticipated. Actual results coulddiffer materially from those anticipated in the forward-lookingstatements and from historical results due to the risks anduncertainties described above, as well as others that Engelhard mayconsider immaterial or do not anticipate at this time. The foregoingrisks and uncertainties are not exclusive and further informationconcerning Engelhard and its businesses, including factors thatpotentially could materially affect its financial results orcondition, may emerge from time to time. Investors are advised toconsult any further disclosures Engelhard makes on related subjects inEngelhard's future periodic and current reports and other documentsthat Engelhard files with or furnishes to the Securities and ExchangeCommission ("SEC").

No Offer or Solicitation. This letter does not constitute an offeror invitation to purchase nor a solicitation of an offer to sell anysecurities of Engelhard. The self-tender offer by Engelhard previouslyannounced on April 26, 2006 commenced on May 5, 2006. Any offers topurchase or solicitation of offers to sell will be made only pursuantto a tender offer statement (including an offer to purchase, a letterof transmittal and other offer documents) filed by Engelhard("Engelhard's Tender Offer Statement") on Schedule TO with the SEC onMay 5, 2006. Engelhard's shareholders are advised to read Engelhard'sTender Offer Statement and any other documents relating to the tenderoffer that are filed with the SEC carefully and in their entiretybecause they will contain important information.

Additional Information. Engelhard's shareholders are advised toread Engelhard's definitive proxy statement dated May 12, 2006carefully and in its entirety because it contains importantinformation. Copies of the definitive proxy statement may be obtainedfrom MacKenzie Partners, Inc. at the address set forth above.