-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 CDtzD/12bKXgvszDHH6h369QfVioIbacFxqvIAG1bY7SYjHSwPaG6RBs7KaDXYdY
 QQU4XAoAWetBorU1PBfZZg==

<SEC-DOCUMENT>0000914317-01-500178.txt : 20010618
<SEC-HEADER>0000914317-01-500178.hdr.sgml : 20010618
ACCESSION NUMBER:		0000914317-01-500178
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20010601
ITEM INFORMATION:		
FILED AS OF DATE:		20010615

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			BALCHEM CORP
		CENTRAL INDEX KEY:			0000009326
		STANDARD INDUSTRIAL CLASSIFICATION:	CHEMICALS & ALLIED PRODUCTS [2800]
		IRS NUMBER:				132578432
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		
		SEC FILE NUMBER:	001-13648
		FILM NUMBER:		1661769

	BUSINESS ADDRESS:	
		STREET 1:		P O BOX 175
		CITY:			SLATE HILL
		STATE:			NY
		ZIP:			10973
		BUSINESS PHONE:		9143555345

	MAIL ADDRESS:	
		STREET 1:		P O BOX 175
		CITY:			SLATE HILL
		STATE:			NY
		ZIP:			10973
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>form8k-39462.txt
<TEXT>


                                  United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549


                                    FORM 8-K


                                 Current Report
                     Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934



                  June 1, 2001                                 1-13648
- ------------------------------------------------      ------------------------
Date of Report (Date of earliest event reported)      (Commission File Number)



                               Balchem Corporation
 -------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)



        Maryland                                           13-2578432
- -----------------------------                          -----------------------
(State or other jurisdiction                           (I.R.S. Employer
 of incorporation)                                      Identification Number)


                                      P.O. Box 175
                               Slate Hill, New York 10973
- --------------------------------------------------------------------------------
                   (Address of principal executive offices) (Zip Code)


                                 (845) 355-5300
- --------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

<PAGE>


Item 2.  Acquisition or Disposition of Assets.

         Effective as of June 1, 2001, pursuant to a certain Asset Purchase
Agreement, dated as of May 21, 2001 (the "Asset Purchase Agreement"), BCP
Ingredients, Inc., ("Buyer"), a wholly owned subsidiary of Balchem Corporation
(the "Company"), acquired certain assets (excluding accounts receivable and
inventories) relating to the choline animal feed, human choline nutrient and
encapsulated products businesses of DCV, Inc. and its affiliate, DuCoa L.P.,
including DuCoa's manufacturing facility in Verona, Missouri, for a purchase
price of $14.98 million, of which $13.95 million was paid in cash, with the
balance reflecting the assumption by the Buyer of certain closing date accounts
payable and accrued expenses. The Buyer also agreed to assume certain
obligations of DuCoa for retiree medical benefits under the collective
bargaining agreement covering various employees at the Verona facility. The
Buyer also assumed the collective bargaining agreement which expires July 8,
2004.

         The Asset Purchase Agreement also calls for payments of up to an
additional $3 million based upon specified product lines of the Verona, Missouri
operations achieving certain gross margin levels (in excess of specified
thresholds) over the three year period following the closing, with no more than
$1,000,000 payable for any particular yearly period.

         For further information with respect to the acquisition, reference is
made to the Asset Purchase Agreement, which is Exhibit 2.1 hereto.

         Concurrently with the closing of the acquisition, the Company and Fleet
National Bank (the "Bank") entered into a Loan Agreement (the "Loan Agreement")
providing for a term loan of $13.5 million (the "Term Loan"), the proceeds of
which were used to fund the acquisition. The Term Loan is payable in equal
monthly installments of principal, together with accrued interest, and has a
maturity date of May 31, 2009. The Loan Agreement also provides for a short-term
revolving credit facility of $3 million (the "Revolving Facility"). No amounts
have been drawn on the Revolving Facility as of the date hereof.

         Indebtedness under the Loan Agreement is secured by substantially all
of the assets of the Company and BCP Ingredients, Inc., other than real
properties, pursuant to Security Agreements between each of the Company and BCP
Ingredients, Inc. respectively, and the Bank. BCP Ingredients, Inc. is a
guarantor of the Company's obligations under the Loan Agreement.

         For further information with regard to the Loan Agreement and the
agreements and instruments related thereto, reference is made to Exhibits 4.1
through 4.4 hereto.

         The description of the agreements and instruments discussed above are
qualified in their entirety by reference to such agreements and instruments
which are attached as exhibits hereto.

         The acquisition will be accounted for using the purchase method. The
purchase price will be allocated principally to property, plant, equipment and
identifiable

                                        2

<PAGE>

intangibles. Property, plant and equipment included in the acquisition consist
principally of manufacturing facilities and equipment located in Verona,
Missouri, which the Company intends to continue to use in the manufacture and
distribution of choline animal feed and human choline nutrients.

         The Verona facility site, which is approximately 100 acres in size, was
designated by the U.S. Environmental Protection Agency ("EPA") as a Superfund
site and placed on the National Priorities List in 1983, as a result of dioxin
contamination discovered on portions of the site. Remediation conducted by the
prior owner under the oversight of the EPA and the Missouri Department of
Natural Resources ("MDNR") included removal of dioxin contaminated soil and
equipment and capping of areas of residual contamination in four relatively
small areas of the site separate from the manufacturing facilities, and the
installation of wells to monitor groundwater and surface water contamination by
organic chemicals. No ground water or surface water treatment was required. The
Company believes that remediation of the site is in its final stages. In 1998,
the EPA certified the work on the contaminated soils to be complete. In February
2000, after the conclusion of the two years of monitoring groundwater and
surface water, the former owner submitted a draft third party risk assessment
report to the EPA and MDNR recommending no further action and is awaiting the
response of the EPA and MDNR.

         While the Company must maintain the integrity of the caps in the
remediation areas on the site, the prior owner is responsible for completion of
any further Superfund remedy. The Company is indemnified by the sellers under
the Asset Purchase Agreement for potential liabilities associated with the
Superfund site and one of the sellers, in turn, has the benefit of certain
contractual indemnification by the prior owner that is implementing the
above-described Superfund remedy.

         This Report includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and which reflect the Company's expectation or
belief concerning future events that involve risks and uncertainties. The
Company can give no assurance that the expectations reflected in forward-looking
statements will prove correct and various factors could cause results to differ
materially from the Company's expectations, including risks and factors
identified in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000. Forward-looking statements are qualified in their entirety by
the above cautionary statement.

                                       3

<PAGE>

Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits.

(a), (b)

         In accordance with Instruction 4 of this Item 7, the financial
statements and pro forma financial information required by this Item will be
filed by an amendment to this initial report on Form 8-K not later than 60 days
after the date this Report was required to be filed.

(c) Exhibits

Exhibit 2.1    Asset Purchase Agreement, dated as of May 21, 2001, among BCP
               Ingredients, Inc. and DuCoa L.P., DCV, Inc. and DCV GPH, Inc. and
               certain related agreements (forms of which constitute Exhibits to
               the Asset Purchase Agreement) as executed. (The Disclosure
               Schedule identified throughout Asset Purchase Agreement, Schedule
               A to the Obligations Undertaking (list of contracts assumed by
               BCP Ingredients, Inc.) and the Power of Attorney and Security
               Agreement (referred to in Section 2.6 of the Asset Purchase
               Agreement) and Post-Closing Escrow Agreement (referred to in
               Sections 3.2.2 and 3.3.3 of the Asset Purchase Agreement), have
               been omitted. The Company agrees to furnish a copy of these
               documents on a supplemental basis to the Securities and Exchange
               Commission upon request.)

Exhibit 4.1    Loan Agreement dated June 1, 2001 by and between Fleet National
               Bank and Balchem Corporation, Note dated June 1, 2001 from
               Balchem Corporation to Fleet National Bank, and Promissory Note
               (Revolving Line of Credit) dated June 1, 2001 from Balchem
               Corporation to Fleet National Bank.

Exhibit 4.2    Guaranty dated June 1, 2001 from BCP Ingredients, Inc. to Fleet
               National Bank.

Exhibit 4.3    Security Agreement dated June 1, 2001 from Balchem Corporation to
               Fleet National Bank.

Exhibit 4.4    Security Agreement dated June 1, 2001 from BCP Ingredients, Inc.
               to Fleet National Bank.


                                       4

<PAGE>



                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


                                                BALCHEM CORPORATION



                                                By:  /s/ Dino A. Rossi
                                                   -------------------
                                                      Dino A. Rossi
                                                      President

Dated: June 14, 2001



                                       5

<PAGE>



                                  EXHIBIT INDEX


Exhibit 2.1    Asset Purchase Agreement, dated as of May 21, 2001, among BCP
               Ingredients, Inc. and DuCoa L.P., DCV, Inc. and DCV GPH, Inc. and
               certain related agreements (forms of which constitute Exhibits to
               the Asset Purchase Agreement) as executed. (The Disclosure
               Schedule identified throughout Asset Purchase Agreement, Schedule
               A to the Obligations Undertaking (list of contracts assumed by
               BCP Ingredients, Inc.) and the Power of Attorney and Security
               Agreement (referred to in Section 2.6 of the Asset Purchase
               Agreement) and Post-Closing Escrow Agreement (referred to in
               Sections 3.2.2 and 3.3.3 of the Asset Purchase Agreement), have
               been omitted. The Company agrees to furnish a copy of these
               documents on a supplemental basis to the Securities and Exchange
               Commission upon request.)

Exhibit 4.1    Loan Agreement dated June 1, 2001 by and between Fleet National
               Bank and Balchem Corporation, Note dated June 1, 2001 from
               Balchem Corporation to Fleet National Bank, and Promissory Note
               (Revolving Line of Credit) dated June 1, 2001 from Balchem
               Corporation to Fleet National Bank.

Exhibit 4.2    Guaranty dated June 1, 2001 from BCP Ingredients, Inc. to Fleet
               National Bank.

Exhibit 4.3    Security Agreement dated June 1, 2001 from Balchem Corporation to
               Fleet National Bank.

Exhibit 4.4     Security Agreement dated June 1, 2001 from BCP Ingredients, Inc.
               to Fleet National Bank.


                                       6
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.1
<SEQUENCE>2
<FILENAME>exhibit2-1_39462.txt
<TEXT>


                                                                  Exhibit 2.1


                            ASSET PURCHASE AGREEMENT

     This ASSET PURCHASE AGREEMENT (the "Agreement") is dated as of May 21, 2001
among BCP Ingredients, Inc., a Delaware corporation ("Buyer"), and DuCoa L.P. a
Delaware limited partnership ("DuCoa"), and DCV, Inc., a Delaware corporation
("DCV") and the general partner of DuCoa, and DCV GPH, Inc., a Delaware
corporation ("LP") and a limited partner of DuCoa (DuCoa, DCV and LP being
together referred to herein as "Sellers" and being individually referred to
herein as a "Seller").

                                   BACKGROUND

     Buyer desires to purchase and acquire from Sellers, and Sellers desire to
sell, assign and transfer to Buyer, certain assets, properties and business, as
a going concern, of Sellers, forming part of or used in connection with any of
the Business (as herein defined), with the exception of certain excluded assets
hereinafter specified, upon the terms and subject to the conditions hereinafter
set forth.

     In consideration of the premises and the mutual covenants and agreements
hereinafter set forth, the parties hereto hereby agree as follows:

                                   ARTICLE 1

1.   Purchase and Sale of Business and Assets.

     1.1 Acquired Assets. Subject to and upon the terms and conditions of this
Agreement, Sellers shall sell, transfer, convey, assign, grant and deliver
(collectively "Transfer") to Buyer, and Buyer shall acquire, and except as
otherwise indicated in this Section 1.1, at the Closing (as hereinafter
defined), subject to the Permitted Liens (as hereinafter defined), all right,
title and interest in and to all business, properties, assets, machinery,
equipment, furniture, fixtures, licenses, goodwill and rights of Sellers as a
going concern, of every kind, nature and description, tangible and intangible,
owned or leased, real or mixed, wherever located and whether or not carried or
reflected on the books or records of any Seller, including all properties,
assets, franchises, rights described in the form of Bill of Sale annexed as
Exhibit 1.1 hereto (the "Bill of Sale"), and all of the Acquired Assets, as
hereinafter referred to, but excluding the Excluded Assets (as hereinafter
defined), as the same shall exist on the Closing Date (as hereinafter defined),
forming part of or used in connection with any of the Business (as hereinafter
defined). All of the foregoing (other than the Excluded Assets) are herein
collectively referred to as the "Acquired Assets." The Acquired Assets also
include, without limitation, all, or where expressly indicated below in this
Section 1.1, all right and title and interest of any of Sellers in and to all,
of the following:

         1.1.1 all real property and buildings and improvements thereon and all
interests therein or pertaining thereto (other than leasehold interests covered
by Section 1.1.3 below) owned by any Seller and used or occupied in connection
with any of the Business (as defined in Section 1.2 below) (such real property
being hereinafter referred to as the "Owned Real Property"), including the real
property more particularly described on Schedule 1.1.1 of the Disclosure
Schedule (as hereinafter defined);

                                      -1-

<PAGE>

         1.1.2 all tools, dies, molds, jigs, patterns, tooling, fittings, tanks,
machinery, equipment, cranes, furniture, furnishings, fixtures, vehicles,
rolling stock, and all computer hardware, used in connection with any of the
Business, all related claims, credits, and rights of recovery and set-off with
respect thereto, and all other items of tangible personal property of any Seller
used by any Seller in connection with any of the Business (collectively the
"Equipment"), including the items of Equipment more particularly described on
Schedule 1.1.2 of the Disclosure Schedule;

         1.1.3 all leasehold interests used, held or occupied in connection with
any of the Business in all properties, real or mixed, wherever situated (but
excluding the leased Randolph, Wisconsin real property, the leased Highland,
Illinois real property and the leased Wilmington, Delaware real property (the
"Excluded Leased Property"), and any and all leasehold improvements located in
the buildings and improvements used by any Seller thereat (collectively, "Leased
Real Property," and, together with the Owned Real Property and the Excluded
Leased Property, the "Real Properties"), including under the leases more
particularly described on Schedule 1.1.3 of the Disclosure Schedule and all
leasehold improvements located thereon;

         1.1.4 all U.S. and foreign trademark registrations and applications
therefor, and all right, title and interest of any of Sellers in and to all
names, titles, trademarks, trade names, service marks and logos owned, used or
proposed for use in connection with any of the Business, and any names similar
to or any derivation or variation of any and all thereof, and the goodwill
pertaining thereto and all right to fully exploit such names and other property
and rights (all of the above being hereinafter referred to as the "Marks"),
including, those names, marks and logos more particularly described on Schedule
1.1.4 of the Disclosure Schedule;

         1.1.5 all patents and patent applications owned or used in connection
with any of the Business, and the goodwill pertaining thereto and the right to
fully exploit, and enforce infringement claims in respect of, such patents
(collectively, "Patents"), including those Patents more particularly described
on Schedule 1.1.5 of the Disclosure Schedule subject to those licenses
identified on said Schedule 1.1.5;

         1.1.6 all of the right, title and interest (including by reason of
license or lease) of any Seller in or to any and all software, computer
programs, and software products and services owned, used, licensed, developed,
being developed or intended to be developed for or in connection with any of the
Business, whether for internal use (including engineering, design,
manufacturing, quality control, quality assurance, inventory control, pricing
and testing programs and software to create, publish, manufacture and distribute
any web site or home page) or for sale or license to others, and any and all
software, computer programs and software and software-related products and
services heretofore or currently or at the Closing manufactured, published,
licensed and/or marketed or proposed to be manufactured, published, licensed
and/or marketed, or under any stage of development, revision, upgrade,
modification or planning, for or in connection with any of the Business , in all
versions and releases, and all updates and enhancements of or to any of the
foregoing, including all run-time systems, libraries, examples, utilities, data
files, manuals, guides and written and related materials and all Intellectual
Property and Documentation (as such terms are herein defined), whether or not
patented or copyrighted, related to the implementation or use of any thereof
(collectively, "Programs");

         1.1.7 all right, title and interest of any of Sellers in and to all
documentation, records and software, whether in machine or visually readable or
other tangible

                                       -2-

<PAGE>

form, evidencing, representing or containing any Intellectual Property (as
hereinafter defined) related to any of the Business in the possession or under
the control of any of Sellers whether relating to any of the Programs or used in
or in connection with or necessary to any of the Business and/or the Acquired
Assets, including any and all manuals, functional and design specifications,
user and programmer instructions, engineering, design, manufacturing, machining,
quality control, quality assurance, inventory control, pricing and testing
instructions, flow charts and diagrams, coding constructions, testing notes,
error reports and logs, patches and patch instructions, itemizations of
development tools, and all other writings which would be necessary or helpful to
a skilled programmer to understand, maintain and enhance any Program
(collectively, "Documentation");

         1.1.8 all right, title and interest of any of Sellers in and to all
know-how and other intellectual property of or developed or under development by
or for any of Sellers necessary for or used in or for any of the Business,
including all research and/or development and all results of all projects
related thereto whether partial, in progress or completed, trade secrets, vendor
information, lists and data bases, proprietary processes and other information,
methods and apparatus, information not known to the general public, each
literary work, whether or not copyrightable, copyrights and copyright
applications, ideas, concepts, product and other designs and drawings,
discoveries, formulae, patents, patent applications, technical information,
product and service developments, inventions, invention disclosures,
improvements, software, source codes and materials, object codes and materials,
algorithms, techniques, mask work rights, prototypes, engineering and design
models, information with respect to firmware and hardware, and any information
relating to any product or Program which has either been developed, acquired or
licensed for or used in or necessary for any of the Business, and also including
all of the foregoing relating in any manner to any of the projects referred to
in Schedule 1.1.8 of the Disclosure Schedule, and also including the
maintenance, modification or enhancement any and all of the foregoing, all
vendor and customer sales and purchase records and files of or related to any of
the Business, and all outsourcing, fulfillment, dealer, distribution,
engineering, design, manufacturing, quality control and assurance, pricing and
testing information, and all product and other information from all relevant
pages and portions of any and all websites of or maintained by or for any Seller
which covers or refers to any of the Business (collectively, together with the
Marks, the Patents, the Documentation and the Programs, "Intellectual
Property");

         1.1.9 each contract, agreement, lease, license, franchise, purchase
order, sale, license or service order, permit, instrument, commitment,
arrangement and understanding (in each case, whether written or oral and
including all amendments thereto) to which any Seller is a party or by which any
Seller or the Business is bound or under which any Seller has any rights or is
entitled to any benefits relating to the Business, including, (i) all
maintenance, service, partnership and joint venture, license, royalty, supply,
purchase, distribution, dealer, distributor, advertising and promotional
services agreements, purchase orders, sale orders, government contracts, bids
and proposals, awards, options to purchase any asset or property rights, (ii)
all restrictive and negative covenants, non-competition, proprietary property,
non-disclosure and confidentiality agreements in favor of any Seller or the
Business or with any and all former or current employees and consultants having
access to Intellectual Property or rendering services to or for any of the
Business to the extent relating to any of the Business, and (iii) all leases of
machinery, equipment and other personal property accepted by Buyer and listed on
Schedule 1.1.9 of the Disclosure Schedule relating to or used in connection with
any of the

                                      -3-

<PAGE>

Business (other than those identified as Excluded Assets or constituting
Excluded Liabilities (as defined below)) (collectively, "Contracts");

         1.1.10 all right, title and interest of any of Sellers in and to all
promotional materials of every kind, nature and description used in, or
necessary for the operation of, any aspect of the Business, including all
physical copies and media of items constituting any part thereof, and all user
manuals, tapes, compact disks and diskettes, and all advertising, artwork,
templates and related creative materials for advertisements, catalog insertions,
page layouts, promotional and product literature and displays, marketing
materials, brochures and pamphlets related to any of the foregoing, in each case
to the extent any Seller has any right, title or interest therein or with
respect thereto (collectively, "Business Materials").;

         1.1.11 the proceeds of any and all insurance, and the right to receive
the proceeds of any and all insurance, with respect to any and all claims which
have been or may be asserted in connection with the damage, destruction or loss
to any tangible property hereunder included, or which, but for such damage,
destruction or loss, would have been included, in the Acquired Assets, to the
extent not utilized prior to the Closing directly and exclusively to repair or
replace the lost, damaged or destroyed items (collectively the "Insurance
Proceeds");

         1.1.12 all easements, rights-of-way, privileges, licenses or other
interests of any of Sellers in, on, or to, any land, highway, street, road, or
avenue, open or proposed, in, on or across, in front of, abutting or adjoining,
any of the Owned Real Property; and all right, title and interest of any Seller
or any affiliate, if any, in and to any awards made or to be made in lieu
thereof, and in and to any unpaid awards for damage thereto by reason of any
change of grade of any such highway, street, road or avenue;

         1.1.13 all rights which any Seller may have against any of its
suppliers under express or implied warranties related to any of the Business or
any products or services sold or offered by or through the Business;

         1.1.14 all right, title and interest of any of Sellers in and to all
operating data and records of any Seller which are necessary to or used in the
operation of any of the Business, wherever located, including all books of
account, files and records of or used in or for any of the Business, whether in
hard copy, electronic, magnetic or other format, including purchase and sales
records and information, customers' records, records pertaining to customer
requirements, equipment maintenance and warranty information, customer and
prospect lists, correspondence, catalogues, promotion materials, customer
contacts, customer invoices, customer returns and vendor product information,
and restrictive and negative covenants, non-competition, proprietary property
and confidentiality agreements, and all other files, records, literature and
other documents necessary to or used in or for any of the Business, excluding
only attorney-client or attorney work product documents or communications
(collectively, "Files and Records"); provided, that any file or record that
pertains solely to the Excluded Assets or Excluded Liabilities shall not be
included;

         1.1.15 all prepaid items, advance payments, customer advances and
prepayments relating to any of the Business, including the items more
particularly described on Schedule 1.1.15 of the Disclosure Schedule, but
excluding the items more particularly described on Schedule 1.3.15 of the
Disclosure Schedule;

                                     - 4 -
<PAGE>

         1.1.16 all right, title and interest of any of Sellers in and to all
licenses, permits, security clearances, authorizations, franchises and
certifications, including ISO 9002 certifications, and other consents and
approvals issued by any agency, division, subdivision, audit group or procuring
office of any federal, state, local or foreign government, or any industry,
trade or standards authority, association or other organization, used or
necessary in the conduct of any of the Business ("Permits and Approvals");

         1.1.17 all rights to payment, causes of action, claims and rights of
recovery of any Seller originating or resulting from or arising in connection
with any of the Business, and/or the Acquired Assets, excluding only those
listed on Schedule 1.3.7 of the Disclosure Schedule; and

         1.1.18 all right, title and interest of any of Sellers in and to the
Business as a going concern, including all of the right, title and interest of
any of Sellers in and to the telephone, telex, telefacsimile and facsimile
numbers and directory listings, and all passwords and security protection
procedures and systems.

     1.2 The Business. The businesses, operations and rights of Sellers or any
of them pertaining or relating to any or all of the "Verona Operations", the
"M-CAP Operations" and/or any of the "Products" (as each such term is defined in
Schedule 1.2 hereto), and/or the ownership and/or use of any and all assets,
properties and rights used in connection with any of the foregoing, are herein
called collectively the "Business."

     1.3 Excluded Assets. Notwithstanding anything to the contrary contained in
this Agreement, the Acquired Assets shall not include any of the following (the
"Excluded Assets"), which Sellers shall continue to own and be responsible for
after the Closing:

         1.3.1 all inventories of Sellers, including goods held by Seller for
sale, raw materials, work-in-process, finished goods and supplies, but not spare
or replacement parts or components for or related to any of the Equipment
(collectively "Inventory");

         1.3.2 any cash or cash equivalents of Sellers on hand or on deposit;

         1.3.3 all trade accounts receivable of Sellers for the sale of
Inventory or other accounts receivable in the ordinary course of business as of
the date immediately prior to the Closing Date (the "Receivables");

         1.3.4 all refunds or credits in respect of income and franchise taxes
paid by Sellers (whether federal, state or local taxes) for periods prior to the
Closing Date;

         1.3.5 those leases, contracts and agreements identified on Schedule
1.3.5 of the Disclosure Schedule (the "Excluded Contracts");

         1.3.6 all limited partnership and corporate formation documents of
Sellers, including minute books and stock ledgers;

         1.3.7 those claims and causes of action of Sellers identified in
Schedule 1.3.7 of the Disclosure Schedule, or constituting only an affirmative
defense accrued prior to the Closing Date to any of the Excluded Liabilities;


                                     - 5 -
<PAGE>

         1.3.8 (i) all assets historically located at Sellers' Wilmington, DE or
Highland, IL facilities, and never located at the Owned Real Property, in the
nature of furniture, office equipment, laboratory equipment, computer hardware
(including software used thereon) and office and laboratory supplies, other than
those used primarily for or in connection with the Business operations at
Verona, Missouri and/or Randolph, Wisconsin, and (ii) the central processing
system historically located at Sellers' Highland, IL facility (and the software
therefor);

         1.3.9 Sellers' real property and improvements located at Miley, SC,
Sellers' abandoned Miley, SC plant and all tangible personal property
historically located at such abandoned plant (collectively with said real
property, improvements and plants, the "Excluded Miley Assets");

         1.3.10 all Documents containing consolidated information of the
Business and other businesses of Sellers as long as Buyer otherwise receives as
part of the Acquired Assets all such information relevant to the Business in
other Documents;

         1.3.11 the Intellectual Property for the production of those products
identified in Schedule 1.3.11(a) of the Disclosure Schedule previously sold,
transferred or assigned by any of Sellers in the transactions identified in said
Schedule 1.3.11(a) and not used in any part of the Business (other than pursuant
to the terms of the tolling agreements identified in said Schedule 1.3.11(b));

         1.3.12 all right, title and interest in and to the trademarks and
tradenames, "DuCoa" and "DCV";

         1.3.13 all right, title and interest in and to any websites, or
Intellectual Property, Documentation or Programs exclusively for such websites,
used, owned or licensed by any of the Sellers except for the website information
referred to in Section 1.1.8 hereof;

         1.3.14 all right, title and interest in and to any Programs, or
Intellectual Property or Documentation exclusively for any Programs, except for
such Programs, or Intellectual Property or Documentation for any Programs, used
primarily at or for the Verona, MO site or the Business; and

         1.3.15 prepaid items, advance payments, customer advances and
prepayment listed in Schedule 1.3.15 of the Disclosure Schedule.

     1.4 Instruments of Transfer. The Transfer to Buyer of each of the Acquired
Assets as herein provided shall be effected by warranty deeds, bills of sale,
licenses, endorsements, assignments, certificates of title, and/or other good
and sufficient instruments of transfer and conveyance, satisfactory in form and
substance to Buyer and as shall be effective to vest in Buyer title to each such
Purchased Asset as required by this Agreement.

     1.5 Title to Acquired Assets. Sellers shall Transfer to Buyer good and
marketable title to all of the Acquired Assets, free and clear of any and all
claims, liabilities and obligations and free and clear of any and all liens,
pledges, charges, mortgages, security interests, restrictions, leases, licenses,
easements, liabilities, claims, encumbrances, preferences, priorities or rights
of others of every kind and description (collectively, "Liens"), except for
those liens or limitations expressly identified on Schedule 1.5 of the
Disclosure Schedule ("Permitted Liens").

                                     - 6 -
<PAGE>

     1.6 Intellectual Property. Without intending to limit or affect any other
representation or covenant made herein or pursuant hereto, Buyer shall have all
rights as Sellers collectively have to use, assert and/or apply for patent,
trademark, copyright and other statutory or common law protection for any or all
Intellectual Property in any and all countries. Sellers agree to assist, and to
use at Buyer's expense all commercially reasonable efforts to cause each of its
current employees and contractors to assist, Buyer in every way to apply for,
prosecute and obtain, and from time to time enforce, any and all patent,
trademark, copyright and other statutory or common law protection for any of the
Intellectual Property in any and all countries. Sellers shall, or shall use
commercially reasonable efforts to cause the appropriate employee or contractor
to, execute any and all assignments, transfers, applications and other papers
covering any Intellectual Property which may be considered necessary or helpful
by Buyer in furtherance of the foregoing and/or to accomplish the assignment,
transfer and/or license of any Intellectual Property to persons designated by
Buyer. Seller constitutes and appoints Buyer its attorney-in-fact to execute and
deliver all applications for registration in its behalf of such copyrights and
to cause all assignments required, permitted or contemplated under the terms of
this Agreement to be recorded.

     1.7 Assignment of Certain Contracts. Buyer and Sellers acknowledge that
certain of the Contracts, Permits and Approvals and Intellectual Property may
not, by their terms or under applicable law, be assignable without obtaining
third-party consents or approvals (collectively, "Unassignable Contracts"). Each
of Sellers acknowledges that the inability to assign any of the Unassignable
Contracts shall not relieve any Seller of the obligation to sell and deliver
such of the Acquired Assets as shall be tangible and/or capable of being
delivered or otherwise assignable as long as the compliance with such obligation
does not put any Seller in breach of any such Unassignable Contract. Anything in
this Agreement to the contrary notwithstanding, this Agreement shall not
constitute an agreement to assign any Unassignable Contract if an attempted
assignment thereof, without the consent of a third-party thereto, would
constitute a breach thereof. Any assignment to Buyer by any Seller of any
Unassignable Contract or any claim or right or any benefit arising thereunder or
resulting therefrom which shall require the consent of any third party, shall be
made subject to such consent being obtained. If such consent is not obtained, or
if an attempted assignment thereof would be ineffective or would adversely
affect the rights of Buyer thereunder, Sellers shall both before and after the
Closing cooperate with Buyer in any reasonable arrangement requested by Buyer to
provide for Buyer at Buyer's expense all rights and benefits under any or all of
such Unassignable Contracts, including enforcement for the benefit of Buyer of
any and all rights of any Seller against any third-party arising out of the
breach or cancellation by such third-party or otherwise, and Sellers shall both
before and after the Closing, and without further consideration therefor, pay,
assign and remit to Buyer promptly all monies, and, to the extent permitted, all
other rights or consideration received, or which may be received or obtained in
respect of performance of any of the Unassignable Contracts. When any such
consent shall be obtained or any such Unassignable Contract shall otherwise
become assignable, Sellers shall promptly assign same to Buyer and Buyer shall,
to the extent and only to the extent the same constitute Assumed Obligations (as
defined below) be deemed to have assumed Sellers' obligations under the
Unassignable Contracts, but in each case only if Buyer shall be entitled to the
full benefits associated therewith. Until such time, no Seller shall enter into
any amendment of any Unassignable Contract without the prior written consent of
Buyer.


                                     - 7 -
<PAGE>

                                   ARTICLE 2

2. Purchase Price; Assumption of Obligations; Adjustments; Prior Agreement.


     2.1 Purchase Price. Subject to and upon the terms and conditions of this
Agreement, including the adjustments hereinafter referred to, Buyer shall pay to
Sellers, in full payment for the Acquired Assets and in reliance upon the
representations and warranties made herein by Sellers, the purchase price (the
"Purchase Price") set forth on and computed in accordance with Schedule 2.1
hereto, and payable in the manner and subject to adjustment as provided in said
Schedule 2.1.

     2.2 Allocation. The Purchase Price shall be allocated among the Acquired
Assets as determined by Buyer in its reasonable judgment, and Buyer shall notify
Sellers thereof in writing within ninety (90) days following the Closing, and
such allocation shall be binding on Sellers. The parties hereto shall file all
tax returns consistently with such allocation.

     2.3 Assumed Obligations. Except as may otherwise be provided hereunder,
Buyer shall, at the Closing, execute and deliver to Seller an Obligations
Undertaking in the form of Exhibit 2.3 hereto (the "Obligations Undertaking"),
pursuant to which Buyer shall assume and agree to pay and perform as the same
shall become due in accordance with their respective terms, the obligations of
Sellers set forth in the Obligations Undertaking, in each case, only to the
extent that such obligation is legally enforceable and also shall not have been
paid, performed or discharged prior to the Closing (hereinafter collectively
referred to as the "Assumed Obligations").

     2.4 Excluded Liabilities. Except as expressly provided in the Obligations
Undertaking, and without intending to limit the provisions of Article 8 hereof,
Buyer shall not and does not assume any liability or obligation of any Seller,
fixed or contingent, disclosed or undisclosed, and does not and shall not assume
any liability for any claim, debt, default, duty, obligation or liability of any
Seller of any kind or nature, whether known or unknown, contingent or fixed, all
of which, to the extent that they exist on and after the Closing shall be
retained by Sellers. All of the foregoing are collectively referred to as the
"Excluded Liabilities" and also include (without intending to limit the
provisions of Article 8 hereof) all of the following:

         2.4.1 any and all liabilities and obligations based on or arising from
the presence, use, disposal or treatment of any Hazardous Substance (as
hereinafter defined) on or about any of the Real Properties or any of the Prior
Properties (as hereinafter defined) or any of the disposal, storage or other
sites or premises used or occupied by or for any Seller or any past or present
affiliate or partner thereof, or any discharge or release of a Hazardous
Substance prior to the Closing Date, or failure to obtain any license or permit
required in connection with any Hazardous Substance, or arising out of any
non-compliance with any environmental, health or safety law, ordinance, rule or
regulation, in each case to the extent based on or arising from any act,
transactions, state of facts or other condition or conduct which existed before
the Closing Date, whether or not then known, including all fines, penalties,
remedial action and clean-up and other costs and expenses;

         2.4.2 any obligation or liability of any Seller based upon acts or
omissions of any Seller occurring on or after the Closing Date;


                                     - 8 -
<PAGE>

         2.4.3 any Seller's obligations under any stock or equity option, stock
or equity purchase or profit-sharing plans or agreements;

         2.4.4 any brokerage, investment banking or finder's fee payable by any
of Sellers in connection with the transactions contemplated hereby;

         2.4.5 any liabilities of any Seller to any of its present or former
partner whether or not arising out of any action by any Seller or in connection
with any of the transactions contemplated hereby;

         2.4.6 any and all obligations of any Seller for any indebtedness,
including capitalized leases not expressly assumed by Buyer hereunder and
amounts advanced by any Seller or any affiliate thereof or amounts otherwise
owed or payable by any Seller or any affiliate thereof, and any and all other
intercompany obligations (whether current or long-term);

         2.4.7 except as expressly set forth in Section 6.6 hereof, any and all
debts, liabilities and obligations of any Seller incurred or accrued with
respect to any period, or circumstances, or state of facts or occurrences, on,
or prior to the Closing Date, relating to bonuses, salaries, wages, incentive
compensation, compensated absences, workmen's compensation, FICA, unemployment
taxes, employee benefits, medical and health, deferred compensation, wage
continuation, severance, termination, pension (including any unfunded accrued or
vested obligation), section 401(k) plans, cafeteria, child care, retirement,
profit-sharing or similar plans or arrangements and any and all vacation,
holiday or sick pay or leave incurred or accrued with respect to any current or
former employees of Seller whether or not such employees become employees of
Buyer;

         2.4.8 any and all domestic and foreign federal, state and local income,
payroll, property, sales, use, franchise or value added tax liabilities, imposed
on any Seller or with respect to income or activities of any Seller, including
assessments and governmental charges or levies imposed in respect of such taxes,
and any and all other taxes of any Seller, any subsidiary or affiliate,
including any income or gains tax with respect to the Transfer of Acquired
Assets contemplated hereby;

         2.4.9 any and all liabilities and obligations of any Seller arising
under or in connection with this Agreement (including indemnification
obligations and obligations to pay expenses arising out of this Agreement), or
from any failure to perform any of the agreements contained herein or incurred
in connection with the consummation of the transactions contemplated hereby, or
for which any Seller is responsible under this Agreement, including fees of
lawyers, accountants and other advisors;

         2.4.10 any and all liabilities and obligations with respect to claims,
suits, legal, administrative, arbitral or other actions, proceedings and
judgments with respect to causes of action or disputes arising out of, and other
actual or alleged liabilities of any Seller asserted or imposed, or arising out
of, any events occurring, or circumstances or state of facts existing, on or
prior to the Closing Date, including personal injury, anti-trust, tort
negligence, deceptive, unfair or illegal trade practices, or any product
liability (including strict liability) or warranty claim with respect to
products, goods or items manufactured, sold or distributed or services rendered
by any Seller prior to the Closing Date;


                                     - 9 -
<PAGE>

         2.4.11 any and all debts, liabilities and obligations of any Seller
with respect to any of the Excluded Assets and/or the Excluded Contracts;

         2.4.12 any and all liabilities or obligations arising out of any
breach, default or non-performance of any lien, license, agreement, or contract,
oral or written, or any violation of or failure of compliance with any law,
rule, regulation, ordinance, order or judgment, policy or requirement of any
governmental body, authority, agency, court, arbitrator(s) or tribunal occurring
or accrued, or attributable to any fact, occurrence or state of fact or
condition, on or before the Closing Date;

         2.4.13 any and all accrued liabilities and obligations arising under
leases of real and personal property by any Seller to be assumed by Buyer,
including all arrearages in rent, for all periods prior to the Closing Date;

         2.4.14 any and all claims or liabilities relating to any actions by any
present or former partner, shareholder, director, officer or employee of any
Seller or any affiliate thereof or of any predecessor of any Seller or any
affiliate thereof (including trustees of employee benefit plans) on or prior to
the Closing Date; and

         2.4.15 any and all liabilities or obligations to or as a guarantor,
co-obligor or surety of any Seller or any affiliate thereof.

     2.5 Apportionment of Certain Expenses.

         2.5.1 Appropriate adjustments and apportionments shall be made between
Sellers and Buyer, as of the close of business on the calendar day immediately
preceding the Closing Date, for (i) real property (but not transfer or sales)
taxes, assessments and rentals, utilities, water, fuel and sewage expense in
respect of the Owned Real Properties and leased Equipment assigned to Buyer and
(ii) personal property (but not transfer or sales) taxes applicable to the
tangible Acquired Assets, such that Sellers shall be responsible for the pro
rated portion attributable to all periods ending prior to the Closing Date and
Buyer shall be responsible for the pro rated portion attributed to all periods
commencing on the Closing Date. To the extent Buyer assumes an accrued
obligation referred to in this Section 2.5.1 which is the responsibility of
Sellers, Sellers shall pay such amount to Buyer at the Closing. To the extent
Sellers have paid an obligation referred in this Section 2.5.1 which is the
responsibility of Buyer, such payment shall be added to the amount of the
Purchase Price payable at the Closing.

         2.5.2 In addition, the Purchase Price (and the amount thereof payable
at the Closing) shall be reduced by the amount of all accrued vacation pay as of
the Closing Date for all personnel of the Business who shall be hired by Buyer.

         2.5.3 If all the apportionments and reductions set forth above are not
accomplished at the Closing Date, then, as soon as practicable after said date,
representatives of Sellers and Buyer will examine all appropriate books and
records in order to make the determination of said apportionment. Payment in
respect thereof shall be made within 10 days after such determination; provided,
that if the payments with respect to real and personal property taxes are based
in whole or in part on the previous year's taxes, there shall be a later
adjustment to reflect the current year's taxes when the tax bills are finally
rendered.


                                     - 10 -
<PAGE>

     2.6 Prior Agreement. At the Closing, Sellers shall execute and deliver to
Buyer: a power of attorney with respect to Sellers' rights under that certain
Asset Purchase Agreement, identified in Schedule 2.6 of the Disclosure Schedule
(the "Prior Agreement"), and a security agreement, with respect to any and all
sums now or hereafter payable to any of Sellers under or by reason of the Prior
Agreement, all in the form appended to Schedule 2.6 of the Disclosure Schedule
(collectively the "PA/Security Agreement").

     2.7 Certain Other Transfers.

         2.7.1 Promptly after the execution hereof, Sellers shall take all steps
and execute and file all applications, assignments, notices and other documents
necessary or reasonably requested by Buyer to promptly transfer to Buyer or to
permit Buyer to promptly obtain in its own name all Licenses.

         2.7.2 Sellers shall use their best efforts to cause all toll-free
customer service telephone numbers used primarily for the Business to be
transferred to Buyer effective within fifteen (15) days of the Closing Date.

                                   ARTICLE 3

3. Closing; Deliveries; Conditions Precedent.

     3.1 Closing.

         3.1.1 The Closing under this Agreement (the "Closing") shall take place
at the offices of Golenbock, Eiseman, Assor & Bell, 437 Madison Avenue, New
York, New York at 10:00 a.m., local time, on May 31, 2001 or such other date,
place or time as the parties hereto shall mutually agree upon; provided that if
Buyer is actively engaged in efforts to obtain bank or institutional lender
financing for the acquisition contemplated hereby, then Buyer shall be entitled
to extend the date of the Closing until a date on or before June 15, 2001 (such
date for the Closing as Buyer may designate from time to time being herein
called the "Buyer Designated Date"), it being acknowledged by all parties that
Buyer has not assured and cannot assure that such financing will be obtained and
that none of Sellers will have any claim or cause of action whatsoever, nor will
Buyer be deemed to be in breach or default, if such financing is not obtained.
The time and date of the Closing is referred to in this Agreement as the
"Closing Date", but for purposes of any calculation or determination required to
be made by any of the parties following the Closing, the Closing shall be deemed
to have been effective as of 12:01a.m. on the Closing Date.

         3.1.2 In the event that the Closing is not held on or before May 31,
2001, and such failure to hold the Closing is solely the result of a failure to
satisfy the condition set forth in Section 3.6.8 hereof without there also being
a failure of any other condition set forth in Section 3.6 hereof and which such
failure to satisfy the condition set forth in Section 3.6.8 is not due to any
act or omission of any of Sellers (the foregoing taken as a whole being a "Buyer
Financing Cause"), then, for each day after May 31, 2001 through the earlier of
(x) June 15, 2001, and (y) the Buyer Designated Date, the Purchase Price shall
be increased by $3,000 (the "Buyer Delay Increase"). Under no circumstances
shall any Buyer Delay Increase be payable by Buyer or added to the Purchase
Price if a delay in the Closing is due to any cause or event other than the
Buyer Financing Cause.

                                     - 11 -

<PAGE>

         3.1.3 All proceedings to be taken and all documents to be executed and
delivered by all parties at the Closing shall be deemed to have been taken and
executed simultaneously and no proceedings shall be deemed taken nor any
documents executed or delivered until all have been taken, executed and
delivered.

     3.2 Deliveries of Selling Parties. At the Closing, Sellers shall deliver,
or cause to be delivered, to Buyer:

         3.2.1 the Bill of Sale, executed by Sellers;

         3.2.2 a Post-Closing Escrow Agreement, substantially in the form of
Exhibit 3.2.2 hereto, dated as of the Closing Date, among the Sellers and Buyer,
and the Escrow Agent thereunder (the "Escrow Agreement"), executed by Sellers
and pursuant to which $250,000 of the portion of the Purchase Price payable at
Closing (the "Escrow Amount") shall be deposited in escrow thereunder;

         3.2.3 a Non-Competition Agreement, dated as of the Closing Date in the
form of Exhibit 3.2.3 hereto, among each of Sellers and Buyer (the "Non- Compete
Agreement"), as executed by each of Sellers;

         3.2.4 a Non-Competition Agreement, dated as of the Closing Date, in the
form of Exhibit 3.2.4 hereto, between James Doncheck and Buyer, executed by said
individual;

         3.2.5 such warranty deeds, endorsements, assignments, and other
instruments of Transfer, in form and substance reasonably required by Buyer, as
shall be effective to vest in Buyer, good and marketable title to the Acquired
Assets as provided herein;

         3.2.6 instruments of assignment and transfer of all Marks, Patents and
Intellectual Property to be Transferred from any of Sellers to Buyer hereunder,
executed by the applicable Sellers, in form and substance satisfactory to Buyer;

         3.2.7 with respect of each parcel of the Owned Real Property, evidence
as to whether such parcel is located within a flood hazard area for purposes of
the National Flood Insurance Act of 1968, as amended;

         3.2.8 a survey (collectively, the "Survey") of each parcel of the Owned
Real Property, dated not more than 60 days prior to the Closing Date, certified
to Buyer and its lenders, and either (i) made in accordance with the "Minimum
Standard Detail Requirements for ALTA/ACSM Land Title Surveys" established and
adopted by the American land Title Association and American Congress on
Surveying and Mapping in 1992, and meeting the accuracy requirement of an
"Urban" survey as defined therein, or (ii) meeting the applicable state survey
requirements and sufficient to obtain "Extended Coverage Endorsements" for each
applicable title insurance policy insuring over the general exceptions contained
customarily in any such policy, in the case of both (i) and (ii) above, showing
all buildings and other improvements, if any, all encroachments, if any, all
set-back lines, if any, and all areas affected by any easement or other
instrument of record, if any (the recording data in respect of which shall be
marked on the Survey), containing metes and bounds description of such parcel,
and setting forth the flood zone designations, if any, in which such parcel is
located and otherwise reasonably satisfactory to Buyer; provided that Buyer
shall accept at the Closing such a Survey which does not show the precise metes
and bounds location of each building located entirely


                                     - 12 -
<PAGE>

within the Owned Real Property or the precise metes and bounds location of each
utility easement, but which nevertheless shows and certifies the location of
each railroad easement and right of way easement and shows that no building or
improvement is located within or in conflict with any such railroad easement or
right of way or encroaches over the property line, and it is hereby agreed that
the estimated price, as established by the surveyor, of $7,000, for completing
and recertifying the Survey to conform with the requirements of this Section
3.2.8, without giving effect to the limitations in this proviso, has been
reflected in the Purchase Price;

         3.2.9 the originals (or if not in existence copies) of all Contracts
included in the Acquired Assets;

         3.2.10 certificates of good standing for Sellers issued as of a recent
date by the Secretaries of State of the States of Delaware and Missouri (with
respect to DuCoa and DCV) and Delaware (with respect to LP);

         3.2.11 a certificate of each of Sellers, dated the Closing Date, in
form and substance reasonably satisfactory to Buyer, as to (i) the resolutions
of the board of directors shareholders and partners of each Seller, as the case
may be, authorizing the execution, delivery and performance of this Agreement
and each exhibit hereto and the consummation of the transactions contemplated
hereby and thereby; and (ii) the incumbency and signatures of the officers of
each Seller executing this Agreement and any Seller Documents (as defined
below);

         3.2.12 the PA/Security Agreement, executed by Seller;

         3.2.13 the certificate required by Section 3.6.6 hereof; and

         3.2.14 all other documents, materials, items and property required by
the terms of this Agreement to be delivered to Buyer under or to effect the
provisions of this Agreement.

     3.3 Deliveries of Buyer. At the Closing, Buyer will deliver, or cause to be
delivered:

         3.3.1 to Sellers: wire transfer(s) in the amount of the Cash Payment
(as defined in Schedule 2.1), less the Escrow Amount;

         3.3.2 to the Escrow Agent: wire transfer(s) in the amount of the Escrow
Amount;

         3.3.3 to Sellers: the Escrow Agreement, executed by the Buyer;

         3.3.4 to Sellers: the Obligations Undertaking, executed by Buyer;

         3.3.5 to Sellers: a certificate of good standing of Buyer, issued as of
a recent date by the Secretary of State of the State of Delaware;

         3.3.6 to Sellers: a certificate of the Secretary or an Assistant
Secretary of Buyer, dated the Closing Date, in form and substance reasonably
satisfactory to Sellers, as to (i) the resolutions of the Board of Directors of
Buyer authorizing the execution delivery and performance of this Agreement and
each exhibit hereto to which it is a party and the consummation of the
transactions contemplated herein and therein; and (ii) the incumbency and

                                     - 13 -
<PAGE>

signatures of the officers of Buyer executing this Agreement and each exhibit
hereto to which it is a party;

         3.3.7 to Sellers: the certificate required by Section 3.7.3 hereof;

         3.3.8 to Sellers: the Non-Compete Agreement, executed by Buyer;

         3.3.9 to DuCoa: a guarantee in the form of Exhibit 3.3.9 hereto,
executed by Buyer's parent corporation, guaranteeing Buyer's obligations under
paragraphs (b) and (m) of Schedule 2.1 hereto and under Section 3.9 hereof, in
the event of a default by Buyer thereunder;

         3.3.10 to Sellers: the release of certain claims as required by Section
3.7.4 hereof;

         3.3.11 to Sellers: the Notice and Acknowledgement as required by
Section 3.7.6 hereof; and

         3.3.12 to Sellers: all other documents required by the terms of this
Agreement to be delivered to Seller at the Closing under or to effect the
provisions of this Agreement.

     3.4 Further Assurances. At any time and from time to time after the
Closing, at Buyer's request, and without further consideration therefor, each of
Sellers shall execute and deliver any and all proper deeds, assignments, powers
of attorney, assurances in law, and such other instruments of sale, transfer,
conveyance, assignment and confirmation, and take such other actions, as Buyer
may reasonably deem necessary or desirable in order more effectively to Transfer
to Buyer, and to vest, perfect or confirm (of record or otherwise) Buyer's title
to, all of the Acquired Assets, to put Buyer in actual possession and operating
control thereof, and to assist Buyer in exercising all rights with respect
thereto.

     3.5 Satisfaction of Liens and Certain Leases.

         3.5.1 At the Closing, Sellers shall cause all Liens on or relating to
any of the Acquired Assets (other than Permitted Liens), to be released,
extinguished and discharged in full, and shall deliver to Buyer instruments
releasing, extinguishing and discharging all such Liens, and all rights and
claims of any holder(s) of any of such Liens with respect to any of the Acquired
Assets, all in such form and substance as Buyer shall reasonably require
(collectively the "Lien Release Instruments").

         3.5.2 At or prior to the Closing, Sellers shall cause those capitalized
leases, if any, identified in Schedule 1.1.2 of the Disclosure Schedule to be
paid and satisfied in full so that Buyer shall acquire at the Closing good and
marketable title to the assets and properties covered thereby.

     3.6 Conditions Precedent of Buyer. The obligations of Buyer under this
Agreement to proceed with the purchase and other transactions contemplated
hereby, are, subject to the fulfillment of all of the following conditions at or
prior to the Closing, and Sellers shall use commercially reasonable efforts to
cause each such condition to be fulfilled:

         3.6.1 No Litigation. No action, suit, proceeding or investigation shall
have been instituted against Buyer or any of Sellers and be continuing before or
by any court,

                                     - 14 -
<PAGE>

tribunal or governmental body or agency or have been threatened, and be
unresolved, to restrain or prevent, or to obtain substantial damages by reason
of, any of the transactions contemplated hereby;

         3.6.2 Representations. The representations and warranties of Sellers
contained in this Agreement, and any Schedules hereto and any certificate or
documents delivered in accordance with this Agreement shall be true and correct
in all material respects at the time of the Closing with the same force and
effect as though such representations and warranties were made at that time
except for changes expressly permitted by this Agreement;

         3.6.3 Performance of Covenants. Each covenant, agreement, obligation
and condition required by the terms of this Agreement to be complied with and
performed by any of Sellers at or prior to the Closing shall have been duly and
properly complied with and performed;

         3.6.4 No Material Adverse Change. Since the date of this Agreement,
there shall not have occurred any material adverse change in the condition
(financial or otherwise), results of operations, business, properties, assets,
liabilities, backlog, prospects, goodwill or results of any Seller or the
Business or in the value of the Acquired Assets or the Business, or in the
utilizability thereof by Buyer, or in any material litigation affecting any of
Sellers, and the Business shall not have suffered a substantial fire, flood,
tornado or other casualty loss or damage;

         3.6.5 Consents. All consents necessary to the assignment to Buyer of
the Contracts and Intellectual Property specified on Schedule 3.6.5 of the
Disclosure Schedule, and all approvals or actions necessary to the assignment to
Buyer of those Permits and Approvals as are specified on such Schedule 3.6.5,
shall have been obtained by Sellers, and there shall have been delivered to
Buyer executed counterparts thereof reasonably satisfactory in form and
substance to Buyer, of all such consents, approvals and actions; provided, that
if the consent of the other party thereto for assignment to the Buyer has not
been obtained and if Buyer waives the condition of this Section 3.6.5 with
respect to such matter, then such Contract, Permit, Personal Property, leasehold
interest or Intellectual Property shall not be assigned to Buyer and all
obligations and liabilities thereunder shall be and remain with Sellers, and, in
such event, Sellers shall cooperate with Buyer in any reasonable arrangement
designed to secure for Buyer the benefits thereunder, as contemplated by Section
1.7 hereof;

         3.6.6 Certificate. There shall have been delivered to Buyer a
certificate of Sellers, dated the Closing Date, jointly and severally certifying
that the conditions set forth in subsections 3.6.2 through 3.6.4 have been
fulfilled;

         3.6.7 Certain Agreements. Each other document, instrument and agreement
contemplated hereby shall have been executed and delivered by each party thereto
other than Buyer;

         3.6.8 Financing. Buyer shall have obtained bank or institutional lender
financing in connection with the transactions contemplated hereby on terms
approved by it and such lenders; and

         3.6.9 Title Insurance. Buyer shall have received written commitments by
a nationally recognized title insurance company reasonably selected by Buyer to
issue a title

                                     - 15 -
<PAGE>

insurance policy, in the amount reasonably determined by Buyer, for the Owned
Real Property, at standard rates (such policy premium to be payable by Buyer)
and confirming Buyer's good and marketable title in fee simple to the Owned Real
Property, free and clear of all Liens and exceptions (except for Permitted Liens
and such insurer's standard printed exceptions).

     3.7 Conditions Precedent of Sellers. The obligations of Sellers under this
Agreement to proceed with the sale contemplated hereby and to proceed with the
other transactions contemplated hereby, are, at the option of Seller, subject to
the fulfillment of all of the following conditions at or prior to the Closing,
and Buyer shall use commercially reasonable efforts to cause each such condition
to be fulfilled:

         3.7.1 Representations. The representations and warranties of Buyer
contained in this Agreement or any certificates or documents delivered in
accordance with this Agreement shall be true and correct in all material
respects at the time of the Closing with the same force and effect as though
such representations and warranties were made at that time except for changes
expressly permitted by this Agreement;

         3.7.2 Performance of Covenants. Each covenant, agreement, obligation
and condition required by the terms of this Agreement to be complied with and
performed by Buyer at or prior to the Closing shall have been duly and properly
complied with and performed;

         3.7.3 Certificate. There shall have been delivered to Seller a
certificate executed by Buyer, dated the date of the Closing, certifying that
the conditions set forth in subsections 3.7.1 and 3.7.2 have been fulfilled;

         3.7.4 Release. Sellers shall have received a release in the form of
Exhibit 3.7.4;

         3.7.5 [Intentionally Omitted];

         3.7.6 Notice and Acknowledgement. Sellers shall have received a copy of
the Notice and Acknowledgement required pursuant to 10 CSR 25-10.010 of the
Missouri Code of State Regulations as set forth in Exhibit 3.7.6; and

         3.7.7 No Litigation. No action, suit, proceeding or investigation shall
have been instituted against Buyer or any of Sellers and be continuing before or
by any court, tribunal or governmental body or agency or have been threatened,
and be unresolved, to restrain or prevent, any of the transactions contemplated
hereby, except for any action, suit, proceeding or investigation based on or
arising out of any actual or alleged conduct, act, omission, liability or
obligation of any of Sellers.

     3.8 Bulk Sales Compliance. Sellers have advised Buyer that none of the
provisions of any bulk sales law or any comparable statute relating to notice to
and rights of creditors of any of Sellers applies to the transactions
contemplated by this Agreement. To the extent any such bulk sales law or
comparable statute shall so apply, Sellers shall promptly pay or cause to be
paid (or provide, in a manner satisfactory to Buyer, for prompt payment of) all
claims against and debts of any of Sellers which are payable with respect to any
and all of the Excluded Liabilities and for which Buyer could be liable by
reason of any such law or statute if not paid by any Seller.

                                     - 16 -
<PAGE>

     3.9 Receivables. Buyer shall have the exclusive right and authority to
pursue collection of all accounts receivable of Sellers not included in the
Acquired Assets (the "Excluded Receivables") in accordance with Buyer's standard
accounts receivable management and collection practice (but without being
required to resort to litigation or use of collection agencies or efforts
involving cost or expense to Buyer). Promptly after the Closing Date, Seller
shall deliver to Buyer a list of the accounts receivable of Seller outstanding
as of the Closing Date setting forth in reasonable detail such information as
Buyer may reasonably require, and Buyer shall update such list on a weekly basis
and remit to Seller, on a weekly basis, all amounts in fact collected by Buyer
in respect of such Excluded Receivables. Buyer shall have the authority to
collect such Excluded Receivables and to endorse with the name of Seller checks
received on account thereof for purposes of collecting the same and thereupon
remitting amounts collected thereon to Seller in accordance with this Section
3.9. In the event Buyer shall receive moneys from an account debtor for which
pre-closing accounts receivable of Sellers from the Business and post-closing
accounts receivable of Buyer from the Business shall be outstanding, then such
receipts shall be applied first to the oldest of such accounts receivable,
unless the account debtor shall otherwise specify. If an Excluded Receivable
shall not be collected in the ordinary course within 90 days after the Closing
Date, then Sellers shall be entitled to pursue the collection of such Excluded
Receivable. In the event any of Sellers shall receive any money or check(s) from
any account debtor in connection with any account receivable of or other payment
obligation in favor of Buyer or any of its Affiliates, Sellers shall promptly
remit the same to Buyer, in the exact form received, on a weekly basis.

     3.10 Certain Equipment. Sellers shall cooperate in all respects reasonably
requested by Buyer and at Buyer's expense to facilitate the removal and
transportation to Buyer within ninety (90) days following the Closing Date of
all equipment and other personal property included in the Acquired Assets and
located (or heretofore located) at Sellers' leased Randolph, WI facility (the
"Randolph Equipment"). Notwithstanding anything to the contrary contained in
this Agreement regarding the value, use or operating condition of same, Buyer
undertakes and acknowledges that the Randolph Equipment is transferred hereunder
in an "AS IS, WHERE IS" condition.

                                   ARTICLE 4

4. Representations and Warranties of Sellers. Sellers hereby jointly and
severally represent and warrant to Buyer the matters set forth in Schedule 4
hereto, and the representations and warranties therein contained shall be and
hereby are incorporated herein by reference with the same force and effect as if
set forth in full herein. References in said Schedule or elsewhere in this
Agreement to the "Disclosure Schedule" shall be deemed to refer to the
Disclosure Schedule to this Agreement delivered among the parties hereto
concurrent with the execution and delivery hereof. References in said Schedule 4
to "this Agreement" shall be deemed to include said Schedule 4.

                                   ARTICLE 5

5. Representations and Warranties of Buyer. Buyer represents and warrants to
Sellers that:

     5.1 Organization and Standing. Buyer is a corporation duly incorporated,
validly existing under the laws of the State of Delaware and has all requisite
corporate power and corporate authority to enter into this Agreement and each
other agreement, document and


                                     - 17 -
<PAGE>

instrument to be executed or delivered by Buyer in accordance with this
Agreement (the "Buyer Documents") and to carry out the transactions contemplated
hereby and thereby.

     5.2 Authority of Buyer. The execution, delivery and performance of this
Agreement and the Buyer Documents by Buyer have been duly authorized and
approved by its Board of Directors and no other corporate proceedings on the
part of Buyer are necessary to authorize this Agreement, the Buyer Documents and
the transactions contemplated hereby and thereby. This Agreement is the legal,
valid and binding obligation of Buyer, and each of the Buyer Documents, upon
execution and delivery thereof by Buyer, will be a legal, valid and binding
obligation of Buyer.

     5.3 No Violation. Except as set forth in Schedule 5.3 of the Disclosure
Schedule and except for matters pertaining to or arising from facts or
requirements involving any of the Sellers: the execution, delivery and
performance of this Agreement and the Buyer Documents and the consummation of
the transactions contemplated hereby and thereby, including the purchase of the
Acquired Assets by Buyer, will not (a) conflict with or violate any provision of
the amended and restated certificate of incorporation or By-Laws of Buyer or its
parent corporation, or (b) with or without the giving of notice or the passage
of time, or both, result in a breach of, or violate, or be in conflict with, or
constitute a default under, or permit the termination of, or cause or permit
acceleration under, any agreement, instrument, debt or obligation (other than
any of the Contracts) to which Buyer or its parent corporation is a party or to
or by which any of them is subject or bound, (c) require the consent of any
party to any agreement or commitment (other than any of the Contracts) to which
Buyer or its parent corporation is a party, or (d) violate any law, rule or
regulation or any order, judgment, decree or award of any court, governmental
authority or arbitrator to or by which the Buyer or its parent corporation is
subject or bound.

                                   ARTICLE 6

6. Covenants of Sellers.

     6.1 Conduct of Business. During the period from the date of this Agreement
to and including the Closing Date, Sellers shall conduct and cause to be
conducted the Business and all other businesses and activities of any Seller in
the ordinary, regular and usual course of business and consistent with past
practices, and shall not take any action which might result in any material
change in such operations or which might have a materially adverse effect on the
value of the Business, the Acquired Assets or any Seller other than changes made
with the prior written consent of Buyer. Without limiting the generality of the
foregoing, prior to the Closing, Sellers shall not, without the prior written
consent of Buyer:

         6.1.1 dissolve, liquidate, merge or consolidate or sell, transfer,
lease or otherwise dispose of any assets or properties of or related to the
Business or obligate itself to do so, other than the sale of inventory or
consumption of supplies in the ordinary course of business on standard terms
(including delivery times and margins), conditions and operating procedures
customarily used by it, or discontinue any products, or effect or announce price
changes or special promotions;

         6.1.2 enter into, amend, modify, change, alter, terminate, rescind, or
waive any rights or benefits under, any contract, agreement or commitment which
if in existence


                                    - 18 -
<PAGE>

on the date hereof would have been required to have been disclosed pursuant to
Section 4.10 of Schedule 4 hereto;

         6.1.3 fail to maintain the Acquired Assets or any of the other
properties of or used in connection with the Business in reasonably good
condition, repair and working order, reasonable and ordinary wear and tear
excepted;

         6.1.4 fail to maintain any of the current insurance policies or any of
the coverage thereunder maintained for the protection of any of the Acquired
Assets or with respect to any of the Business or Seller;

         6.1.5 fail to comply in any material respect with all laws, rules,
regulations and orders and all contractual obligations applicable to any Seller
or to the conduct of the Business;

         6.1.6 except for normal salary review adjustments for non-union
employees not in excess of 5% per annum for any employee and increases in wages
and salaries made in accordance with applicable collective bargaining agreements
in effect on the date hereof, make or grant any general wage or salary increase;
pay or provide for any bonus, profit sharing, deferred compensation, pension,
retirement or other similar payment or arrangement except in the ordinary course
of the administration of the Collective Bargaining Agreement, or enter into or
amend any employment or consulting agreement, sales agency or other contract or
arrangement with respect to the performance of services for Seller which is not
terminable without liability by any Seller on 30 days' notice or less; or

         6.1.7 perform, take any action or incur or permit to exist any of the
acts transactions, events or occurrences of the type described in any of clauses
(a), (b), (c), (d), (f), (g), (h), (j), (k), (l), (m) or (p) (but only to the
extent said clause (p) applies to matters covered by any of said clauses (a),
(b), (c), (d), (f), (g), (h), (j), (k), (l) or (m)) of Section 4.11 of Schedule
4 hereto which would have been inconsistent with the representations and
warranties set forth in any of such subsections of Section 4.11 of Schedule 4
hereto had the same occurred after the Balance Sheet Date and prior to the date
hereof.

     6.2 Changes in Information. During the period from the date of this
Agreement to the Closing Date, Sellers shall give Buyer prompt written notice of
any material change in, or any of the information contained in, the
representations and warranties made by them in or pursuant to this Agreement or
of any event or circumstance which, if it had occurred on or prior to the date
hereof, would cause any of such representations or warranties not to be true or
correct in all material respects.

     6.3 Access to Information.

         6.3.1 During the period from the date of execution of this Agreement to
the Closing Date, Sellers shall cause Buyer and its counsel, accountants and
other representatives to be given, during normal business hours, full access to
and copies of all of the respective books, tax returns, contracts, commitments,
records, facilities and properties of Sellers or constituting any part of the
Acquired Assets, all work papers of all accountants of Sellers (to the extent
permitted by said accountants if they are outside accountants), and all
personnel of any of Sellers (excluding medical records which under applicable
law may not be disclosed to Buyer), and to be furnished with all documents and
information with respect to the respective affairs of

                                     - 19 -
<PAGE>

Sellers and/or in connection with the Business as may from time to time
reasonably be requested. Sellers shall use their best efforts to have their
accountants provide Buyer with access to and copies of all work papers of said
accountants. Prior to Closing, Buyer will (and will cause its representatives
to) maintain the confidentiality of the confidential information it receives
from any Seller; provided, that such information may be disclosed (in
confidence, subject to the existing confidentiality agreement between DCV and
Buyer's parent corporation) to lawyers, accountants, lenders and investors, and
other persons or entities involved in the transaction, and that nothing herein
shall prevent disclosure of any information as may be required by applicable law
or that is at the date hereof or hereafter becomes generally available to and
known by the public other than by reason of Buyer's breach of its obligations
under this Section 6.3, or is or becomes available to Buyer on a
non-confidential basis from a source that is not then known by Buyer to be
prohibited from disclosing such information pursuant to a confidentiality
agreement with any of Sellers, or has been independently developed by Buyer or
any of Buyer's affiliates without violation of any obligation under this
Agreement. For a period of seven years after the Closing Date, each party and
its respective representatives shall have reasonable access to all of the books
and records of the Business in the possession of the other party or parties to
the extent that such access may reasonably be required by such party in
connection with the Excluded Liabilities, or in support of tax audits involving
the Business or litigation retained by Seller involving the Business. Such
access shall be afforded by the party or parties in possession of such books and
records upon receipt of reasonable advance notice and during normal business
hours. The party or parties exercising this right of access shall be solely
responsible for any costs or expenses incurred by it or them pursuant to this
Section. Notwithstanding the foregoing, Buyer's obligations hereunder shall be
subject to prior receipt of confidentiality agreements, executed by Sellers,
reasonably satisfactory to Buyer, and Buyer's obligation to retain particular
documents and records shall expire upon Buyer's sale of that portion of the
Business to which the documents and records in question relate.

         6.3.2 Without limiting the foregoing, from time to time after the date
hereof and prior to the Closing Date, Sellers shall use their commercially
reasonable best efforts to provide to Buyer sample electronic files so as to
allow Buyer to prototype the transfer of all management information system
records of or pertaining to any of the Business electronically on the management
information system ("MIS") of Buyer, and all block, process and flow diagrams of
its MIS, telephone and other systems.

         6.3.3 Until the Closing, the provisions of any written confidentiality
agreement between any of Sellers and Buyer shall remain in effect (to the extent
not inconsistent with the provisions hereof).

     6.4 Confidentiality. Sellers shall hold confidential (and shall not
disclose, except in confidence to its lawyers, accountants and institutional
lenders) (a), at any time, whether before or after the Closing, any information
obtained by any of them or any of their representatives from or concerning Buyer
or any of its affiliates or otherwise arising out of any of its negotiations
with or investigations of Buyer or any of its affiliates, and such information
shall not be used except in furtherance of the transactions contemplated herein,
or (b), after the Closing, any information regarding any of the Acquired Assets
or the Business, except (i) information which is publicly available at the time
of disclosure (through no act of any of Sellers or any of their affiliates) or
(ii) which is disclosed to Sellers or an affiliate of Sellers by a third party
which did not disclose it in violation of a duty of confidentiality or (iii)
disclosures which (x) are required to be made by Sellers under applicable laws
or regulations or (y) with respect to

                                     - 20 -
<PAGE>

information under clause (b), are directly required in dealing with any Excluded
Liabilities or to perform Sellers' duties hereunder. Buyer shall hold
confidential (and shall not disclose) except to its lawyers, accountants and
lenders any information regarding any of the assets or businesses of Sellers
other than any relating to any of the Acquired Assets or the Business, except
(i) information which is publicly available at the time of disclosure (through
no act of any of Buyer or any of its affiliates) or (ii) which is disclosed to
Buyer or an affiliate of Buyer by a third party which did not disclose it in
violation of a duty of confidentiality or (iii) disclosures which (x) are
required to be made by Buyer under applicable laws or regulations or (y) are
directly required in dealing with any Excluded Liabilities or to perform Buyer's
duties hereunder or are made in connection with the enforcement of rights or
obligations under this Agreement.

     6.5 Preservation of Business. During the period from the date of this
Agreement to the Closing Date, Sellers shall use best efforts to preserve intact
the present goodwill of Sellers and the relationships of any Seller with
customers, dealers, suppliers, creditors, distributors, consultants,
governmental authorities and others having business relations with it and the
present business organization and personnel of Sellers. Sellers shall cause to
be paid before they become delinquent all taxes, assessments, and governmental
charges or levies imposed prior to the Closing Date upon the business or
properties of any Seller and all claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords, and other similar persons asserted prior to
the Closing Date which, if unpaid, might result in the creation of a Lien upon
any of the Acquired Assets or otherwise have an adverse effect on Buyer or the
Business.

     6.6 Employees.

         6.6.1 Sellers have supplied Buyer with a list setting forth the names,
location of employment, dates of hire and the current rate of compensation and
date and amount of last salary adjustment, of all employees employed in the
Business. Buyer has advised Sellers that it desires to employ following the
Closing Date, those employees identified in Schedule 6.6.1 of the Disclosure
Schedule who are then full time employees of the Business and who at the Closing
shall not be on any form of leave or absence, except as required by the
Collective Bargaining Agreement identified in Schedule 6.6.1 of the Disclosure
Schedule (the "Collective Bargaining Agreement"). Buyer has no intention to
employ any employees of the Randolph, Wisconsin operation. Sellers agree that
Buyer shall have the right to employ the employees so identified (each of whom
who accepts such employment being hereinafter referred to as a "Designated
Employee") and, after Sellers have terminated the employment of such employees
immediately prior to the Closing, Buyer shall offer employment commencing on the
Closing Date to such Designated Employees as of such date at such basic salary
rates or on such other terms as Buyer shall determine (subject where applicable
to such Collective Bargaining Agreement); provided, that Buyer shall not be
obligated to maintain any Designated Employees for any specific length of time
after the Closing Date and all Designated Employees shall be employees at will
(subject where applicable to such Collective Bargaining Agreement). Nothing in
this Section 6.6 shall be construed to confer any rights or remedies on any
employee of any Seller (Designated or not). Sellers shall use their best efforts
to encourage and induce the employees identified in said Schedule 6.6.1 to
become employees of Buyer and shall not take any action to prevent or discourage
any such employee from being employed by Buyer from and after the Closing Date
or derogate Buyer.

         6.6.2 Sellers shall be solely responsible for any and all claims and
obligations, if any, for wages, commissions, salary, insurance, wage
continuation, severance pay, termination pay and other benefits (including
accrued and unearned vacation, holiday, sick pay


                                     - 21 -
<PAGE>

and other benefits, if any) arising or accruing or claimed to arise or accrue
with respect to any employee of any Seller for any period on or prior to the
Closing Date, or out of termination of employment of any employee of any Seller
on or prior to the Closing Date, or the failure of Buyer to retain any employee
of any Seller after the Closing Date, or the effect of the transactions
contemplated by this Agreement on the employment status of any employee of any
Seller; provided that Buyer shall assume all liability and shall be responsible
for the payment of all accrued vacation pay for those Designated Employees in
fact employed by Buyer if any to the extent that Buyer received a dollar for
dollar reduction in the Purchase Price (and the cash portion of the Purchase
Price) for such accrued vacation pay pursuant to Section 2.5.2 hereof. Without
limiting the foregoing, Buyer shall have no responsibility for any compensation,
employee benefits or severance pay for or any notice to any employees of any
Seller who are not offered employment by Buyer, or who are offered employment by
Buyer and who fail to accept such offer or who fail to commence employment with
Buyer on or after the Closing Date, except with respect to retiree medical
benefits expressly required to be provided by Buyer after the Closing pursuant
to the Collective Bargaining Agreement for those retirees identified on Schedule
6.6.2 to the Disclosure Schedule (the "Designated Retirees"), but only with
respect only to occurrences after the Closing giving rise to such medical
benefits thereunder and for covered claims therefor first submitted to Buyer
after the Closing Date (and not theretofore submitted to any of Sellers or any
administrator therefor on or prior to the Closing Date). It is expressly
understood that any health care payment obligations for any employees of any of
Sellers for occurrences on or prior to the Closing and any health care payment
obligations for retirees covered by the Collective Bargaining Agreement for
claims submitted on or prior to the Closing Date shall be the sole and exclusive
liability and obligation of Sellers. Sellers shall pay all withholding tax and
similar obligations in each case with respect to all employees of Sellers for
all periods ending on or prior to the Closing Date.

         6.6.3 Sellers shall remain liable and responsible for all obligations
to all past or present employees of any of Sellers (or any predecessors thereto)
who may be currently receiving or entitled to receive, or who from and after the
date hereof shall be entitled to receive, and shall provide or continue to
provide to such employees, health care related benefits consistent with the
health care continuation coverage requirements of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, and of any analogous state law,
together with any of the rules or regulations thereunder, in connection with or
by reason of any termination of employment with any Seller (or any predecessor
thereto), regardless of whether any Seller is entitled under law to terminate
such coverage.

         6.6.4 It is expressly acknowledged that any obligations of Buyer
arising under the Collective Bargaining Agreement shall be limited in all
respects to wages, current pension contributions and other benefits first
accruing after the Closing, except as expressly provided herein with respect to
retiree medical benefits.

         6.6.5 Any payments for health care benefits under any of the Sellers'
plans, to the extent they relate to occurrences or events on or prior to the
Closing Date shall be the sole and exclusive liability and obligation of the
Sellers, except that, for the Designated Retirees, Buyer shall assume the
liability therefore under the Collective Bargaining Agreement with respect to
claims first submitted after the Closing Date and not submitted to any of
Sellers or any administrator therefor on or prior to the Closing Date.

         6.6.6 Except as expressly provided above, all liabilities and
obligations of any of Sellers under or arising by reason of this Section 6.6
shall constitute Excluded Liabilities.

                                     - 22 -
<PAGE>

     6.7 Books and Records. During the period from the date of this Agreement to
and including the Closing Date, Sellers shall maintain all of their respective
books, accounts and records in the usual, regular and ordinary manner consistent
with GAAP, and on a basis consistent with prior periods, and will duly comply
with all legal and GAAP accounting requirements applicable thereto and to the
conduct of the business thereof. In maintaining its accounting records, Sellers
shall not make any change in the accounting methods or practices followed in
connection with the preparation of the unaudited financial statements heretofore
delivered to Buyer.

ARTICLE 7

7. Further Agreements.

     7.1 Environmental Remediation Obligations.

         7.1.1 Sellers, at their sole cost and expense, shall be fully
responsible for enforcing the terms of the Prior Agreement and performing the
terms of the settlement agreements identified in Schedule 7.1.1 of the
Disclosure Schedule (the "Remediation Activities"). Sellers represent and
warrant that, to Sellers' knowledge, all actions required by said settlement
agreements have been completed.

     7.2 Sales and Other Taxes. Sellers shall pay all sales tax, transfer tax,
intangibles tax, filing fees, recording and registration fees and similar
government charges applicable to the transactions contemplated by this
Agreement, including, without limitation, all taxes and charges payable, if any,
upon the transfer of title to any Acquired Assets. Buyer and Sellers will
cooperate to prepare and file with the proper public officials, as and to the
extent available and necessary, all appropriate sales tax exemption certificates
or similar instruments as may be necessary to avoid the imposition of sales,
transfer and similar taxes on the transfer of Acquired Assets pursuant hereto.

     7.3 Brokerage and Finder's Fee. Buyer represents and warrants to Sellers,
and Sellers represent and warrant to Buyer, that no person is entitled to any
brokerage commissions or finder's fees in connection with the transactions
contemplated by this Agreement as a result of any action taken by the
representing party or any of its affiliates, officers, directors or employees.

     7.4 Referral. From and after the Closing, Sellers shall use their best
efforts to refer to Buyer all requests for and forward to Buyer all orders for
products of the type manufactured or sold by the Business at such telephone
number and address as Buyer from time to time informs Sellers. Sellers and Buyer
shall each attempt in good faith to direct or deliver to the other all incoming
mail, telephone or other communications or deliveries which are not received by
the appropriate party (that is, Buyer in the case of matters or materials
pertaining to the Business or the Acquired Assets or Sellers in the case of
matters or materials pertaining to the Excluded Assets or Excluded Liabilities).

     7.5 No Shop. From the date hereof until the Closing Date, each of Sellers
agrees that, without Buyer's prior written consent, it shall not and shall not
permit any subsidiary or affiliate of any of Sellers to, directly or indirectly,
(A) offer or convey any of the Acquired Assets or the Business (except only the
sale of inventory in the ordinary course of business consistent with past
practices) or control thereof, (B) issue, sell or purchase any shares of any
class or series of any of the issued and outstanding capital stock or other
equity interests of either

                                     - 23 -
<PAGE>

of them or any security interest convertible into or exchangeable for such stock
or other equity interest or any option or warrant with respect to such stock or
other equity interest, or (C) merge or consolidate with another entity, and no
Seller or anyone acting on its behalf will solicit, entertain or encourage
inquiries or proposals, or enter into, pursue, or carry on any discussions or
negotiations, with respect to any transaction of the type referred to above with
any person or entity other than Buyer. Sellers shall immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
parties conducted heretofore in respect of any such transaction. Without
limiting the generality of, or providing an exception to the foregoing, if an
offer unsolicited by a Seller or its representatives is received prior to the
Closing, Sellers shall promptly advise Buyer of the identity of such offeror and
communicate to Buyer the terms of any oral inquiry or proposal which it or they
may receive and deliver to Buyer a copy of any such offer in writing. Without
limiting the rights of Buyer to pursue any remedies, the parties agree that
damages are not an adequate remedy for a breach of this Section 7.5 and that the
obligations under this Section 7.5 of Sellers may be specifically enforced.

     7.6 8-K Report. Sellers shall in a prompt and timely manner both before and
after the Closing provide Buyer with all annual and interim financial
information relating to the Business as may be requested by Buyer in order for
Buyer to comply with its reporting and disclosure obligations under the Federal
securities laws covered by, and in accordance with the requirements of, SEC
Regulation S-X and Form 8-K (the "Reporting Requirements"), in connection with
Buyer's preparation of and so as to enable Buyer to timely file Buyer's Current
Report on Form 8-K, and any amendments thereto, regarding the Closing, and the
audit, by Buyer's regularly retained accounting firm ("Buyer's Accountant"), of
all financial statements relating to the Business as shall be required to be
included in said Current Report on Form 8-K and/or any such amendment (the "8-K
Financials"); provided that such financial information shall, prior to the
Closing, be held confidential by Buyer consistent with Section 6.3.1 hereof.
Sellers shall in a prompt and timely manner provide Buyer's Accountant with such
management representations as may be requested by Buyer's Accountant in
connection with its preparation of any financial statements for the Business
relating to such Current Report on Form 8-K. Without limiting the generality of
the foregoing, Sellers shall cause their respective chief financial officers and
other executive officers to promptly prepare, execute and deliver to Buyer's
Accountant all management representation letters and other certificates as shall
be requested by Buyer's Accountant, consistent with generally accepted auditing
standards, to support, and enable Buyer's Accountant to complete in a timely
manner (in accordance with the Reporting Requirements) its audit of, and to
promptly provide the certification and report of Buyer's Accountant of, the 8-K
Financials (in accordance with the Reporting Requirements). All fees and charges
of Buyer's Accountant in connection the above shall be borne by Buyer.

     7.7 Excluded Miley Assets. Sellers shall assure that, for a period of five
(5) years from the Closing Date, none of the Excluded Miley Assets are sold or
transferred to any person or entity engaged or who or which to any Seller's
knowledge proposes to engage in any business in competition with any of the
Business as conducted by Buyer or its parent corporation after the Closing, and
shall cause any acquiror to enter into a written agreement, in reasonable and
customary form and content, whereby such acquiror agrees for the period of five
(5) years from the Closing Date neither it nor any of its affiliates, nor any
successor or assign thereof, shall use any of the Excluded Miley Assets in
competition with any of the Business as conducted by Buyer or its parent
corporation. Said agreement shall name Buyer and its successors and assigns as
express third party beneficiaries thereof and Sellers shall supply Buyer with a
true and


                                     - 24 -
<PAGE>

complete executed copy thereof promptly after the execution of same.
Sellers shall use their best efforts to enforce said agreement.

     7.8 Certain Transition Matters.

     7.9 For a period of thirty (30) days from the Closing Date, Sellers shall
make available to Buyer, at no charge or fee, all reasonable access (subject to
reasonable security procedures) to and use of the computer and management
information systems, and all customer service and order taking and processing
personnel and facilities, of any of Sellers heretofore relating to or used for
any of the Business, so as to enable Buyer to continue to conduct all computer,
processing and management information system, and customer services and order
taking and processing aspects of the Business in a manner consistent with past
practice, and to facilitate Buyer's transition to its own computers and
management information systems and its own customer service and order taking and
processing functions, and Sellers shall cooperate in all reasonable respects
with Buyer in connection with the foregoing. Should Buyer so request, Sellers
will continue to provide such access and use for a period not to exceed sixty
(60) days after said initial 30-day period and Buyer shall pay Sellers for all
access, use and cooperation an amount equal to $3,000 per month plus the
out-of-pocket cost of the use of the dedicated telephone (data) line to Verona
applicable to the period of such usage (but not for any installation or removal
charge).

         7.9.1 For a period of up to thirty (30) days or, in the case of any
particular category of end products, such lesser period ending on the date
Sellers shall have substantially exhausted their inventory of such category of
end products in satisfying outstanding customer orders of the Business for such
end products (in the case of each particular category of products a
"Post-Closing Product Sale Period"), Sellers shall fulfill in the timely manner
all outstanding orders for end products of the Business calling for delivery
prior to the end of the Post-Closing Product Sale Period out of Sellers'
inventory of such end products as of the Closing Date. Sellers and Buyer will
reasonably cooperate with each other in connection with such fulfillment efforts
and Sellers shall promptly compensate Buyer or Buyer's parent company for any
and all products and services provided by any of them in connection therewith,
in each case at the market price for same reflected in the particular order for
which the same are provided. In no event shall Sellers be entitled to fulfill
any customer order or sell any of such inventory after the end of the applicable
Post-Closing Sale Period, or, at any time, fill any order calling for delivery
after the end of the Post-Closing Sale Period, in each case without the express
prior written consent of Buyer. Under no circumstances shall any of Sellers
effect or make any sales or take or fill any order for any quantity in excess of
normal and customary levels (based on past history) or at any price less than
market price as most recently quoted or most recently in effect prior to the
date hereof, or in a manner or on terms not consistent with the ordinary and
normal course of business and recent past practice.

         7.9.2 Limited License. Sellers hereby grant to Buyer, effective from
and after the Closing, the right and license to use and sublicense the names and
trade names DuCoa and DCV for the sole purpose of performing all obligations of
the licensor under that certain Technology and Trademark License between DuCoa
and Grupo Celanese S.A. de C.V., dated as of September 27, 2000 (the "Mexico
License"). Sellers shall cooperate in all respects to enable Buyer to fulfill
all obligations under or arising out of the Mexico License.


                                     - 25 -
<PAGE>

                                   ARTICLE 8

8. Indemnification.

     8.1 From and after the Closing Date, Buyer hereby agrees to save, indemnify
and hold harmless Sellers and their officers, directors and shareholders (each,
together with Sellers, a "Seller Indemnitee") from and against, and shall on
demand reimburse the Seller Indemnitees for:

         8.1.1 Buyer's failure to pay or perform the Assumed Obligations in
accordance with the Obligations Undertaking;

         8.1.2 any and all loss, liability, damage or deficiency suffered or
incurred by any Seller Indemnitee by reason of any misrepresentation or breach
of warranty by Buyer or nonfulfillment of any covenant or agreement to be
performed or complied with by Buyer under this Agreement or any agreement,
certificate, document or instrument executed by Buyer and delivered to Sellers
pursuant to this Agreement; and

         8.1.3 any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including reasonable attorneys'
fees, incident to any of the foregoing, or incurred in reasonably investigating
or attempting to avoid the same or to oppose the imposition thereof, or in
enforcing any of the obligations under this Section 8.1.

     8.2 Sellers hereby jointly and severally assume and agree to save,
indemnify and hold harmless Buyer and Buyer's officers, directors and
shareholders (each, together with Buyer, a "Buyer Indemnitee") from, against and
in respect of, and shall on demand reimburse the Buyer Indemnitees for:

         8.2.1 the Excluded Liabilities;

         8.2.2 any and all loss, liability, damage or deficiency suffered or
incurred by any Buyer Indemnitee by reason of any misrepresentation, breach of
warranty or nonfulfillment of any covenant or agreement to be performed or
complied with by Seller under this Agreement or any agreement, certificate,
document or instrument executed by any of Sellers and delivered to Buyer
pursuant to this Agreement;

         8.2.3 any and all loss, liability or damage suffered or incurred by any
Buyer Indemnitee in respect of or in connection with any and all debts,
liabilities and obligations of, and any and all violation of laws, rules,
regulations, codes or orders by, any Seller, direct or indirect, fixed,
contingent, legal, statutory, contractual or otherwise, which exist at or as of
the Closing Date or which arise after the Closing Date but which are based upon
or arise from any act, transaction, circumstance, sale or providing of products
or services, state of facts or other condition which occurred or existed, on or
before the Closing Date, whether or not then known, due or payable, except to
the extent specifically assumed by Buyer pursuant to the Obligations
Undertaking;

         8.2.4 any and all loss, liability, damage, cost or expense suffered or
incurred by any Buyer Indemnitee based on or arising from (A) the presence of
any Hazardous Substance on any of the Real Properties or any Prior Property or
any Hazardous Discharge on or prior to the Closing Date, and/or any
Environmental Complaint (as such terms are defined in

                                     - 26 -
<PAGE>

Schedule 4 hereto), and/or the failure to obtain any license or permit required
in connection with any Hazardous Substance or Hazardous Discharge or the
retention, disposal, treatment or use thereof, and/or arising out of any
noncompliance with any environmental, health or safety law, ordinance, rule,
regulation, order or policy (each, an "Environmental Requirement"), in each
case, based on or arising from any act, transaction, state of facts or other
condition which occurred or existed on or before the Closing Date, on, from,
involving or by any of the Real Properties or any Prior Property, or any
off-site waste or disposal location, or any of Sellers, whether or not then
known, (B) any personal injury (including wrongful death) or property damage
(real or personal) arising out of or related to any Hazardous Discharge, the
presence, use, disposal or treatment of a Hazardous Substance, or noncompliance
with any Environmental Requirement, on or prior to the Closing Date, and/or (C)
any Environmental Complaint and/or any demand of any government agency or
authority prior to, on or after the Closing Date which is based upon or in any
way related to any Hazardous Discharge, the presence, use, disposal or treatment
of a Hazardous Substance, and/or noncompliance with any Environmental
Requirement on or prior to the Closing Date, on, from, involving or by any of
the Real Properties or any Prior Property, or any off-site waste or disposal
location, or any of Sellers, and including, without limitation and in each such
case under this subsection 8.2.4, the costs and expenses of all remedial action
and clean-up, attorney and consultant fees, investigation, sampling and
laboratory fees, court costs and litigation expense and costs arising out of
emergency or temporary assistance or action undertaken by or as required by any
regulatory body in connection with any of the foregoing; and

         8.2.5 any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including, without limitation,
reasonable attorneys' fees, incident to any of the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing any of the obligations under this Section 8.2.

     8.3 Survival, etc.

         8.3.1 Each of the representations, warranties, indemnities, covenants
and agreements of any of Sellers shall constitute the joint and several
representations, warranties, indemnities, covenants and agreements of each of
Sellers. Each representation, warranty, indemnity, covenant and agreement of any
of the parties hereto shall survive the Closing; provided, that:

         (a) no party shall be entitled to assert any claim against any other
for misrepresentations or breach of warranty (as opposed to any covenant or
agreement) under or pursuant to this Agreement unless the party asserting such
claim shall notify the other in writing of such claim within two years after the
Closing Date; provided, further, that the foregoing limitations on the survival
of representations and warranties set forth in this paragraph (a) shall not
apply to any of the representations and warranties in or pursuant to any of
Sections 4.3, 4.6(a), 4.8, 4.12, 4.13 and 4.14 of Schedule 4 hereto, and in the
case of any of said Sections 4.8, 4.12 and 4.13 said two year period set forth
above in this paragraph (a) shall be deemed extended until such time as all
claims and matters referred to therein or based thereon are barred by the then
applicable statute of limitations; and

         (b) no party shall be entitled to assert any claim against any other
with respect to any environmental matter or any Environmental Requirement or
Hazardous Discharge, under any provision of this Agreement, unless the person or
entity making such claim (an "Environmental Claim") shall notify the other party
or parties hereto of such claim (A) within


                                     - 27 -
<PAGE>

thirty (30) years after the Closing Date in the case of an Environmental Claim
involving Pre-Closing Dioxin Matters or Pre-Closing Non-Dioxin Matters, or (B)
within eight (8) years after the Closing Date in the case of an Environmental
Claim involving Hazardous Materials Used Both Before and After Closing; provided
further that the foregoing limitation on survival set forth in this paragraph
(b) shall not apply to any claim or indemnification obligation under any
provision of this Agreement arising out of a third party claim or Covered
Proceeding asserted or commenced against any Buyer Indemnitee. "Pre-Closing
Dioxin Matters, "Pre-Closing Non-Dioxin Matters" and "Hazardous Materials Used
Both Before and After Closing" shall have the respective meanings set forth in
Schedule 8.3 of the Disclosure Schedule.

         8.3.2 In no event shall Sellers on the one hand, or Buyer on the other
hand, have any liabilities under or pursuant to this Agreement for any
misrepresentations or breaches of warranties hereunder, or any breach of any
covenant required to be performed before the Closing, or for any Excluded
Liability or any indemnification obligation under Section 8.2.1, 8.2.3, 8.2.4 or
(if and to the extent the provisions thereof are triggered by the foregoing
under this Section 8.3.2) 8.2.5, until, and then, only to the extent, such
liabilities shall exceed in the aggregate $200,000, except that the said
$200,000 aggregate deductible shall not apply to, limit or reduce Sellers'
liabilities or any Buyer Indemnitee's rights in the case of or with respect to
any and all pending litigation(s) involving any of Sellers and/or any and all
third party claims and Covered Proceedings.

         8.3.3 Notwithstanding anything to the contrary herein, in no event
shall the total liability, cost and expense to Sellers or their affiliates or
their respective officers, directors or shareholders in respect of breaches of
representations or warranties hereunder on a cumulative basis exceed 50% of the
Purchase Price.

         8.3.4 In the event of a breach of the representations in Section
4.14(a) hereof by reason of an environmental condition at DuCoa's Verona, MO
facility of which, on the date of the execution and delivery hereof, none of
Sellers had knowledge and Buyer shall elect not to effect the Closing, then
Sellers shall not have liability to Buyer for such breach.

     8.4 Covered Proceedings.

         8.4.1 If any action or proceeding is commenced by a third party against
a party entitled to indemnification under this Article 8 (an "Indemnitee") in
respect of which the Indemnitee proposes to hold any party or parties obligated
to provide such indemnification with respect thereto (the "Indemnitor(s)")
liable under the provisions of this Article 8 (a "Covered Proceeding"), the
Indemnitee shall give the Indemnitor(s) reasonably prompt written notice of such
Covered Proceeding and copies of all pleadings filed relating thereto within 20
days after the Indemnitee's receipt thereof.

         8.4.2 If the Indemnitor(s) shall, at its (their) option, elect by
prompt written notice to each Indemnitee to contest or defend any such Covered
Proceeding, the Indemnitor(s) shall, subject to and except as otherwise provided
in the provisions of this Section 8.4, be entitled, at its or their sole cost
and expense, to contest or defend the same with counsel of its or their own
choosing, but reasonably satisfactory to the Indemnitee, and in such event the
Indemnitee shall not settle, compromise, pay or discharge the same without the
prior written consent of the Indemnitor(s) (which consent shall, however, not be
unreasonably withheld or delayed), so long as the Indemnitor(s) is (are)
actively contesting and defending the same in good faith.

                                     - 28 -
<PAGE>

         8.4.3 Notwithstanding the foregoing provisions of this Article 8, if
(i) the Covered Proceeding does not seek only monetary damages, but seeks any
injunction or other equitable relief or specific performance against any
Indemnitee, or may materially affect the continued use, condition, status or of
any of the Acquired Assets, or (ii) the Covered Proceeding involves any matter,
cause of action or claim covered by Section 8.2.4 hereof in which any
governmental or regulatory authority, agency or body of any other person or
entity seeks or may seek remediation or other action which may adversely affect
any business or operations of any Indemnitee, then the Indemnitee shall be
entitled to elect in good faith not to contest, and shall be entitled in good
faith to settle and discharge, any claim arising thereunder, and in the case of
clause (ii) the provisions of Section 8.4.5 shall apply.

         8.4.4 Notwithstanding anything to the contrary contained in this
Section 8.4, and in the case of clause (ii) the provisions of Section 8.4.5
shall also be applicable:

         (a) Even if the Indemnitee fails to give the Indemnitor(s) timely
notice of a Covered Proceeding or otherwise defaults in its obligations under
this Section 8.4, the sole remedy of the Indemnitor(s) for such default shall be
to offset against the indemnification liability otherwise payable by the
Indemnitor(s) to the Indemnitee the amount of damages actually suffered by the
Indemnitor(s) as a result of such default, including increased expenses,
liability or damages related to any limitation on the ability of Indemnitor(s)
to defend or remedy the liability or damage.

         (b) The Indemnitor(s) shall not have any right to defend, or control
the settlement of, any Covered Proceeding: (i) if each Indemnitor does not
reasonably acknowledge in writing, within a reasonable period of time after the
Indemnitee gives notice of the Covered Proceeding, that the Indemnitor is
obligated to indemnify the Indemnitee in full with respect to the Covered
Proceeding as provided in Section 8.1 hereof or (ii) if the Indemnitor is then
in default in any of its material obligations under this Agreement or (if the
claim relates to violations or rights under the Prior Agreement) the PA/Security
Agreement, or (iii) if any of the Indemnitors is one of Sellers, then if Sellers
shall not have the financial ability and resources to conduct actively and
aggressively the defense of the Covered Proceeding and to pay and satisfy in
full the entire aggregate of the liabilities, costs and expenses which could
reasonably be expected to be incurred by any or all of Sellers or the Buyer
Indemnitees in connection with an adverse determination as a result thereof or
therein.

         (c) In the event the Indemnitor(s) elect(s) (and is (are) entitled as
provided herein) to defend a Covered Proceeding, the Indemnitee shall be
entitled to participate in the defense thereof with its own separate counsel and
receive copies of all pleadings and other papers in connection therewith. In
such event, the fees and expenses of such Indemnitee's counsel shall, except as
otherwise provided in this Article 8, be borne by the Indemnitee, unless a
conflict of interest exists or the Indemnitee may have one or more defenses
available to it which are different from or in addition to those available to
the Indemnitor (an "Indemnitee Control Situation"). In the case of an Indemnitee
Control Situation, the Indemnitor shall not have the right to direct the defense
thereof.

         (d) If the Indemnitor(s) do(es) not (or is (are) not entitled to) elect
to contest or defend a Covered Proceeding, or after so electing do(es) not
actively contest and defend the same in good faith, and in conformity with the
requirements of this Section 8.4, the Indemnitee shall be entitled to contest,
defend and/or settle such Covered Proceeding on such

                                     - 29 -
<PAGE>

terms and with such counsel as the Indemnitee reasonably deems appropriate, and
at the sole cost and expense of the Indemnitor(s).

         (e) If the Indemnitor(s) is (are) entitled to control the settlement of
a Covered Proceeding (subject to the requirements and limitations of this
Section 8.4), the Indemnitor(s) will be entitled to control such settlement only
if (i) the terms of such settlement require no more than the payment of money
(i.e., such settlement does not require the Indemnitee to admit any wrongdoing
or take or refrain from taking any action), (ii) the full amount of such
monetary settlement is or would be paid by the Indemnitor(s), and (iii) each
Indemnitee receives as part of such settlement a legally binding and enforceable
unconditional satisfaction and/or release, in form and substance reasonably
satisfactory to the Indemnitee, providing that the Covered Proceeding and any
claimed liability or obligation of the Indemnitee with respect thereto is being
fully satisfied by reason of such settlement and that the Indemnitee is being
released from any and all obligations or liabilities it may have with respect
thereto.

         8.4.5 In the event any party hereto shall be in the process of
defending any Covered Proceeding, or any party hereto shall be liable for
indemnification obligations with respect to any environmental condition or
environmental incident at the Verona, MO site, the other parties hereto shall
(at the sole cost and expense of the party with the indemnification obligation
for the particular situation) reasonably cooperate with the party engaged in
such defense or so liable for such indemnification obligation to facilitate its
investigation of the matters at issue and provide reasonable access to the
Verona, MO site for such purpose at reasonable times during normal business
hours, and so long as such investigation or access shall not interfere with the
business or operations at the Verona, MO site. In addition, in the case of an
Environmental Claim involving the Verona, MO site for which Buyer is entitled to
indemnification under this Article 8: (a) Buyer will provide Sellers (in the
absence of emergency circumstances or applicable statutory or regulatory
requirements which make the same impractical) with a reasonable opportunity to
discuss possible means of effecting required remediation and to exchange with
Buyer cost estimates for remediation measures proposed by Buyer or Sellers, as
the case may be; and (b) Buyer will act in good faith in selecting remediation
measures which are reasonably cost efficient (in light of available alternatives
and its business needs) and consistent with commercially reasonable business
practice, so long as (i) such measures could not reasonably be expected to have
a material impact on production or other operations at the Verona, MO site, and
(ii) all liabilities, costs, expenses and damages resulting or likely to result
from or in connection with such measures are promptly paid by Sellers to Buyer
(and Sellers establish to Buyer's reasonable satisfaction (via bond or
satisfactory security device) their ability to make such payment), and (iii)
such measures does not significantly impair the ability of Buyer to continue to
conduct its business at the Verona, MO site or to maintain its competitive
position in the marketplace.

     8.5 (a) If the Closing occurs and an Environmental Claim for Pre-Closing
Dioxin Matters or Pre-Closing Non-Dioxin Matters exists which entitles Buyer to
indemnification under this Agreement (a "Dioxin Claim"), and Sellers shall
concurrently be entitled to indemnification for such Dioxin Claim under the
Prior Agreement (the "Prior Seller Indemnity"), then if (i) Buyer commits an act
set forth in paragraph (b) below and the actual and direct effect of the
commission of such act is to cause the Prior Seller Indemnity for such
particular Dioxin Claim to be terminated and lost without right of recovery by
any of Sellers (a "Buyer Termination Cause") and (ii) such termination and loss
is not otherwise caused by or due to any other act, event or circumstance not
constituting a Buyer Termination Cause and Sellers shall have complied with

                                     - 30 -
<PAGE>

paragraph (c) below and shall have timely and diligently used all reasonably
available means to preserve the Prior Seller Indemnity, then the entitlement of
Buyer to indemnity under this Article 8 for such Dioxin Claim (but not any other
Environmental Claim) shall be reduced by the actual dollar amount of Prior
Seller Indemnity for such Dioxin Claim so terminated and lost which would
otherwise have been recovered but for such Buyer Termination Cause.

     (b) A "Buyer Termination Cause" shall mean if after the Closing:

     (i) Buyer shall disturb or damage the caps on the Sites or shall fail to
assume responsibility, at its sole expense, for the mowing and seeding of the
vegetative covers of the Sites or shall fail to notify DuCoa (or at Buyer's
option Prior Seller directly) of any disturbance of or damage first occurring
after the Closing to any such cap within twenty-four (24) hours after Buyer has
Knowledge thereof (the "Sites", for the purposes hereof, shall mean the Slough,
Lagoon, Burn, Spill and Irrigation areas as defined in the map attached as Annex
8.5A to the Disclosure Schedule, each of which may be referred to singly as a
"Site").

     (ii) Buyer shall spray irrigate wastewater at the Plant.

     (iii) Buyer shall fail to provide Prior Seller and its representatives with
access to (i) the Plant and the Verona, MO Owned Real Property acquired by Buyer
pursuant to this Agreement (the "Real Property") for so long as Prior Seller is
obligated to fulfill an environmental covenant under Article 10 of the Prior
Agreement, and (ii) the real property retained by Prior Seller as described on
Schedule 10.7 of the Prior Agreement via the easement described in the Ingress
and Egress Easement, a copy of which is attached hereto as Annex 8.5B to the
Disclosure Schedule; such access to be afforded during all reasonable times to
Prior Seller and to its representatives , upon reasonable notice to Buyer, in
order that Prior Seller and its representatives may undertake any and all
Remediation Activities that may be necessary to carry out the terms of the Prior
Agreement or any undertakings applicable thereto.

     (iv) For a period of thirty (30) years after Closing, Buyer shall undertake
any construction or excavation or earthmoving activities that may affect the
Sites or otherwise substantially interfere with or materially increase the costs
of Prior Seller in carrying out its covenants under Section 10.4(a) of the Prior
Agreement.

     (v) Buyer (and its successors and assigns) shall fail to notify DuCoa (or
at Buyer's option Prior Seller directly) within twenty-four (24) hours after
Buyer becomes aware that a third party having an easement right on the Real
Property: (i) intends to undertake any construction or excavation or earthmoving
activities that may affect the Sites, or (ii) has come onto the Real Property
with the intention of performing (or has already commenced performing) any such
activities.

     (vi) Buyer shall refuse to meet with the Environmental Committee regarding
Remediation Activities of Prior Seller.

     (c) Sellers shall, if and to the extent Buyer shall so require, promptly
and from time to time appoint representatives of Buyer (or its successors and
assigns) to the Environmental Committee as DuCoa's representatives thereto
(together with DuCoa's own internal designees). Sellers shall consult regularly
with Buyer regarding all Environmental Committee matters, and none of Sellers
shall take any action in the context of or relating to the Environmental
Committee without reasonable prior notice to and the express prior written


                                     - 31 -
<PAGE>

consent of Buyer. Sellers shall use its best efforts to facilitate continuing
communication between Prior Seller and Buyer and to enable Buyer to avoid a
Buyer Termination Cause and to preserve and enforce its right and remedies under
the Prior Agreement.

     (d) For purposes of this Section 8.5 only: the terms "Knowledge", "Plant"
and "Remediation Activities" shall have the respective meanings ascribed thereto
in the Prior Agreement.

     (e) Notwithstanding anything to the contrary contained herein, (i) Buyer
shall not have or assume any obligation of any of Sellers under the Prior
Agreement, nor shall Buyer have any liability or obligation to any of Sellers or
to Prior Seller for any matter covered by paragraph (b) above, the only
consequence of any such paragraph (b) matter being the possible reduction of an
indemnity right under Article 8 of this Agreement with respect to a particular
Dioxin Claim under the limited circumstances set forth above, (ii) the
obligations of Sellers under Article 8 of this Agreement shall not be limited or
affected in any manner by any termination or lack of availability of Prior
Seller's obligations under the Prior Agreement whatsoever, except under the
limited circumstances and to the limited extent expressly set forth in this
Section 8.5, and (iii) neither Prior Seller nor any other person or entity shall
be a third party beneficiary hereof, nor shall this Section 8.5 limit or affect
any rights or remedies which any Buyer Indemnitee may have against Prior Seller
or any other person or entity.

8.6  Escrow; Offsets.

         8.6.1 Sellers' performance of their respective obligations under or
pursuant to this Agreement and/or any agreement or certificate or instrument
contemplated hereby, shall be secured by the Escrow Funds, as defined in, and
held in escrow pursuant to the terms of, the Escrow Agreement. In the event that
any Buyer Indemnitee shall have any claim for indemnification, then in addition
to any other rights and remedies available to any Buyer, Buyer shall be entitled
to recover such claim out of, and make claim for, the Escrow Funds and, subject
to the terms of the Escrow Agreement, the proceeds of the Escrow Funds shall be
available to satisfy any such claim. The right of any Buyer Indemnitee to assert
any claim it may have under or in connection with this Agreement against or to
recover the Escrow Funds shall be in addition to any and other rights and
remedies which any Buyer Indemnitee may have, all of which shall be cumulative.
In the event of any claim for indemnification, any Buyer Indemnitee may proceed
against any of Sellers and/or the Escrow Funds, and no failure or delay by any
Buyer Indemnitee in exercising any right to claim any portion of the Escrow
Funds shall operate as a waiver thereof, nor shall any single or partial
exercise of any right preclude the exercise of any other right.

         8.6.2 Without limiting its other rights and remedies, Buyer, subject to
the provision of this Section 8.6.2, shall also have the right to set-off and
deduct the amount of any entitlement of any Buyer Indemnitee in respect of any
obligation under Section 8.2 or otherwise in respect of this Agreement against
amounts payable by Buyer under or pursuant to this Agreement, in each case at
the option of Buyer, in the order in which such payments come due. In order to
assert the set-off right herein provided for: either (i) there must be an
agreement by Sellers thereto or a determination of a court or arbitrator that
the claim on which such set-off is based is valid, or (ii) Buyer must propose
that an independent mediator mutually acceptable to Buyer and Sellers render a
non-binding determination as to the extent to which such claim on which such
set-off is based is reasonably likely to be a valid claim, and, in such event,
either Sellers shall fail to submit such matter to such a mediator or such
mediator shall make such non-


                                     - 32 -
<PAGE>

binding determination. In the event Sellers agree to such submission to such
mediator, then the parties shall proceed expeditiously to make such submission
and to request such mediator to render a determination promptly and any payment
obligation as to which such set-off claim applies shall be suspended until such
mediator renders his determination.

     8.7 Remedies. After the Closing, the rights of Buyer under this Article 8
and under Section 9.1 hereof shall be the exclusive remedy of Buyer with respect
to claims based upon a breach or alleged breach of any of the representations,
warranties and covenants of Sellers contained herein. The rights of Sellers
under this Article 8 shall be the exclusive remedy of Sellers with respect to
claims based upon a breach or alleged breach of any of the representations,
warranties and covenants of Buyer contained herein. Except as expressly set
forth in or made pursuant to this Agreement, neither Sellers nor any of their
respective representatives or affiliates makes or has made any representations
or warranties, express or implied, in connection with the transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, except as set forth in or provided pursuant to this Agreement, the
Acquired Assets shall be transferred to Buyer pursuant to this Agreement,
without any warranty of merchantability or fitness for a particular purpose.

                                   ARTICLE 9

9.   Miscellaneous.

     9.1 Specific Performance. Sellers agree that the Acquired Assets are unique
property that cannot be readily obtained on the open market and that Buyer will
be irreparably injured if this Agreement is not specifically enforced.
Therefore, Buyer shall have the right specifically to enforce the performance of
Sellers under this Agreement without the necessity of posting any bond or other
security, and Sellers hereby waive the defense in any such suit that Buyer has
an adequate remedy at law and agree not to interpose any opposition, legal or
otherwise, as to the propriety of specific performance as a remedy. The remedy
of specifically enforcing any or all of the provisions of this Agreement in
accordance with this Section shall not be exclusive of any other rights or
remedies which Buyer may otherwise have under this Agreement or otherwise
(subject nevertheless to Section 8.6 hereof), all of which rights and remedies
shall be cumulative.

     9.2 Binding Agreement; Assignment. All the terms and provisions of this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the parties hereto and their respective successors and assigns, and no other
person shall have any right, benefit or obligation under this Agreement as a
third party beneficiary or otherwise. Prior to the Closing, neither this
Agreement nor any of the rights or obligations hereunder may be assigned by any
party without the prior written consent of the other parties.

     9.3 Law To Govern. This Agreement and each of the agreements and
instruments executed and delivered pursuant thereto shall be governed by and
construed in accordance with the laws of the State of New York without regard to
any principles or requirements thereof that would otherwise require the
application of or reference to the laws of another jurisdiction.

     9.4 Applicable Law; Venue. This Agreement and each of the agreements and
instruments executed and delivered pursuant thereto shall be construed and
enforced in

                                     - 33 -
<PAGE>

accordance with the internal laws of the State of New York, without regard to
principles of conflict of laws. Any litigation arising under or related to or in
connection with this Agreement or any of such other agreements and instruments
shall be tried by the United States District Court for the Southern District of
New York, provided that if such litigation shall not be permitted to be tried by
such court then such litigation shall be held in the state courts of New York.
Each party hereto irrevocably consents to and confers personal jurisdiction on
the United States District Court for the Southern District of New York, or, if
(but only if) the litigation in question shall not be permitted to be tried by
such court, on the state courts of New York, and expressly waives any objection
to the venue of such court, as the case may be, and agrees that service of
process may be made on such party by mailing a copy of the pleading or other
document by registered or certified mail, return receipt requested, to its
address for the giving of notice provided for in Section 9.6 hereof, with
service being deemed to be made five (5) business days after the giving of such
notice.

     9.5 Waiver of Trial By Jury. Each party hereto waives, to the fullest
extent permitted by applicable law, any right it may have to a trial by jury in
respect of any litigation directly or indirectly arising out of, under or in
connection with this Agreement, any other agreement or instrument contemplated
by or relating to this Agreement, any of the transactions contemplated hereby or
thereby. Each party hereto acknowledges that it and the other parties hereto
have been induced to enter into this Agreement by, among other things, the
mutual waiver in this Section 9.5.

     9.6 No Public Announcement. Prior to Closing, no party hereto shall,
without the prior written approval of Buyer and Sellers, make any press release
or other public announcement concerning the transactions contemplated by this
Agreement, except as and to the extent that any party hereto, or any of its
affiliates, shall reasonably determine it is so obligated by any law, rule or
regulation or the rules of any stock exchange, in which case the disclosing
party shall so advise the other parties and Buyer and Sellers shall use their
reasonable efforts to cause a mutually agreeable release or announcement to be
issued.

     9.7 Notices. All notices shall be in writing and shall be deemed to have
been duly given if delivered personally or when deposited in the mail if mailed
via registered or certified mail, return receipt requested, postage prepaid, or
when delivered to a nationally recognized overnight courier service or when sent
by electronic facsimile transmission (with copy to follow by mail or courier as
aforesaid), to the other party hereto at the following addresses:

                  if to any Seller, to:

                                    DCV, Inc.
                                    3521 Silverside Road
                                    Suite 2K - Quillen Bldg.
                                    Wilmington, Delaware 19810
                                    Attn:  Mr. Earnest Porta
                                    Tel: 302-695-5330
                                    Fax: 302-695-5350


                                     - 34 -
<PAGE>

                  if to Buyer, to:

                                    c/o Balchem Corporation
                                    2007 Route 284
                                    Slate Hill, New York 10973
                                    Attn: Dino A. Rossi, President
                                    Tel: 845-355-6300
                                    Fax: 845-355-6528

                           with a copy to:

                                    Golenbock, Eiseman, Assor & Bell
                                    437 Madison Avenue
                                    New York, New York  10022
                                    Attention: Nathan E. Assor, Esq.
                                    Tel: 212-907-7300
                                    Fax: 212-754-0330

or to such other address as any such party may designate in writing in
accordance with this Section 9.7.

     9.8 Fees and Expenses. Except as otherwise provided in this Agreement, each
of the parties hereto shall bear its own costs and expenses (including fees and
disbursements of its counsel, accountants and other financial, legal, accounting
or other advisors) incurred or otherwise payable by it in connection with the
preparation, negotiation, execution, delivery and performance of this Agreement
and each of the other documents and instruments executed in connection with or
contemplated by this Agreement.

     9.9 Severability. In the event that any of the provisions contained in this
Agreement would be held to be invalid, prohibited or unenforceable in any
jurisdiction for any reason because of the scope, duration or area of its
applicability or for other reasons, unless narrowed by construction, such
provision shall, for purposes of such jurisdiction only, be construed as if such
invalid, prohibited or unenforceable provision had been more narrowly drawn so
as not to be invalid, prohibited or unenforceable (or if such language cannot be
drawn narrowly enough, the court making any such determination shall have the
power to modify, to the extent necessary to make such provision or provisions
enforceable in such jurisdiction, such scope, duration or area or all of them,
and such provision shall then be applicable in such modified form). If,
notwithstanding the foregoing, any such provision would be held to be invalid,
prohibited or unenforceable in any jurisdiction for any reason, such provision,
as to such jurisdiction only, shall be ineffective to the extent of such
invalidity, prohibition or unenforceability, without invalidating the remaining
provisions of this Agreement. No narrowed construction, court-modification or
invalidation of any provision shall affect the construction, validity or
enforceability of such provision in any other jurisdiction. Subject to the
foregoing, in case any one or more of the provisions contained herein should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not be
affected in any way thereby.

     9.10 Entire Agreement. This Agreement and the schedules and exhibits hereto
which form a part hereof contain the entire understanding of the parties hereto
in respect of the


                                     - 35 -
<PAGE>

subject matter hereof. There are no promises, representations, warranties,
covenants, or undertakings, other than those expressly set forth herein or made
pursuant hereto. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.

     9.11 Amendments; Consents and Waivers. This Agreement and the other
agreements to be executed in connection herewith may not be modified, amended or
terminated except by a written agreement specifically referring to this
Agreement signed by Buyer and Sellers. Any failure by any party to this
Agreement to comply with any of its obligations hereunder may be waived by the
other party. No waiver shall be effective unless in writing and signed by the
party granting such waiver, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature.

     9.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same Agreement.

     9.13 No Third-Party Beneficiaries. Nothing herein, express or implied, is
intended or shall be construed to confer upon or give to any person or entity,
other than the parties hereto, any rights, remedies or other benefits under or
by reason of this Agreement or any other documents executed in connection with
this Agreement.

     9.14 Section Headings. The Article, Section and paragraph headings
contained herein are for the purposes of convenience only and are not intended
to define or limit the contents of this Agreement.

     9.15 Use of Terms. Whenever required by the context, any pronoun used in
this Agreement or in any Exhibit or Schedule hereto shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns, pronouns and verbs shall include the plural and vice versa. The use of
the words "include" or "including" in this Agreement or in any Exhibit or
Schedule hereto shall be by way of example rather than by limitation. Reference
to any agreement, document or instrument means such agreement, document or
instrument as amended or otherwise modified from time to time in accordance with
the terms thereof. Unless otherwise indicated, reference in this Agreement to a
"Section" or Article" means a Section or Article, as applicable, of this
Agreement. When used in this Agreement or in any Exhibit or Schedule hereto,
words such as "herein", "hereinafter", "hereof", "hereto", and "hereunder" shall
refer to this Agreement as a whole, unless the context clearly requires
otherwise. The use of the words "or," "either" and "any" shall not be exclusive.
The parties hereto have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.

     9.16 Termination. This Agreement may be terminated at any time prior to
Closing: (i) by mutual written consent of Buyer and Sellers; (ii) by Buyer or
Sellers if the Closing shall not have occurred on or before June 15, 2001,
provided that this provision shall not be available to Buyer if Sellers have the
right to terminate this Agreement under clause (iv) of this Section 9.16, and
this provision shall not be available to Sellers if Buyer has the right to
terminate this Agreement under clause (iii) of this Section 9.16, (iii) by Buyer
if there is a material breach of any representation, warranty, covenant or
agreement made or to be complied


                                     - 36 -
<PAGE>

with or performed by any of Sellers pursuant to the terms of this Agreement,
provided that Buyer may not terminate this Agreement prior to the Closing if
Sellers have not had a reasonable opportunity (not to exceed twenty (20) days
from the date of notice from Buyer to Sellers of such breach) to cure such
breach; or (iv) by Sellers if there is a material breach of any representation,
warranty, covenant or agreement made or to be compiled with or performed by
Buyer pursuant to the terms of this Agreement, provided that Sellers may not
terminate this Agreement prior to the Closing Date if Buyer has not had a
reasonable opportunity (not to exceed twenty (20) days from the date of notice
from Sellers to Buyer of such breach) to cure such breach.

     9.17 Effect of Termination. In the event of termination of this Agreement
prior to the Closing: (i) each party will redeliver all documents, work papers
and other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after execution hereof, to the party
furnishing the same; (ii) the provisions of the confidentiality agreements
signed by each of the parties shall continue in effect; and (iii) no such
termination shall affect or negate any rights which any party hereto may have by
reason of any breach or default under this Agreement by any other party hereto.

                                     - 37 -
<PAGE>

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


                                            BCP Ingredients, Inc.



                                            By:   /s/ Dino A. Rossi
                                               --------------------------------
                                               Name: Dino A. Rossi
                                                    ---------------------------
                                               Title: President
                                                     --------------------------



                                            DuCoa L.P.

                                            By: DCV, Inc., general partner



                                            By:    /s/ Earnest W. Porta
                                               --------------------------------
                                               Name: Earnest W. Porta
                                                    ---------------------------
                                               Title: President
                                                     --------------------------



                                            DCV, Inc.



                                            By: /s/ Earnest W. Porta
                                               --------------------------------
                                               Name: Earnest W. Porta
                                                    ---------------------------
                                               Title: President
                                                     --------------------------


                                            DCV GPH, Inc.



                                            By: /s/ Earnest W. Porta
                                               --------------------------------
                                               Name: Earnest W. Porta
                                                    ---------------------------
                                               Title: President
                                                     --------------------------




<PAGE>


                                                                  SCHEDULE 1.2


Schedule 1.2 - Operations and Products  pertaining to the Business  (Section 1.2
"The Business")

A.  "Verona  Operations"  means the  business,  operations  and rights of any of
Sellers for or relating to any of the following products,  compounds,  chemicals
or materials and any and all Derivative Products (as hereinafter defined):

Feedgrade choline chloride products, including:
         50% Dry Choline Chloride
         60% Dry Choline Chloride
         70% Dry Choline Chloride
         70% & 75% Aqueous Choline Chloride
         all other choline and choline chloride products and materials for
         animal and feed uses

Human nutritional choline products, including:
         Choline chloride, FCC
         Choline bitartrate, FCC
                  Regular
                  Coarse
                  Conditioned
                  20 Mesh Conditioned
                  40 Mesh Conditioned
                  Fine, Conditioned (milled by a third party)
         Betaine HCl USP
         Choline Dihydrogen Citrate
         All other choline and betaine and related products for human use.

TMAC (Tetramethylammonium chloride)


Product tolled for EKC

Stabilized Choline Base in Methanol


Product tolled for Velsicol

Sodium Benzoate
Potassium Benzoate


Other:

All other business, operations and rights relating to any and all products,
materials and services related to any of the above under this Schedule 1.2.


                                       1
<PAGE>

Any and all other products, compounds, chemicals and materials concurrently
processed, produced, tolled and/or marketed, or currently proposed to be
processed, produced, tolled and/or marketed, as part of or in connection with
any operations or business of any of Sellers from or utilizing any of the
Verona, MO facilities or any services provided thereat or therefrom, including
without limitation Derivative Products (as hereinafter defined).

B. "M-Cap Operations" means the business, operations and rights of any Sellers
for or relating to any of the following products, compounds, chemicals and
materials and any and all Derivative Products:

Baking Soda G110
Baking Soda G130
Baking Soda 435
Baking Soda 516B
Cinnamon H100
F-440
F-441
F-444
F-445
Sodium Diacetate DP-208
Arginine 362
Ascorbic Acid B100
Ascorbic Acid 431
Betaine Hydrochloride 454
Choline Bitartrate 424
Choline Dihydrogen Citrate 430
Copper Gluconate 486
Ferrous Fumarate 451A
Ferrous Fumarate 482
Ferrous Sulfate 481A
Lysine 360
Magnesium Oxide 153
Magnesium Oxide 154
Natural Betaine 454WS
Niacinamide 477A
Riboflavin 357
Thiamine Hydrochloride 355
Thiamine Mononitrate 356
Zinc Oxide 471
Aspartame 311
Aspartame 452
Citric Acid A100
Citric Acid 437
Citric Acid 474
Citric Acid 535
Fumaric Acid 410A
Potassium Chloride C101
Potassium Chloride C102
Sodium Chloride 436A
Sodium Chloride 436B
All products, compounds, chemicals and materials related to any of the above.

                                       2
<PAGE>

C. "Products" as used in the Agreement includes (i): any and all of the
products, materials and services identified or referred to in this Schedule 1.2,
and (ii) any and all products, materials and services reflecting or utilizing
percentages or portions of any of the chemicals or compounds referred to in this
Schedule 1.2 which are different than the particular percentages or portions
referred to in this Schedule 1.2 or reflected in, and which products, materials
or services are used for similar purposes as, any of the other Products
("Derivative Products").


                                       3
<PAGE>

                                                                   SCHEDULE 2.1

                                 Purchase Price

         (a) The Purchase Price shall be the sum of $14,981,000 (the "Base
Price"), subject to adjustment as provided in Section 2.5 or 3.1.2 of the
Agreement, and also reduced dollar-for-dollar by the aggregate amount of the
Payables as of the Closing Date, plus the Contingent Amount (if any), and shall
be payable as provided in the Agreement or otherwise herein.

         (b) The term the "Payables" shall mean the aggregate amount of (i) all
trade and other accounts payable, and (ii) those categories of accrued business
expenses described in Annex B hereto, in each case relating to the Business, as
of the Closing Date, which Buyer shall, at the Closing, elect to assume and pay
when due.

         (c) The parties shall cooperate in good faith prior to the Closing to
estimate the amount of the accounts payable and accrued business expenses as of
the Closing Date relating to the Business, and at the Closing Buyer shall
designate, by category or amount, in its discretion, those items which shall
constitute Payables, in which event the parties' good faith estimate thereof
(the "Estimated Payables") shall be deducted from and reduce the Purchase Price
and the Base Price and such net sum (the "Cash Amount") shall be payable at the
Closing by Buyer as follows: $250,000 to the Escrow Agent; and the balance of
the Cash Amount to Sellers.

         (d) The parties shall, promptly after the Closing (but in no event
later than sixty (60) days after the Closing), cooperate in good faith to
mutually compute the definitive amount of the Payables (the "Definitive
Payables"). If the Definitive Payables shall exceed the Estimated Payables,
Sellers shall promptly pay such excess to Buyer. If the Estimated Payables shall
exceed the Definitive Payables, Buyer shall promptly pay such excess to Sellers.

         (e) Sellers and Buyer agree to use their best efforts to reach
agreement on any disputed portion of the computation of the Definitive Payables
under paragraph (d) above (the "Disputed Items"). Any Disputed Items remaining
unresolved on the 90th day after the Closing shall forthwith be submitted to a
neutral arbitrator selected under the auspices of the American Arbitration
Association or as Sellers and Buyer shall otherwise agree (the "Arbitrator").
Sellers and Buyer shall promptly present their positions with respect to the
Disputed Items to the Arbitrator, together with such other materials as the
Arbitrator may deem appropriate. Any determination by the Arbitrator with
respect to any Disputed Item shall be final and binding on each party. The cost
of the Arbitrator shall be borne 50% by Sellers and 50% by Buyer.

         (f) The "Contingent Amount" shall be the product of $1,000,000,
multiplied by the appropriate and corresponding "Applicable Fraction" specified
below, for each of the twelve (12) month periods beginning July 1, 2001, July 1,
2002 and July 1, 2003, respectively (each an "Applicable Fiscal Period" and,
respectively the "2002 Fiscal Period," the "2003 Fiscal Period" and the "2004
Fiscal Period", as the case may be), based on the relationship of the Actual
Gross Margin, to the applicable Base Gross Margin, for the particular Applicable
Fiscal Period, and to the applicable Prior Base Gross Margin, all as hereinafter
defined and provided. 1
<PAGE>

         (g) The "Actual Gross Margin" for any respective Applicable Fiscal
Period shall mean Net Sales (as hereinafter defined) less all actual
manufacturing costs associated with the Verona, MO operations of Buyer for such
respective Applicable Fiscal Period, including all labor and material costs and
production costs (but excluding depreciation, income taxes, interest expense and
allocations of home office overhead, provided that home office or other overhead
items such as insurance which are properly allocable to the Verona, MO
operations of Buyer shall be included in computing Actual Gross Margin), as
determined in accordance with generally accepted accounting principles ("GAAP")
applied by Buyer on a basis consistent with GAAP reflected in the accounting
records of Sellers reviewed by Buyer's parent's accountants prior to May 1, 2001
during their review of the Sellers' financial statements.

         (h) "Net Sales" shall equal gross sales by Buyer of the Covered
Products (as hereinafter defined) manufactured at the Verona, MO facility
included in the Acquired Assets, less all delivery and freight charges, returns,
allowances, credits, discounts, customs charges, duties and sales, use, VAT and
similar taxes; provided that all Covered Products sold or transferred to Buyer
or any of its affiliates or used by Buyer or any of its affiliates in the
manufacture or processing of encapsulated choline chloride (or any other
product) shall be deemed sold and transferred at a price no higher than the
applicable per unit manufacturing cost therefor for the Applicable Fiscal Period
in which so sold, transferred or used as determined in accordance with generally
accepted accounting principles ("GAAP") applied by Buyer on a basis consistent
with GAAP reflected in the accounting records of Sellers reviewed by Buyer's
parent's accountants prior to May 1, 2001 during their review of the Sellers'
financial statements.

         (i) The Covered Products shall mean Choline Nutrient, Dry and Aqueous
Choline Chloride Feed, Betaine Hydrochloride, Tetramethyl Ammonium Chloride
(TMAC), Sellers' form of Encapsulated Choline Chloride and Benzoate tolling. It
is expressly understood that Buyer has no intention of marketing Sellers' form
of Encapsulated Choline Chloride.

         (j) The Base Gross Margin for each Applicable Fiscal Period shall be as
follows:

                  Applicable Fiscal Period           Base Gross Margin
                  ------------------------           -----------------
                  2002 Fiscal Period                          $4,661,000
                  2003 Fiscal Period                          $6,062,000
                  2004 Fiscal Period                          $7,371,000

         (k) The "Prior Base Gross Margin" applicable to a particular Applicable
Fiscal Period shall be the Base Gross Margin for the immediately preceding
Applicable Fiscal Period, and the Prior Base Gross Margin applicable to the 2002
Fiscal Period shall be $2,966,000.

         (l) The Applicable Fraction for any particular Applicable Fiscal Period
shall be calculated as follows:

     (i) If the Actual Gross Margin for such particular Applicable Fiscal Period
is greater than the Prior Base Gross Margin applicable to such Applicable Fiscal
Period, then the Applicable Fraction shall be a fraction (but in no event more
than 1.0):

                                       2

<PAGE>

                           (a)      The  numerator  of  which  is  equal  to the
                                    amount by which  such  Actual  Gross  Margin
                                    ("Current AGM") shall exceed such Prior Base
                                    Gross Margin ("Prior BGM"), and

                           (b)      The  denominator  of  which  is equal to the
                                    amount by which the Base  Gross  Margin  for
                                    such  particular  Applicable  Fiscal  Period
                                    ("Current BGM") shall exceed such Prior BGM.

     (ii) Expressed as a fraction, such Applicable Fraction shall equal:

                            (Current AGM - Prior BGM)
                            -------------------------
                            (Current BGM - Prior BGM)

     (iii) If the Current Gross Margin is less than or equal to the Prior Base
Gross Margin, then the Applicable Fraction shall equal zero and there shall be
no Contingent Payment.

     (iv) As an example, if the Actual Gross Margin for the 2002 Fiscal Period
is $3,351,000 then the Applicable Fraction shall equal (3,351,000 -
2,966,000)/(4,661,000-2,966,000) or 385,000/1,695,000 or 0.2271. In such case,
the Contingent Amount payable for the 2001 Fiscal Period would equal
($1,000,000) times (.2271) or $227,100.

         (m) If any Contingent Amount shall be payable for a particular
Applicable Fiscal Period, then Buyer shall pay the same to Sellers within 60
days after the end of such Applicable Fiscal Period. In no event shall the
Contingent Amount for a particular Applicable Fiscal Period exceed $1,000,000,
nor shall the aggregate Contingent Amount for all Applicable Fiscal Periods
exceed $3,000,000.

         (n) Buyer acknowledges that the Base Gross Margin amounts are based on
estimated margins of the products currently manufactured at the Verona, MO site
and therefore, to the extent possible, the operations of the Verona, MO site
shall be accounted for on a basis separate from the remaining operations of
Buyer such that the results of operations at the Verona, MO site may be
accurately compared to such Base Gross Margin amounts.

         (o) The use and amounts of all reserves or contingent liabilities,
including product claims or refunds or liability reserves, shall be consistent
with GAAP.

         (p) In the event of an occurrence of a Force Majeure event during a
particular Fiscal Period resulting in (i) a Partial Shutdown (for a period
exceeding 30 consecutive days), or (ii) a total unscheduled shut-down (for a
period exceeding 7 consecutive days), of the Verona, MO site, including due to
earthquake, fire, or similar natural event, a plant shutdown, strike, lack of
raw materials, transportation or other situations outside the reasonable control
of the parties hereto, then the relevant Fiscal Period shall be extended by the
time period during which such shut-down continues, and Actual Gross Margin for
such Fiscal Period as extended shall not include Actual Gross Margin during the
period of such shut-down. A "Partial Shutdown" shall mean the unscheduled
shutdown of a major production line for the manufacture of liquid or dry choline
or choline salts.

         (q) Upon payment of each Contingent Amount (or determination that no
Contingent Amount is owed) Buyer shall deliver to Sellers documents in
sufficient detail to show

                                       3
<PAGE>

how the calculation of the Contingent Amount was determined. Sellers or their
representatives shall have a right, during normal business hours at such times
as reasonably approved by Buyer and subject to such restrictions as to
confidentiality as Buyer shall require, to audit all relevant records and
documents of Buyer necessary to verify the calculation of the Contingent Amount.

         (r) Buyer acknowledges and agrees that the above Gross Margin
projections are solely for the purpose of establishing a Contingent Amount and
do not constitute a legally binding or enforceable commitment, projection,
representation or warranty for purposes of the Agreement, nor have Sellers made
any representations, warranties or assurances, express or implied, to Buyer as
to projected sales, margins or profits.

                                       4
<PAGE>


                             ANNEX B TO SCHEDULE 2.1


Accrued Business Expenses:

         Property Taxes
         Payroll withholdings (Taxes, 401(k), etc.)
         Union pension contribution
         Safety bonus
         Vacation
         Salary and wages
         Lease/rental obligations



                                       5
<PAGE>

                                                                     SCHEDULE 4



         4.1 Organization, Standing and Qualification; No Subsidiaries.


         (a) Each of Sellers is duly organized, validly existing and in good
standing under the laws of its jurisdiction of formation, as set forth in
Schedule 4.1(a) of the Disclosure Schedule; and has all requisite power and
authority and is entitled to own, lease and operate its properties and to carry
on its business as and in the places such properties are now owned, leased or
operated and where such business is presently conducted. Set forth in Schedule
4.1(a) of the Disclosure Schedule is a listing of each jurisdiction in which the
respective Seller is qualified to do business as a foreign corporation. Each of
Sellers is duly qualified and authorized to do business, in good standing as a
foreign corporation in each jurisdiction in which it owns or leases property or
in which the nature of its business requires it to be so qualified except where
the failure to so qualify would not have a material adverse effect on the
Business, or on the condition (financial or otherwise), assets, liabilities or
operations of the Business. The copies of the Restated Certificate of Limited
Partnership and Limited Partnership Agreement of DuCoa and the Certificate of
Incorporation and By-Laws of each of DCV and LP delivered to Buyer are complete
and correct.

         (b) Subsidiaries. Except as set forth in Schedule 4.1(b) of the
Disclosure Schedule, none of Sellers has any subsidiary or any interest, direct
or indirect, nor has any commitment to purchase any interest, direct or
indirect, in any other corporation or in any partnership, joint venture or other
business enterprise or entity. Except as set forth in Schedule 4.1(b), none of
Sellers is a subsidiary of another person or entity and no person or entity has
any interest, direct or indirect, nor has any commitment to purchase any
interest, direct or indirect, in any Seller. The Business has not been conducted
through any direct or indirect subsidiary or any direct or indirect shareholder
or affiliate of any of Sellers.

         4.2 Related Transactions. Except as indicated in Schedule 4.2 of the
Disclosure Schedule, during the past three years none of Sellers nor the
Business has, directly or indirectly, purchased, leased nor otherwise acquired
any property or obtained any services from, or sold, leased or otherwise
disposed of any property or furnished any services to, or otherwise engaged in
transactions with any person or entity which, directly or indirectly, alone or
together with others, controls, is controlled by or is under common control with
any of Sellers or any partner or shareholder of any of Sellers or any person or
entity associated with any such person or entity, and no part of the property or
assets of any direct or indirect shareholder, subsidiary or affiliate of any of
Sellers is used by any Seller.

         4.3 Authority. Each of Sellers has all requisite power and authority to
enter into this Agreement and each other agreement, document and instrument to
be executed or delivered by it in accordance with this Agreement (the "Seller
Documents") and to carry out the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the Seller
Documents by Sellers have been authorized by all necessary corporate stockholder
partnership and partner action and no other proceedings on the part of any of
Sellers are necessary to authorize this Agreement, the Seller Documents and the
transactions contemplated hereby and thereby. This Agreement has been duly
authorized, executed and delivered by Sellers and is the legal, valid and
binding obligation of each Seller and each of the Seller Documents has been duly
authorized by Sellers and upon execution and delivery by such of Sellers as is
party thereto will be a legal, valid and binding obligation of same.

                                       1
<PAGE>

         4.4 No Violation. Except as set forth on Schedule 4.4 of the Disclosure
Schedule, the execution, delivery and performance of this Agreement and the
Seller Documents and the consummation of the transactions contemplated hereby
and thereby, including without limitation the sale of the Acquired Assets to
Buyer, will not (a) conflict with or violate any provision of the amended and
restated certificate of limited partnership or limited partnership agreement of
DuCoa or the certificate of incorporation or by-laws of DCV or LP, (b) with or
without the giving of notice or the passage of time, or both, result in a breach
of, or violate, or be in conflict with, or constitute a default under, or permit
the termination of, or cause or permit acceleration under, any agreement,
instrument, debt or obligation to which any of Sellers is a party or to or by
which any of them or any of the Acquired Assets or the Business is subject or
bound, (c) require the consent of any party to any agreement or commitment to
which any of Sellers is a party, or to or by which any of them or any of the
Acquired Assets or the Business is subject or bound, (d) result in the creation
or imposition of any Lien upon any of the Acquired Assets, or (e) violate any
law, rule or regulation or any order, judgment, decree or award of any court,
governmental authority or arbitrator to or by which any of Sellers or any of the
Business or the Acquired Assets is subject or bound.

         4.5 Financial Statements.

             (a) Sellers have delivered to Buyer copies of the financial
statements identified on Schedule 4.5(a) of the Disclosure Schedule
(collectively the "Financial Statements"), including those for the calendar
years ended December 31, 1999 and December 31, 2000 and the three months ended
March 31, 2001, and the unaudited, pro forma listing of assets and liabilities
of the Business as at March 31, 2001 (the "Balance Sheet" and March 31, 2001 is
the "Balance Sheet Date"). Except as set forth in Schedule 4.5(b) of the
Disclosure Schedule, all of the Financial Statements have been prepared, on such
unaudited pro forma basis, from the books and records of Sellers in accordance
with generally accepted accounting principles consistently applied and
maintained throughout the periods indicated and fairly present in all material
respects the financial position of the Business as at their respective dates and
the results of operations and cash flows of the Business respectively for the
respective periods covered thereby, and do not contain any items of special or
nonrecurring income or any other income not earned in the ordinary course of
business except as expressly specified therein, and include all adjustments,
which consist only of normal recurring accruals, necessary for such fair
presentation.

             (b) Except as and to the extent reflected or reserved against on
the face of the Balance Sheet (excluding the notes thereto), or set forth on
Schedule 4.5(c) of the Disclosure Schedule, none of Sellers has any debts,
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
of any nature whatsoever, other than current liabilities permitted under Section
4.11(a) below, and other than contract obligations disclosed pursuant to Section
4.9 below or not required to be disclosed pursuant to said Section 4.9, which in
each case conform to the representations and warranties with respect thereto in
this Agreement.

         4.6 Title to and Condition of Acquired Assets.

             (a) DuCoa has good and marketable title in fee simple to the Owned
Real Property, free and clear of all Liens, except (1) as reflected in Schedule
4.6(a) of the Disclosure Schedule, and (ii) liens for current real estate Taxes
not yet due or payable. None of the Owned Real Property is subject to or
affected by any reservation or exclusion of mineral, timber, air or other rights
or interests. Sellers have good and marketable title to all of the Acquired
Assets, and

                                       2
<PAGE>

all of the assets, properties and rights of the types described in Section 1.1
of this Agreement which any of them owns or purports to own, other than the
Owned Real Property, free and clear of any and all Liens, except as reflected in
Schedule 4.6(a) of the Disclosure Schedule.

             (b) All Owned Real Property and all plants, facilities, structures,
machinery and equipment of or used by any Seller in connection with any of the
Owned Real Property conform in all material respects with all applicable
building and zoning ordinances and all other laws, regulations and requirements.
All such plants, structures, machinery and equipment of or used by any Seller in
connection with any of the Business are suitable for the purposes used and
adequate and sufficient for all operations and conduct of the Business as
currently being conducted, all of which are in all material respects in good
operating condition, order and repair, subject to normal wear and tear from
normal use and subject to normal maintenance requirements, and are free from
termites, wood destroying insects and organisms and structural damage therefrom.
There are no conditions or events, except for normal wear and tear, which would
prevent continued normal operation of said plants, structures, machinery and
equipment or would otherwise materially and adversely affect the operation
and/or use of the same as currently used by any Seller. There are no actions
pending or to the best of Sellers' knowledge threatened by any federal, state,
local or foreign regulatory agency with respect to the compliance of such
properties or assets with applicable laws, ordinances or regulations.

             (c) Each Seller enjoys peaceful possession of all real and personal
properties held under lease or license. There are no material defaults existing
or event or condition which with notice or lapse of time or both, would
constitute an event of default, or arrearages under any of such leases and
licenses and all such leases and licenses are in good standing and in full force
and effect.

             (d) Except as set forth in Schedule 4.6(d) of the Disclosure
Schedules, the Acquired Assets, together with the Excluded Leased Properties and
the inventory forming part of the Excluded Assets, include all of the assets,
contracts, leases and licenses and all of the other properties and rights of
every type and description, real, personal and mixed, tangible and intangible,
which are necessary to the conduct of the Business as presently conducted, and
for Buyer to conduct the Business in the same manner.

         4.7  Intellectual Property.

             (a) Except as indicated in Schedule 4.7(a) of the Disclosure
Schedule, Sellers own, or possess the perpetual and royalty-free licenses and
all other rights necessary to use, all Intellectual Property used in or
necessary to conduct any of the Business, all of which are in good standing and
uncontested and free and clear of any and all Liens and rights of others of any
kind. None of the Intellectual Property is owned or licensed or held by any
partner, shareholder, director, officer, consultant, independent contractor or
employee of any Seller, or by any person or entity which is an affiliate of any
Seller, all such Intellectual Property being owned or licensed as aforesaid
solely by DuCoa itself. To the knowledge of Sellers, no Seller is infringing
upon or otherwise acting adversely to any copyright, trademark, trademark right,
service mark, service name, trade name, patent, patent application, license or
trade secret or other proprietary right or intellectual property of any other
person or entity. No claim, suit, demand, proceeding or investigation is
pending, has been asserted or is threatened by or against any Seller with
respect to, based on or alleging infringement of any such rights or the
proprietary rights or intellectual property of any third party, or challenging
the validity or effectiveness of any license for such

                                       3
<PAGE>

rights, and none of Sellers knows of any basis for any such claim, suit, demand,
proceeding or investigation.

             (b) Schedule 4.7(b) of the Disclosure Schedule, contains a true and
complete list of all Programs owned, developed, under development, published,
licensed, supported or maintained by any Seller (excluding commonly used and
available Programs used by Sellers each of which is subject to a commercially
standard "shrink-wrap" licenses which Buyer shall be entitled to utilize and
which can be readily obtained by Buyer without cost or expense).

             (c) Sellers have delivered to Buyer copies of all registrations and
applications, which are currently pending for all Marks, Patents and copyrights,
all of which are identified in Schedule 4.7(c) of the Disclosure Schedule.
Sellers have, and on the Closing Date will continue to have, and Buyer will
have, the right to use all Intellectual Property in the manner presently used by
any of Sellers. None of Sellers has any knowledge of any infringement or
unlawful, unauthorized or conflicting use of any of the Intellectual Property.

         4.8  Litigation.

             (a) Except as set forth on Schedule 4.8(a) of the Disclosure
Schedule, there is no action, suit, proceeding, arbitration or investigation
pending against or affecting any of the Business or the transactions
contemplated by this Agreement, nor any basis therefor or threat thereof which,
in any case or in the aggregate, could if adversely determined have a material
adverse effect on the business, assets, liabilities, operations, prospects or
condition (financial or otherwise) of the Business or the Acquired Assets or the
value thereof, or the use thereof by Buyer. No Seller (with respect to any of
the Business), the Business or the Acquired Assets is subject to any court or
administrative order, writ, injunction or decree, nor in default with respect to
any order, writ, injunction or decree, of any court or federal, state, municipal
or other governmental department, commission, board, agency, instrumentality,
domestic or foreign.

             (b) Schedule 4.8(b) of the Disclosure Schedule sets forth a
complete list and description of all product warranty and/or product liability
claims, other than minor returns or exchanges of goods in the ordinary course of
business consistent with industry practice, made in connection with the Business
during the past three years, in each case, together with the resolution thereof
(whether under insurance policies or otherwise).

         4.9  Compliance; Permits.

             (a) Each of Sellers, with respect to the Business, is in compliance
in all material respects with all laws, rules, regulations, orders, judgments or
decrees applicable to any Seller, any of its employees, any of the Acquired
Assets and/or any aspect of the Business, including any laws, rules,
regulations, ordinances, codes, orders, judgments or decrees as to zoning,
building requirements or standards, import, export, environmental, health and/or
safety matters. Each Seller has all licenses, consents, certificates,
franchises, permits, and authorizations issued by any department, board,
commission, bureau or instrumentality necessary to the conduct and operation of
the Business and the use of the Acquired Assets in the manner that it is
currently conducted by it ("Licenses"), and each of which is identified in
Schedule 4.9 of the Disclosure Schedule and none of operations of any Seller or
the Business is being conducted in any manner which violates in any material
respect any of the terms or conditions under which such License was granted.
Each License has been duly obtained, is valid and in full force and effect, and
is

                                       4
<PAGE>

not subject to any pending or, to the knowledge of any Seller, threatened
administrative or judicial proceeding to revoke, cancel or declare such License
invalid in any respect.

             (b) None of Sellers, nor any officer employee or agent thereof, nor
any other person acting on behalf of any of them, has, directly or indirectly,
within the past two years given or agreed to give any gift or similar benefit to
any client, customer, governmental employee or other person who is or may be in
a position to help or hinder the Business (or assist any Seller in connection
with any actual or proposed transaction) which could reasonably be expected to
any Seller to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, if not given in the past might have had a material
adverse effect on the assets, operations or prospects of the Business, or if not
continued in the future might adversely affect the retention of any material
client, customer, account or business or the assets, operations or prospects of
the Business or which could reasonably be expected to subject any Seller to
material suit or penalty in any private or governmental litigation or
proceeding.

         4.10 Schedules. Schedule 4.10(a) of the Disclosure Schedule contains a
true, complete and accurate list and description of the following:

             (a) all real property and all buildings and improvements thereon in
which any Seller has an ownership, leasehold or other interest and which is used
in connection with any of the Business;

             (b) all items of equipment, owned, leased or used by any Seller in
connection with any of the Business and setting forth with respect to all such
listed property an identification of all leases relating thereto;

             (c) all Patents, Trademarks and copyrights and all applications
therefor (including any licensed to any Seller), held or used by any Seller in
connection with any of the Business, specifying such Seller's interest therein
and in the case of any licensed to any Seller, the expiration date of such
license, or if owned by any Seller, the date on, and manner in, which acquired;
and all Contracts (including licenses) relating to any of the Patents,
Trademarks or Copyrights;

             (d) all fire, theft, casualty, liability, collision, personal
injury and other insurance policies insuring any Seller in connection with the
Business, or insuring any Acquired Assets or the Business, specifying with
respect to each such policy, the name of the insurer, the risk insured against,
the limits of coverage, the deductible amount (if any), and the date through
which coverage will continue by virtue of premiums already paid;

             (e) all sales agency, supply, purchase, distribution, sales
representation, advertising, promotional, support, maintenance, outsourcing,
manufacture and fulfillment agreements or franchises, and all agreements
providing for the services of an independent contractor, to which any Seller is
a party or by which it or the Business is bound, currently used in any of the
Business;

             (f) all guarantees, loan agreements, indentures, mortgages and
pledges, all conditional sale or title retention agreements, security
agreements, equipment obligations, leases or lease purchase agreements as to
items of personal property, in each case to which any Seller is a party or by
which it or the Business is bound or under which it has rights and which are
secured by or otherwise relate to any of the Acquired Assets or the Business;

                                       5
<PAGE>

             (g) each employee benefit plan as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, and all collective
bargaining agreements, employee policies, employment and consulting agreements,
and all employee bonus and benefit plans and all group insurance plans, whether
or not legally binding, relating to the Business or any current or former
employee, person or firm providing services to or for the Business, including
wage continuation, severance, reemployment assistance, termination, deferred
compensation, holiday, sympathy, sick leave or pay, vacation, personal day,
education, pension, retirement, welfare and group or individual life, health,
hospitalization, dental and accident insurance and other bonus practices, plans,
agreements, arrangements, and/or commitments to which any Seller is a party or
bound and, with respect to each of the employees identified in Schedule 6.6.1 of
the Disclosure Schedule, showing separately for each such person, the amounts
paid or payable as salary, bonus payments and all other direct or indirect
compensation for the year ended December 31, 2000 and the current year through
April 20, 2001;

             (h) all contracts, agreements, commitments, purchase orders,
leases, licenses or other understandings or arrangements to which any Seller is
a party or by which it or the Business or any of its property is bound or
affected, relating to any of the Business, except for (i) short-term purchase or
short-term sale orders in the ordinary course of business on customary terms and
conditions, involving less than $10,000 in any single case, and (ii) contracts
entered into in the ordinary course of business which are terminable by any
Seller on less than 30 days' notice without any penalty or consideration and
involving payments or receipts during the entire life of such contract by any
Seller of less than $10,000 in the case of any single contract but not more than
$50,000 in the aggregate;

             (i) all current forms of purchase orders, sales orders, invoices
and quotations used by or for the Business; and

             (j) all agreements (whether or not fully performed) by which any of
Sellers or any holder(s) of any equity interest therein acquired or disposed of
any of such equity interests or any aspect of the Business or control thereof
(excluding the agreement covering the sale of the Mexican choline chloride
operation, other than all portions thereof accurately describing the business
and assets transferred pursuant thereto and any covenants and obligations
relating to any post-transfer conduct of any business or operations by any of
Sellers).

             True and complete copies of all contracts, agreements, plans,
arrangements, commitments and documents (other than the Sellers' Credit
Agreement, dated August 20, 1977, and credit documents ancillary thereto,
between Sellers and Fleet Bank, as lead bank, which need only be listed and
identified in said Schedule 4.10) required to be listed or identified pursuant
to this Section 4.10 (to the extent either in writing or if not in writing, an
accurate summary thereof), together with any and all amendments thereto, have
been delivered to Buyer.

             Except as expressly set forth on Schedule 4.10 (b) of the
Disclosure Schedule, all of the contracts and agreements required to be listed
or identified pursuant to this Section 4.10 (other than those which have been
fully performed) are in full force and effect, do not require the consent or
approval of any party to the assignment thereof and will be unaffected by any
Transfer of the Acquired Assets, and Buyer will be entitled to the full benefits
thereof, and none of such contracts and agreements is with a governmental agency
or authority. To the best of the knowledge of Sellers, there is not under any
contract or agreement required to be listed or identified pursuant to this
Section 4.10 any material existing default or event which, after notice or lapse
of time, or both, would constitute such a default or result in a right to
accelerate or loss

                                       6
<PAGE>

of rights. There have been no written modifications, or to Sellers' knowledge no
oral modifications to the terms or provisions of any of such contracts and
agreements. no amount payable or reserved under any such contract or agreement
has been assigned or anticipated and Except for security interests held by
Sellers' lenders, which shall be released in full at the Closing, no amount
payable under any such contract or agreement is in arrears or has been collected
in advance, and to the best of the knowledge of Sellers, there exists no offset
or defense to payment of any amount under any such contract or agreement.

         4.11 Absence of Changes or Events. Since January 1, 2001, Sellers have
conducted the Business only in the ordinary course in a manner consistent with
past practices. Without limiting the foregoing, since such date, with respect to
the Business neither any Seller nor the Business has:

             (a) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except current
liabilities for trade or business obligations incurred in the ordinary course of
business and consistent with its prior practice, none of which, in any case or
in the aggregate, could have a material adverse affect on the Business or on the
condition (financial or otherwise), assets, liabilities, business, operations or
prospects of the Business;

             (b) discharged or satisfied any Lien affecting the Business or any
of the Acquired Assets, other than those then required to be discharged or
satisfied, or paid any obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due, other than current liabilities
permitted by subsection (a) above;

             (c) mortgaged, pledged or subjected to any Lien any of the Acquired
Assets except for Liens held by Sellers' bank lenders which shall be released in
full at the Closing;

             (d) sold, transferred, leased to others or otherwise disposed of
any assets or properties or rights of or relating to any of the Business or any
of the Acquired Assets, except for the sale of inventory and consumption of
supplies, in the ordinary course of its business and consistent with its prior
practice; or canceled or compromised any debt or claim, or waived or released
any right of significant value;

             (e) received any notice of termination of any material contract,
license, lease or other agreement relating to the Business;

             (f) suffered any damage, destruction, loss (whether or not covered
by insurance) which, in any case or in the aggregate, could have a material
adverse effect on the Business or on the business, assets, operations or
prospects thereof, or disposed of or destroyed any records other than disposal
of duplicates, drafts and other immaterial documents in the ordinary course of
business in accordance with its written document retention policy;

             (g) transferred or granted any rights under, or entered into any
settlement regarding the breach or infringement of, any United States or foreign
license, patent, copyright, trademark, trade name, invention or other
proprietary right, or modified any existing rights with respect thereto;

             (h) instituted, settled or agreed to settle any litigation, action,
arbitration, investigation or proceeding before any court or governmental body
relating to it or its property or

                                       7
<PAGE>

received any threat thereof except for the good faith settlement of worker's
compensation claims in the ordinary course of business or immaterial labor
grievances involving individual employees relating to the Business;

             (i) suffered any change, event or condition which, in any case or
in the aggregate, has had or may have a material adverse effect on the Business
or the condition (financial or otherwise), properties, business, assets,
liabilities, operations or prospects of the Business, except to the extent
reflected in the Financial Statements including, without limitation, any change
in its revenues, costs, backlog, or relations with its employees, landlords,
agents, customers, dealers, suppliers or government regulators;

             (j) entered into any transaction, contract or commitment other than
in the ordinary course of business or incurred any severance pay obligations by
reason of this Agreement or the transactions contemplated hereby;

             (k) made any change in excess of 4% in the rate of compensation,
commission, bonus or other direct or indirect remuneration payable to, or paid
or agreed or orally promised to pay, conditionally or otherwise, any bonus or
extra compensation to, or made any change in any pension, wage continuation,
severance, reemployment assistance, termination or vacation pay policy covering,
any officer, employee, salesman, or agent providing services to or for the
Business, except pursuant to the terms of the Collective Bargaining Agreement;

             (l) made any capital expenditure or capital additions or
betterments in connection with the Business, in excess of $500,000 in the
aggregate, whether or not reflected on the Financial Statements as capitalized
expenditures;

             (m) made any purchase commitment in connection with the Business,
in excess of normal, ordinary and usual requirements of the Business or at any
price materially in excess of the then current market price or upon terms and
conditions more onerous than those usual and customary in the industry or trade,
or made any change in its selling, pricing, advertising or personnel practices
inconsistent with its prior practice or prudent business practices prevailing in
the industry or trade;

             (n) encountered any labor union organizing activity, had any actual
or threatened employee strikes, work stoppages, slow downs or lockouts, or had
any material change in its relations with its employees, agents, customers or
suppliers or any governmental regulatory authority or self-regulatory authority,
in each case in connection with or affecting any of the Business;

             (o) received any notice from any customer or supplier that it
intends to cease doing business with it (or will refuse to do business with
Buyer), which, in any case or in the aggregate, has had or could have a material
adverse effect on the Business or on the condition (financial or otherwise),
business, assets, liabilities, operations or prospects of the Business, or on
the value of the Acquired Assets or the Business or the Transfer thereof to
Buyer; or

             (p) entered into any agreement or made any commitment to take any
of the types of action described in subsections (a) through (o) above.

         4.12 Taxes. (a) Sellers have paid or made adequate provision for the
payment of all taxes, fees, assessments and charges, including income, property,
sales, use, franchise, added

                                       8
<PAGE>

value, employees' income withholding and social security taxes, imposed by the
United States or by any foreign country, or by any state, municipality or
instrumentality of any of same or by any other taxing authority, and all
penalties and interest thereon (collectively "Taxes"), which has or may become
due for or during all periods ending, and in respect of all operations, on or
prior to the Closing Date. All Tax Returns (as hereinafter defined) required to
be filed in connection therewith have been accurately prepared and filed and all
deposits required by law to be made by any Seller or with respect thereto have
been duly made. No Seller is a party to any pending action, proceeding or audit
by any governmental authority for assessment or collection of any amount of
Taxes for which it may be directly or indirectly liable, and there is no claim
for assessment or collection of any amount of Taxes for which it may be directly
or indirectly liable. The term "Tax Return" shall mean any return, declaration,
report, claim for refund, or information return or statement relating to any
Tax, including any schedule or attachment thereto, and including any amendment
thereof.

             (b) Each of Sellers has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.

             (c) No Seller (nor any director or officer or any employee
responsible for Tax matters) of any of Sellers expects any authority to assess
any additional Taxes for any period for which Tax Returns have been filed. There
is no dispute or claim concerning any Tax liability of any of Sellers related to
any of the Business or the Acquired Assets either (A) claimed or raised by any
authority in writing or (B) as to which any of Sellers or any of the directors
and officers (and employees responsible for Tax matters) of Sellers has
knowledge based upon personal contact with any agent of such authority.

             (d) No claim has ever been made by an authority in a jurisdiction
where any of Sellers does not file Tax Returns that any of them is or may be
subject to taxation by that jurisdiction.

             (e) None of Sellers (other than the corporate Sellers themselves)
(A) is or has been a member of an affiliated group (within the meaning of
Section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"))
or any similar group defined under a similar provision of state, local, or
foreign law filing any consolidated or combined income Tax Return, or (B) has
any liability for the Taxes of any person or entity, whether under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), or as a transferee or successor, by contract, or otherwise.

         4.13 Employee Benefits; Labor Matters. Except as set forth in Schedule
4.13 of the Disclosure Schedule:

             (a) Each employee benefit plan as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and any
other plan, policy, program, practice, agreement, understanding or arrangement
providing compensation or other benefits to any current or former employee or
independent contractor providing services to or for the Business (or to any
dependent or beneficiary thereof), which is maintained by any Seller or under
which any Seller has an obligation to contribute, including all pension,
retirement, profit-sharing, stock, stock option, deferred compensation, bonus,
incentive, medical, vision, dental and other health insurance, life insurance or
any other employees benefit plan, arrangement or understanding and any trusts,
insurance and administrative service contracts and agreements

                                        9
<PAGE>

maintained in connection therewith (collectively, "Benefit Plans"), conform in
all material respects to, and the administration thereof is in material
compliance with, all applicable laws and regulations, including, without
limitation ERISA and the Code, and neither the operation or administration of
any such Benefit Plan, nor the transactions contemplated by this Agreement will
result in any liability to any Seller, the Business or Buyer under or in respect
of any of such Benefit Plans, in Buyer incurring or suffering any liability, or
have any adverse effect on the financial condition, assets, liabilities or
results of operations of any Seller, the Business or Buyer. All contributions
required, by law or by contract, to be made to any Benefit Plans subject to
ERISA for any plan year or other period on the basis of which contributions are
required, ending before the date hereof, have been made as of the date hereof.
Sellers have complied in all material respects with all reporting and disclosure
requirements with respect to each Benefit Plan. No such Benefit Plan (including
any trust created thereunder), nor any trustee or administrator thereof, has
engaged in any transaction prohibited by ERISA or any foreign law, or by Section
4975 of the Code, which could subject any Seller, the Business or such Plan to
any penalty imposed under ERISA or to any tax imposed by Section 4975 of the
Code or, if any such transaction has occurred, it has been corrected within the
meaning of Section 4975 of the Code, and all applicable taxes and penalties with
respect thereto have been paid. No "reportable event" as that term is defined in
ERISA has occurred with respect to any of the Benefit Plans. No Seller
participates, maintains or contributes to (nor has any Seller participated,
maintained or contributed to), nor has any liability or obligation under or with
respect to, any multi-employer plan governed by or subject to ERISA, nor has it
participated, maintained, contributed or incurred any liability in respect of
any thereof. No Seller has any liability or obligation with respect to any
Benefit Plan or trust related thereto that may have been terminated prior to the
date hereof.

             (b) Sellers have complied in all material respects with all
applicable laws, rules and regulations relating to the employment of labor,
including those relating to hiring, wages, hours, collective bargaining and the
payment and withholding of taxes, and has withheld all amounts required by law,
regulation or agreement to be withheld from the wages or salaries of its
employees and is not liable for any arrears of wages or any taxes or penalties
for failure to comply with any of the foregoing. No Seller has engaged in any
unfair labor practice, and there is no unfair labor practice, sexual harassment
or other employment-related complaint pending, or, to the knowledge of any
Seller, threatened against any Seller or any officer, director or employee
thereof. There do not exist any pending worker's compensation claims against any
Seller that is not adequately provided for by insurance, subject to deductibles,
or any pending or written claim that any workplace of Seller is unsafe.

             (c) Sellers have previously delivered to Buyer a schedule listing
each present and former employee of the Business who is currently claiming or is
entitled to any health care related benefits mandated by the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), or any of the
rules or regulations thereunder.

             (d) Other than as required by COBRA, none of Sellers has offered or
provided or is required to offer or provided any post-employment or retiree
medical or health benefits or coverage of any nature to any past or present
employee (other than to union employees at the Verona, MO plant to the extent
expressly required under the Collective Bargaining Agreement). The census data
provided to William M. Mercer, Incorporated as of May 1, 2001 in connection with
such firm's computation of Accumulated Post-retirement Benefit Obligation as of
May 1, 2001 is set forth in Schedule 4.13(d) of the Disclosure Schedule, is true
and complete and covers

                                       10
<PAGE>

all former employees (and their dependents) who are entitled to retiree health
benefits, all active employees who are eligible to receive retiree health
benefits and all other active employees who may in the future be entitled to
receive retiree health benefits, all as indicated therein.

             (e) No Benefit Plan, including any providing long term disability
benefits, covers any employee(s) whose terms of employment are governed by a
collective bargaining agreement except as provided for in the Collective
Bargaining Agreement.

         4.14 Environmental Matters.

             (a) Except as set forth in Schedule 4.14(a) of the Disclosure
Schedule, no Hazardous Substance (as hereinafter defined) is present or at any
time has been stored, treated, released, disposed of or discharged on, about,
from or affecting any of the Real Properties or, during the period of any
ownership, lease or occupancy thereof by any of Sellers, any other property or
location heretofore owned, leased or occupied by any of them (the "Prior
Properties"), in any material amounts, except for products that have been used,
maintained and disposed of in compliance with all applicable laws, rules and
regulations and all applicable manufacturer instructions, and none of Sellers
has any liability which is based upon or related to any environmental condition,
and there is no reasonable basis for any such liability arising. The term
"Hazardous Substance" as used in this Agreement shall include, without
limitation, gasoline, oil and other petroleum products, explosives, radioactive
materials and related and similar materials, dioxins and any other substance or
material defined as a hazardous, toxic or polluting substance or material by any
federal, state or local law, ordinance, rule or regulation, including asbestos
and asbestos-containing materials.

             (b) Except as set forth on Schedule 4.14(b) of the Disclosure
Schedule, none of Sellers or, to the best knowledge of Sellers, any prior or
current owner, tenant or occupant of any part of any of the Real Properties or
any of the Prior Properties, has received any notification or advice from or
given or been required to have given any report or notice to any governmental
agency or authority or any other person, firm or entity whatsoever involving the
use, disposal, management, handling, transport, treatment, generation, storage,
spill, escape, seepage, leakage, spillage, emission, release, discharge,
remediation or clean-up of any Hazardous Substance on or about any of the Real
Properties or caused by any of Sellers or any affiliate thereof (a "Hazardous
Discharge"), or any complaint, order, citation or notice with regard to a
Hazardous Substance or any other environmental, health or safety matter
affecting any of the Real Properties or any of the Prior Properties, or any
business or operations conducted thereat (an "Environmental Complaint"), under
the federal Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") or under any other federal, state or local law, ordinance, rule or
regulation.

         4.15 Receivables. Schedule 4.15(a) of the Disclosure Schedule is a
true, accurate and complete item by item aging of the accounts receivable of the
respective Sellers as of the recent date indicated therein. Except as set forth
on Schedule 4.15(b) of the Disclosure Schedule, and except for a normal and
customary reserve for doubtful accounts consistent (as a percentage of
outstanding receivables) with past practice, all accounts receivable of any
Seller relating to the Business have arisen only from bona fide transactions
with unrelated third-parties in the ordinary course of business, and are
collectible in the ordinary course of business (without resort to litigation)
and in accordance with their respective terms.

                                       11
<PAGE>

         4.16 Inventory. Except as set forth in Schedule 4.16 of the Disclosure
Schedule, and except for insignificant quantities thereof, all items of
inventory now owned or hereafter acquired (and not subsequently disposed of in
the ordinary course of business) are and will be merchantable, and for sale or
use in the ordinary course of business, as first quality products and materials,
at normal mark-ups, and none of such items is below standard quality. The
inventories of the respective Sellers do not include an excessive quantity of
any type of inventory or supplies in relation to the normal requirements of the
Business consistent with past practice. The practices and experience of the
Business with regard to returned items from customers and items returned by any
Seller to the original supplier thereof are and have been in conformity with,
and not in excess of, normal, industry-wide return practices in the ordinary
course of business.

         4.17 Customers and Suppliers. Set forth in Schedule 4.17(a) of the
Disclosure Schedule is a list of the names and addresses of each of the twenty
(20) largest customers and the ten (10) largest suppliers (measured by dollar
volume of purchases) of the Business, and the dollar amounts and percentages of
the Business' revenues and expenses which each such customer or supplier
represented, during each of the years ended December 31, 2000 and 1999 and the
three (3) months ended March 31, 2001, respectively. Except as set forth in
Schedule 4.17(b) of the Disclosure Schedule, there exists no actual or
threatened termination, cancellation or limitation of, or any modification or
change in, the business relationship of any Seller with any supplier or customer
listed in said Schedule 4.17(a).

         4.18 Records. The respective books and records of Sellers are complete
and correct in all material respects, and there has been no transaction which
properly should have been set forth therein and which has not been accurately so
set forth.

         4.19 Disclosure. No representation or warranty by any Seller contained
in this Agreement, nor any Exhibit, Schedule or Certificate referenced herein,
furnished or to be furnished by or on behalf of any Seller in connection
herewith or any of the transactions contemplated hereby contains or will contain
any untrue statement of a material fact, or omits or will omit to state any
material fact required to make the statements herein or therein contained, under
the circumstances under which made, not misleading or necessary in order to
provide a prospective purchaser of the Acquired Assets with adequate information
as to each of Sellers, the Business, the operations thereof, the Acquired Assets
and the Owned Real Property. The representations and warranties contained in
this Agreement or in any Exhibit, Schedule or certificate in connection with
this Agreement shall not be affected or deemed waived by reason of the fact that
Buyer and/or its representatives knew or should have known that any such
representation or warranty is or might be inaccurate in any respect.

         4.20 Certain Limitations on Representations and Warranties. Each of the
parties is a sophisticated legal entity that was advised by experienced counsel
and, to the extent it deemed necessary, other advisors in connection with this
Agreement. Accordingly, each of the parties hereby acknowledges that there are
no representations or warranties by or on behalf of any party or any of its
respective affiliates or representatives other than those expressly set forth in
or made pursuant to this Agreement and BUYER ACKNOWLEDGES THAT, SHOULD THE
CLOSING OCCUR, BUYER WILL ACQUIRE THE ACQUIRED ASSETS WITHOUT ANY IMPLIED
WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

                                       12
<PAGE>

                                  BILL OF SALE

         KNOW ALL PEOPLE BY THESE PRESENTS THAT DuCoa L.P., a Delaware limited
partnership ("DuCoa"), DCV, INC., a Delaware corporation ("DCV") and the general
partner of DuCoa, and DCV GPH, INC., a Delaware corporation ("LP") and a limited
partner of DuCoa (DuCoa, DCV and LP being together referred to herein as
"Sellers" and being individually referred to herein as a "Seller"), for good and
valuable consideration paid to Sellers by or on behalf of ABC Corp., a Delaware
corporation ("Buyer"), receipt of which is hereby acknowledged, do hereby grant,
bargain, sell, transfer and deliver unto Buyer, its successors and assigns, all
of the Acquired Assets, as defined in Section 1.1 of the Asset Purchase
Agreement, dated as of May 21, 2001, by and between Buyer and Sellers (the
"Purchase Agreement"). Capitalized terms used but not defined herein have the
respective meanings specified in the Purchase Agreement.


         TO HAVE AND TO HOLD the same unto Buyer, its successors and assigns,
forever.

         In furtherance of the foregoing, Sellers shall any time, and from time
to time from and after the date hereof, upon the request of Buyer, promptly do,
execute, acknowledge and deliver or cause to be done, executed, acknowledged and
delivered, all such further acts, deeds, assignments, transfers, conveyances,
instruments, powers of attorney and assurances as may be required or reasonably
requested for the better assigning, transferring, granting, conveying, assuring
and confirming to Buyer or for aiding and assisting in the collection of, or the
reduction to possession of, any or all of the Acquired Assets.

         This sale, conveyance, assignment, transfer and delivery of the
Acquired Assets is made free and clear of all Liens, excluding the Permitted
Liens.

         Each of Sellers hereby authorizes and grants its power of attorney to
Buyer, and appoints Buyer and each officer or agent of Buyer, with full power of
substitution, as its true and lawful attorney-in-fact to take any appropriate
action in connection with any of the Acquired Assets, in the name of each or any
of Sellers or in Buyer's own or any other name, it being understood that this
authorization and power of attorney are coupled with an interest and are
irrevocable.

         This instrument shall inure to the benefit of and is binding upon the
respective successors and assigns of Buyer and Sellers.


                                       1
<PAGE>


         IN WITNESS WHEREOF, Sellers have caused this instrument to be executed
as of June 1, 2001.

                                             DuCoa L.P.

                                             By: DCV, Inc., general partner


                                                    By: /s/ Harvey L. Weaver
                                                       ----------------------
                                                       Name: Harvey L. Weaver
                                                       Title: V.P.



                                             DCV, Inc.


                                             By: /s/ Harvey L. Weaver
                                                 ----------------------
                                                 Name: Harvey L. Weaver
                                                 Title: V.P.


                                             DCV GPH, Inc.


                                             By: /s/ Ricky L. Stejskal
                                                 -----------------------
                                                 Name: Ricky L. Stejskal
                                                 Title: V.P.


                                       2

<PAGE>


STATE OF NEW YORK          )
                           ) ss:
COUNTY OF NEW YORK         )

         Personally appeared Harvey L. Weaver, Vice President of DuCoa L.P.,
signer and sealer of the foregoing instrument, and acknowledged the same to be
his free act and deed and the free act and deed of said limited partnership,
before me on this 31st day of May, 2001.


                                            /s/ Beverly S. Oppenheim-Patterson
                                            ----------------------------------
                                            Notary Public


My Commission Expires:  October 2, 2001
                        ---------------



STATE OF NEW YORK          )
                           ) ss:
COUNTY OF NEW YORK         )


         Personally appeared Harvey L. Weaver, Vice President of DCV, Inc.,
signer and sealer of the foregoing instrument, and acknowledged the same to be
his free act and deed and the free act and deed of said corporation, before me
on this 31st day of May, 2001.


                                            /s/ Beverly S. Oppenheim-Patterson
                                            -----------------------------------
                                            Notary Public


My Commission Expires:  Ocober 2, 2001_
                        --------------


STATE OF NEW YORK          )
                           ) ss:
COUNTY OF NEW YORK         )


         Personally appeared Ricky L. Stejskal, Vice President of DCV GPH, Inc.,
signer and sealer of the foregoing instrument, and acknowledged the same to be
his free act and deed and the free act and deed of said corporation, before me
on this 31st day of May, 2001.


                                            /s/ Beverly S. Oppenheim-Patterson
                                            ----------------------------------
                                            Notary Public


My Commission Expires:  October 2, 2001
                        ---------------

                                       3
<PAGE>


                             Obligations Undertaking

         OBLIGATIONS UNDERTAKING dated, as of June 1, 2001, by BCP Ingredients,
Inc., a Delaware corporation ("Buyer"), in favor of DuCoa L.P., a Delaware
limited partnership ("DuCoa"), DCV, Inc., a Delaware corporation ("DCV"), and
DCV GPH, Inc. a Delaware corporation ("LP", LP, DCV and DuCoa being collectively
referred to as "Sellers", and individually as a "Seller").

         WHEREAS, pursuant to an Asset Purchase Agreement, dated as of May 21,
2001 (the "Agreement"), between Buyer and Sellers, Sellers have concurrently
herewith sold, assigned, transferred, conveyed and delivered the Acquired Assets
(as defined in the Agreement) to Buyer; and

         WHEREAS, in partial consideration therefor, the Agreement requires
Buyer to execute and deliver to Sellers this Undertaking;

         NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which by Buyer is hereby acknowledged,
Buyer hereby agrees as follows (capitalized terms used but not defined herein
having the meanings ascribed thereto in the Agreement):

     1. Subject to the limitations contained herein, Buyer hereby assumes and
agrees to perform and discharge the following, but only the extent that the same
shall be legally enforceable and shall not have been paid, performed or
discharged prior to the Closing (collectively, the "Assumed Obligations");

         (a) the unperformed and unfulfilled obligations of Sellers first
accruing after [the Closing Date] (with respect to periods commencing after the
Closing Date) under the contracts and agreements listed on Schedule A hereto and
expressly assigned to Buyer pursuant to the Agreement, and which, in all cases,
conform to the representations and warranties with respect thereto contained in
the Agreement, but in all instances, excluding any obligations arising out of
any breach or any non-performance of any contract, lease or agreement occurring
or existing on or prior to the Closing Date; and

         (b) the Payables (as defined in Schedule 2.1 to the Agreement) as of
[the Closing Date], but in each case only to the extent of the definitive amount
thereof deducted dollar-for-dollar from and in computing the Purchase Price
under said Schedule 2.1;.

         (c) retiree medical benefits under the Collective Bargaining Agreement
to the extent set forth in Section 6.6 of the Agreement; and

         (d) accrued vacation for all Designated Employees to the extent there
has been a specific dollar for dollar reduction therefor in the Purchase Price
(and in the cash portion of the Purchase Price) pursuant to Section 2.5.2 of the
Agreement.

                                       4
<PAGE>

         Notwithstanding anything to the contrary contained herein, the Assumed
Obligations shall not include the Excluded Liabilities, except only to the
extent expressly set forth in this Section 1.

         2. Nothing contained herein shall require Buyer to pay, perform or
discharge any obligations assumed hereby so long as Buyer shall in good faith
contest the amount or validity thereof, except for payment of the Payables to
the extent indicated in Section 1(b) above, which Buyer shall promptly pay, up
to the definitive amount thereof deducted in computing the Purchase Price under
said Schedule 2.1.

         3. Other than as specifically stated above (and subject to the terms of
the Agreement), Buyer assumes no debt, liability or obligation of either of
Sellers, whatsoever whether by this Undertaking or the Agreement, and whether
arising out of any debt, liability or obligation in respect of any act,
occurrence, agreement or state of facts in effect before, on or after the date
hereof, and it is expressly understood and agreed that all debts, liabilities
and obligations not expressly assumed hereunder by Buyer shall remain the sole
obligation of Sellers.

         4. No person, firm or corporation other than Seller shall have any
rights under or by reason of this Undertaking or the provisions contained
herein.


                                           BCP Ingredients, Inc.


                                           By:   /s/ Dino A. Rossi
                                              --------------------------------
                                                Name: Dino A. Rossi
                                                Title: President


                                       5
<PAGE>

                            Non-Competition Agreement

     AGREEMENT, dated as of June 1, 2001, made, jointly and severally, by DuCoa
L.P., a Delaware limited partnership, ("DuCoa"), DCV, Inc., a Delaware
corporation ("GP"), and DCV GPH, Inc., a Delaware corporation ("LP", and,
together with DuCoa and GP, collectively referred to as the "Obligors" and
individually an "Obligor"), in favor and for the benefit of BCP Ingredients,
Inc., a Delaware corporation ("Acquiror").


     WHEREAS, pursuant to an Asset Purchase Agreement, dated as of May 21, 2001
(the "Purchase Agreement") (capitalized terms used herein and not otherwise
defined are used herein with the meanings ascribed thereto in the Purchase
Agreement), Acquiror is acquiring from the Obligors, and the Obligors are
transferring, conveying and assigning to Acquiror, the Acquired Assets;

     WHEREAS, the Obligors derive material benefit from the transactions
contemplated by the Purchase Agreement and accordingly are willing to enter into
this Non-Competition Agreement;

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which by each of the Obligors is hereby acknowledged, and in
order to induce Acquiror to acquire the Acquired Assets pursuant to the terms of
the Purchase Agreement, the Obligors, jointly and severally, hereby undertake
and agree to and for the benefit of Acquiror as follows:

     1. For a period of five (5) years from the date hereof (the "Limited
Period"), no Obligor shall or shall permit any person or entity directly or
indirectly (alone or together with others) controlling, controlled by,
affiliated with or related to, any of the Obligors (collectively the "Obligor
Affiliates") to, directly or indirectly (including through ownership,
management, operation or control of any other person or entity, or participation
in the ownership, management, operation or control of any other person or
entity, or by being connected with or having any interest in, as a stockholder,
agent, consultant, partner or otherwise, any other person or entity):

             (i) own, manage, operate, control, invest in, participate in or be
involved with any business anywhere in the world which sells, licenses,
distributes, markets or provides any service in respect of any of the Products
or any of the associated services which have been, as of the date hereof, sold,
distributed, marketed or provided by or through the Business or which are
otherwise covered by the definition of the Business; provided that the foregoing
shall not prohibit the Obligors from owning in the aggregate less than 1% of any
class of securities listed on a national securities exchange or traded publicly
in the over-the-counter market or from engaging in the limited actions permitted
pursuant to Section 7.8.2 of the Purchase Agreement during the Post-Closing
Product Sale Agreement (as defined therein); or

             (ii) without the express prior written consent of Acquiror,
directly or indirectly employ or retain or attempt to employ or retain or
knowingly arrange or solicit to have any other person or entity employ or
retain, as an employee or consultant, any person who then is or during the
proceeding two-year period has been an employee of or consultant to Acquiror, or
any of Acquiror's affiliates, or who heretofore (during the two-year period
ending on the date

                                       1
<PAGE>

hereof) has been employed or retained by any of Obligors, in connection with any
aspect of the Business.

     2. None of the Obligors shall, nor shall permit any of the Obligor
Affiliates to, during the Limited Period and at all times thereafter, (i)
divulge or make available to any person or entity, except Obligors' counsels,
accountants, lenders or investors, who shall agree, for the benefit of Acquiror,
to be bound hereby, or as otherwise expressly consented to in writing by
Acquiror, or use, any confidential information or any documents, files or other
papers concerning any of the Business or the Acquired Assets or any financial
affairs of Acquiror, except such disclosure which is otherwise required by
applicable law, regulation or court order; provided, that Obligors give Acquiror
reasonable opportunity to contest any requirement to so disclose any such
confidential information prior to making any such disclosure, or (ii) publicly
disparage Acquiror, or any of Acquiror's Affiliates, or the Business, commit any
act, or in any way assist others to commit any act, which would injure Acquiror,
or any Acquiror's Affiliates, or the Business as theretofore conducted by
Acquiror, provided, however, that this sentence shall not restrict Sellers from
bringing in an appropriate legal proceeding any claim it may have against
Acquiror under the Agreement or otherwise.

     3. In the event that any of the provisions contained herein would be held
to be invalid, prohibited or unenforceable in any jurisdiction for any reason
because of the scope, duration or area of its applicability or for any other
reason, unless narrowed by construction, such provision shall for purposes of
such jurisdiction only, be construed as if such invalid, prohibited or
unenforceable provision had been more narrowly drawn so as not to be invalid,
prohibited or unenforceable (or if such language cannot be drawn narrowly
enough, the court making any such determination shall have the power to modify,
to the extent necessary to make such provision or provisions enforceable in such
jurisdiction, such scope, duration or area or all of them, and such provision
shall then be applicable in such modified form). If, notwithstanding the
foregoing, any such provision would be held to be invalid, prohibited or
unenforceable in any jurisdiction for any reason, such provision, as to such
jurisdiction only, shall be ineffective to the extent of such invalidity,
prohibition or unenforceability, without invalidating the remaining provisions
hereof. No narrowed construction, court-modification or invalidation of any
provision shall affect the construction, validity or enforceability of such
provision in any other jurisdiction unless the failure to do so would result in
a violation of any court order.

     4. Since Acquiror will be irreparably damaged if the provisions hereof are
not specifically enforced, Acquiror shall be entitled (without any bond or other
security whatsoever being required) to an injunction restraining any violation
or attempted violation of this Agreement, and/or any other appropriate decree of
specific performance. Such remedies shall not be exclusive and shall be in
addition to any other remedy which Acquiror may have.

     5. This Agreement shall inure to the benefit of Acquiror and its successors
and assigns and shall be binding upon each of the Obligors and their respective
heirs, personal representatives, successors and assigns, and may not be modified
or terminated orally.

     6. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which shall constitute one and the
same instrument.

                                       2
<PAGE>

     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date set forth in the introductory paragraph hereof.


                                   DuCoa L.P.

                                   By: DCV, Inc, general partner



                                          By: /s/ Harvey L. Weaver
                                              --------------------------------
                                              Name: Harvey L. Weaver
                                              Title: V-Pres.



                                   DCV, Inc.



                                   By: /s/ Harvey L. Weaver
                                       ---------------------------------------
                                          Name:  Harvey L. Weaver
                                          Title: V-Pres.



                                   DCV GPH, Inc.



                                   By: /s/ Ricky L. Stejskal
                                       ---------------------------------------
                                          Name: Ricky L. Stejskal
                                          Title: V.P.

<PAGE>

                            NON-COMPETITION AGREEMENT


     AGREEMENT, dated as of [May 30 ], 2001, made by James Doncheck, a resident
of the State of Wisconsin, (the "Obligor"), in favor and for the benefit of the
BCP Ingredients, Inc., a Delaware corporation (the "Company").

     WHEREAS, pursuant to an Asset Purchase Agreement, dated as of May 21, 2001
(the "Agreement"), the Company is acquiring from the DCV, Inc., DCV GPH, Inc.
and DuCoa L.P. ("Sellers"), and Sellers are transferring, conveying and
assigning to the Company, the Acquired Assets (as defined in the Agreement);

     WHEREAS, the Sellers have agreed to make the Obligor available to the
Company to assist in the transition of the business sold to the Company and have
offered Obligor employment with DCV, Inc.;

     NOW, THEREFORE, for good and valuable consideration (including without
limitation such continued employment with DCV, Inc.), the receipt and
sufficiency of which by is hereby acknowledged, the Obligor undertakes and
agrees to and for the benefit of the Company as follows:

     1. For a period of one (1) year from the date hereof (the "Limited
Period"), the Obligor shall not directly or indirectly (including through
ownership, management, operation or control of any other person or entity, or
participation in the ownership, management, operation or control of any other
person or entity, or by being connected with or having any interest in, as a
stockholder, agent, consultant, employee, partner or otherwise, any other person
or entity):

                  (i) be employed by or provide services to or for, or own,
         manage, operate, control, invest in, participate in or be involved
         with, (A) any business anywhere in the world which sells, licenses,
         distributes, markets or provides any service in respect of any of the
         products or services which have been, as of the date hereof, sold,
         distributed, marketed or provided by or through the Business (as
         defined in Schedule A attached hereto) or which is otherwise covered by
         the definition of the Business or the definition of the Products (as
         defined in Schedule A attached hereto); provided that the foregoing
         shall not prohibit the Obligor from owning in the aggregate less than
         1% of any class of securities listed on a national securities exchange
         or traded publicly in the over-the-counter market; or

                  (ii) without the express prior written consent of the Company,
         directly or indirectly employ or retain or attempt to employ or retain
         or knowingly arrange or solicit to have any other person or entity
         employ or retain, as an employee or consultant, any person who then is
         or during the proceeding two-year period has been an

                                       4
<PAGE>


         employee of or consultant to the Company, or any of the Company's
         affiliates, in connection with any aspect of the Business.

             2. Obligor shall not, during the Limited Period and at all times
thereafter, divulge or make available to any person or entity, except as
otherwise expressly consented to in writing by the Company, or use, any
confidential information or any documents, files or other papers concerning any
of the Business or any financial affairs of the Company, except such disclosure
which is otherwise required by applicable law, regulation or court order;
provided, that Obligor give the Company reasonable opportunity to contest any
requirement to so disclose any such confidential information prior to making any
such disclosure.

             3. In the event that any of the provisions contained herein would
be held to be invalid, prohibited or unenforceable in any jurisdiction for any
reason because of the scope, duration or area of its applicability or for any
other reason, unless narrowed by construction, such provision shall for purposes
of such jurisdiction only, be construed as if such invalid, prohibited or
unenforceable provision had been more narrowly drawn so as not to be invalid,
prohibited or unenforceable (or if such language cannot be drawn narrowly
enough, the court making any such determination shall have the power to modify,
to the extent necessary to make such provision or provisions enforceable in such
jurisdiction, such scope, duration or area or all of them, and such provision
shall then be applicable in such modified form). If, notwithstanding the
foregoing, any such provision would be held to be invalid, prohibited or
unenforceable in any jurisdiction for any reason, such provision, as to such
jurisdiction only, shall be ineffective to the extent of such invalidity,
prohibition or unenforceability, without invalidating the remaining provisions
hereof. No narrowed construction, court-modification or invalidation of any
provision shall affect the construction, validity or enforceability of such
provision in any other jurisdiction unless the failure to do so would result in
a violation of any court order.

             4. Since the Company will be irreparably damaged if the provisions
hereof are not specifically enforced, the Company shall be entitled (without any
bond or other security whatsoever being required) to an injunction restraining
any violation or attempted violation of this Agreement, and/or any other
appropriate decree of specific performance. Such remedies shall not be exclusive
and shall be in addition to any other remedy that the Company may have.

             5. This Agreement shall inure to the benefit of the Company and its
successors and assigns and shall be binding upon the Obligor and his respective
heirs, personal representatives, successors and assigns, and may not be modified
or terminated orally.

             6. The term "affiliate", when used with respect to the Company
means any person or entity directly or indirectly controlling, controlled by or
under common control with the Company.

                                       5
<PAGE>


             7. This Agreement may be executed in two or more counterparts, each
of which shall constitute an original but all of which shall constitute one and
the same instrument.


                                       6
<PAGE>


             IN WITNESS WHEREOF, the undersigned has executed this Agreement as
of the date set forth in the introductory paragraph hereof.



                                          /s/ James Doncheck
                                       ----------------------------
                                            JAMES DONCHECK

                                       7

<PAGE>

                                   SCHEDULE A

             The "Business" shall mean all business, operations and rights of
any of Sellers, or of Buyer or of Buyer's affiliates, pertaining or relating to
any or all of the Verona Operations (as hereinafter defined), the M-CAP
Operations (as hereinafter defined) and/or any of the Products (as hereinafter
defined).

A. "Verona Operations" means the business, operations and rights of any of
Sellers or of Buyer or any of Buyer's affiliates for or relating to any of the
following products, compounds, chemicals or materials and any and all Derivative
Products (as hereinafter defined):

Feedgrade choline chloride products, including:
         50% Dry Choline Chloride
         60% Dry Choline Chloride
         70% Dry Choline Chloride
         70%&75% Aqueous Choline Chloride
         all other choline and choline chloride products and materials for
         animal and feed uses

Human nutritional choline products, including:
         Choline chloride, FCC
         Choline bitartrate, FCC
                  Regular
                  Coarse
                  Conditioned
                  20 Mesh Conditioned
                  40 Mesh Conditioned
                  Fine, Conditioned (milled by a third party)
         Betaine HCl USP
         Choline Dihydrogen Citrate
         All other choline and betaine and related products for human use.


TMAC (Tetramethylammonium chloride)


Product tolled for EKC
Stabilized Choline Base in Methanol


Product tolled for Velsicol
Sodium Benzoate
Potassium Benzoate

Other:

All other business, operations and rights relating to any and all products,
materials and services related to any of the above under this Schedule A.


                                       1
<PAGE>


Any and all other products, compounds, chemicals and materials concurrently
processed, produced, tolled and/or marketed, or currently proposed to be
processed, produced, tolled and/or marketed, as part of or in connection with
any operations or business of any of Sellers, or of Buyer or any of Buyer's
affiliates, from or utilizing any of the Verona, MO facilities or any services
provided thereat or therefrom, including without limitation Derivative Products
(as hereinafter defined).

B. "M-CAP Operations" means the business, operations and rights of any Sellers,
or of Buyer or any of Buyer's affiliates, for or relating to any of the
following products, compounds, chemicals and materials and any and all
Derivative Products:

Baking Soda G110
Baking Soda G130
Baking Soda 435
Baking Soda 516B
Cinnamon H100
F-440
F-441
F-444
F-445
Sodium Diacetate DP-208
Arginine 362
Ascorbic Acid B100
Ascorbic Acid 431
Betaine Hydrochloride 454
Choline Bitartrate 424
Choline Dihydrogen Citrate 430
Copper Gluconate 486
Ferrous Fumarate 451A
Ferrous Fumarate 482
Ferrous Sulfate 481A
Lysine 360
Magnesium Oxide 153
Magnesium Oxide 154
Natural Betaine 454WS
Niacinamide 477A
Riboflavin 357
Thiamine Hydrochloride 355
Thiamine Mononitrate 356
Zinc Oxide 471

                                       2
<PAGE>


Ascorbic Acid B100
Ascorbic Acid 431
Aspartame 311
Aspartame 452
Citric Acid A100
Citric Acid 437
Citric Acid 474
Citric Acid 535
Fumaric Acid 410A
Potassium Chloride C101
Potassium Chloride C102
Sodium Chloride 436A
Sodium Chloride 436B
All products, compounds, chemicals and materials related to any of the above.

C. "Products" includes (i): any and all of the products, materials and services
identified or referred to in this Schedule A, and (ii) any and all products,
materials and services reflecting or utilizing percentages or portions of any of
the chemicals, materials or compounds referred to in this Schedule A which are
different than the particular percentages or portions referred to in this
Schedule A or reflected in, and which products, materials or services are used
for similar purposes as, any of the other Products ("Derivative Products").


                                       3
<PAGE>

                                    Guaranty

             This Guaranty, dated as of June 1, 2001, is made by Balchem
Corporation, a Maryland corporation ("Parent") and the parent corporation of BCP
Ingredients, Inc., a Delaware corporation (the "Buyer"), in favor of Sellers (as
hereinafter defined).

             For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Parent hereby guarantees the payment of those
obligations of Buyer under paragraph (m) of Schedule 2.1 to, and Section 3.9 of,
the Asset Purchase Agreement, dated as of May 21, 2001, between Buyer and DuCoa
LP, DCV, Inc. and DCV GPH, Inc. ("Sellers") (the "Agreement"), and under
paragraph 1(b) of the Obligations Undertaking of Buyer executed and delivered as
of the date hereof pursuant to the Agreement (said obligations under said
paragraph (m) of said Schedule 2.1 and said Section 3.9 and under said paragraph
1(b) of said Obligations Undertaking being herein called the "Guaranteed
Obligations").

             Sellers shall be entitled to enforce this Guaranty against Parent
in the event of a default by Buyer in the payment of said Guaranteed
Obligations, provided, however, that Parent's obligations under this Guaranty
are subject to any and all rights and defenses available to Buyer under or in
respect the Agreement (including without limitation under Section 8.6 of the
Agreement), but not to any defense of Buyer arising from the bankruptcy or
insolvency of Buyer.

             Parent waives any and all defenses and discharges of Buyer
pertaining to Guaranteed Obligations, except (i) the defense of discharge by
payment in full, and (ii) all rights and defenses available to Buyer under or in
respect of the Agreement (including without limitation under Section 8.6 of the
Agreement). Parent waives presentment, demand for payment, notice of dishonor or
nonpayment, and protest of any instrument evidencing Guaranteed Obligations.
Sellers shall not be required first to resort to payment of the Guaranteed
Obligations to Buyer before enforcing this Guaranty. Parent also waives the
right to a jury trial on any dispute arising from this Guaranty and waives any
bond or surety or security upon such bond which might, but for this waiver be
required by Sellers.

             IN WITNESS WHEREOF, Parent has duly executed this Guaranty as of
the date first written above.

                                               Balchem Corporation


                                               By:  /s/ Dino A. Rossi
                                                  ---------------------------

                                               Its: President
                                                   --------------------------


                                       4
<PAGE>

                            LIMITED RELEASE AGREEMENT


             THIS RELEASE AGREEMENT (the "Agreement") is made and entered into
as of June 1, 2001 by and between Balchem Corporation ("Balchem") and DuCoa L.P
("DuCoa").

             WHEREAS, BCP Ingredients, Inc., a subsidiary of Balchem, and DuCoa
have entered into an agreement whereby such subsidiary has purchased certain
assets from DuCoa and its affiliates; and

             WHEREAS, litigation, including class action litigation, is
currently pending in various state and federal courts in which plaintiffs have
alleged a variety of antitrust related claims against DuCoa and other choline
chloride producers and sellers; and

             WHEREAS, Balchem, as a purchaser of choline chloride products from
DuCoa, has asserted claims against DuCoa stemming from Balchem's purchases of
choline chloride products prior to January 1, 1999; and

             WHEREAS, DuCoa has denied any liability for claims that may be
raised by Balchem as a result of Balchem's purchase of choline chloride products
from DuCoa prior to January 1, 1999;

             NOW, THEREFORE, in consideration of the mutual promises, covenants,
and agreements, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Balchem agrees as follows:

             Balchem does hereby release, remise, quitclaim and forever
discharge DuCoa, DCV, Inc., DCV Holdings, Inc. and DCV GPH, Inc. and each of
their respective current directors and officers (collectively "Releasees") of
and from any and all claims, actions, causes of action, suits and demands, in
each case arising under any and all antitrust, unfair competition and similar
trade regulation laws and relating to Balchem's purchase of choline chloride
products from DuCoa prior to January 1, 1999 (collectively "Antitrust Claims"),
including but not limited to any such Antitrust Claims relating to pricing of
such choline chloride product so purchased; provided neither this Agreement nor
the foregoing shall (i) release, discharge, apply to or affect any claims,
actions, cause of action, suits or demands based on or involving product
liability, any express or implied warranties, and/or the quality of any
product(s), nor any and all Antitrust Claims, or any other claims or causes of
action, against any person or entity other than Releasees, nor (ii) constitute
or be deemed a waiver or release of any entitlement to or an agreement to

                                       5
<PAGE>

return any monies or payments, if any, heretofore received by Balchem in respect
of any pending or threatened claims or litigation, whether involving Antitrust
Claims or otherwise.

             Balchem and DuCoa represent that the persons executing this
Agreement on behalf of each of them is authorized to do so. This Agreement shall
be governed by the substantive laws of the State of Delaware.

             This Agreement may be signed in one or more counterparts, each of
which when so executed shall be an original, but all of which together shall
constitute one and the same agreement.

             IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by an authorized officer, agent, representative or attorney, as
of the date first set forth above.


Balchem Corporation                                   DuCoa L.P., By DCV, Inc.,
                                                        its general partner



By: /s/ Frank J. Fitzpatrick                          By: /s/ Harvey L. Weaver
    ------------------------                             ----------------------
      Signature                                                 Signature

Frank J. Fitzpatrick, Controller                      Harvey L. Weaver
- --------------------------------                      -------------------------
         Name & Title                                       Name & Title

June 1, 2001                                          June 1, 2001
- ------------                                          ------------
   Date                                                   Date



                                       6
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.1
<SEQUENCE>3
<FILENAME>exhibit4-1_39462.txt
<TEXT>


                                                                    Exhibit 4.1


- --------------------------------------------------------------------------------

                               FLEET NATIONAL BANK


                                       AND


                               BALCHEM CORPORATION



                           ===========================

                                 LOAN AGREEMENT

                           ===========================



                               DATED JUNE 1, 2001


- --------------------------------------------------------------------------------




<PAGE>



<TABLE>
<CAPTION>

SECTION                                                                                        PAGE
- -------                                                                                        ----


<S>                                                                                             <C>
DEFINITIONS......................................................................................2
- -----------
         DEFINITIONS OF TERMS....................................................................2
         ---------------------

ARTICLE I........................................................................................5
- ---------
         REPRESENTATIONS AND WARRANTIES..........................................................5
         ------------------------------
               SECTION 101.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................5
               ------------------------------------------------------------

ARTICLE II.......................................................................................7
- ----------
         COVENANTS OF THE COMPANY................................................................7
         ------------------------
               SECTION 201.  AFFIRMATIVE COVENANTS OF THE COMPANY WITH THE HOLDER................7
               -------------------------------------------------------------------
               SECTION 202.  NEGATIVE COVENANTS OF THE COMPANY WITH THE HOLDER..................10
               ----------------------------------------------------------------

ARTICLE III.....................................................................................12
- -----------
         CONDITIONS PRECEDENT TO THE HOLDER'S OBLIGATIONS HEREUNDER.............................12
         ----------------------------------------------------------
               SECTION 301.  CONDITIONS.........................................................12
               -------------------------

ARTICLE IV......................................................................................14
- ----------
         EVENTS OF DEFAULT......................................................................14
         -----------------
               SECTION 401.  EVENTS OF DEFAULT DEFINED..........................................14
               ----------------------------------------
               SECTION 402.  JURY TRIAL WAIVER..................................................16
               --------------------------------
               SECTION 403.  RIGHT OF SET OFF...................................................16
               -------------------------------
               SECTION 404.  EXPENSES INCURRED IN CONNECTION WITH ENFORCEMENT...................17
               ---------------------------------------------------------------
               SECTION 405.  EFFECT OF UNENFORCEABILITY.........................................17
               -----------------------------------------

ARTICLE V.......................................................................................18
- ---------
         GENERAL CONDITIONS.....................................................................18
         ------------------
               SECTION 501.  GENERAL CONDITIONS OF THE LOAN AGREEMENT...........................18
               -------------------------------------------------------
</TABLE>

                                       i

<PAGE>



                                 LOAN AGREEMENT

         THIS LOAN AGREEMENT dated June 1, 2001 (the "Loan Agreement") by and
between FLEET NATIONAL BANK, a national banking association organized and
existing under the laws of the United States, and having an office at 69 State
Street, Albany, New York 12201 (the "Holder"); and BALCHEM CORPORATION, a
corporation organized and existing under the laws of the State of Maryland and
having an address of P.O. Box 175, Slate Hill, New York 10973 (the "Company");


                              W I T N E S S E T H :


         WHEREAS, the Holder has agreed to extend a term loan in the amount of
$13,500,000.00 and a line of credit loan in the amount of $3,000,000.00
(collectively, the "Loans") to the Company; and

         WHEREAS, the proceeds of the Loans will be made available to the
Company upon the terms and conditions set forth herein; and

         NOW, THEREFORE, for good and valuable consideration, the receipt
whereof is hereby acknowledged, the Holder and the Company agree as follows:



<PAGE>


                                   DEFINITIONS


DEFINITIONS OF TERMS.

         The following words and terms as used in this document shall have the
following meanings unless the context or use indicates another or different
meaning or intent:

         "APPRAISAL" means an appraisal of the Collateral in form and substance
satisfactory to the Holder, prepared by an Appraiser, indicating a value with
respect to the Collateral.

         "APPRAISER" means an appraiser satisfactory to the Holder.

         "CLOSING" means the closing with respect to the execution and delivery
of the Notes by the Company to the Holder.

         "CLOSING  DATE"  means the date of the  execution  and  delivery of the
Notes by the Company to the Holder.

         "COLLATERAL" means all property which may from time to time be subject
to the Lien of the Security Agreement and the Lien of the Corporate Guarantor
Security Agreement.

         "CORPORATE GUARANTOR" means BCP Ingredients, Inc., a Delaware
corporation, and its successors and permitted assigns.

         "CORPORATE GUARANTOR SECURITY AGREEMENT" means the security agreement
dated the Closing Date from the Corporate Guarantor in favor of the Holder as
security for the Notes, as said security agreement may be modified, amended,
supplemented, consolidated, spread or assumed from time to time.

         "COMPANY" means Balchem Corporation, a Maryland corporation having an
address of P.O. Box 175, Slate Hill, New York 10973 and its permitted successors
and permitted assigns.

         "DEFAULT RATE" shall have the meaning assigned to such term in the
Notes.

         "ENVIRONMENTAL COMPLIANCE AGREEMENT" means the environmental compliance
agreement dated the date hereof from the Company and the Corporate Guarantor in
favor of the Holder, as said environmental compliance agreement may be amended
or supplemented from time to time.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may from time to time be amended or supplemented, and all regulations
promulgated thereunder.

         "EVENT OF DEFAULT" shall have the meaning assigned to such term in
Section 401 hereof.

         "FINANCING DOCUMENTS" means the Notes, the Security Agreement, the
Guaranty, the Corporate Guarantor Security Agreement, this Loan Agreement, the
Swap Agreement, the Environmental Compliance Agreement and any other document
now or hereafter executed by the Company or the Corporate Guarantor by or in
favor of the Holder which affects the rights of the Holder in or to the

                                       2

<PAGE>

Collateral, in whole or in part, or which evidences, secures or guarantees any
sum due under the Notes or any of the other Financing Documents.

         "GAAP" means generally accepted accounting principles as then in
effect, which shall include the official interpretations thereof by the
Financial Accounting Standards Board, consistently applied.

         "GOVERNMENTAL AUTHORITY" means the United States, the State and any
political subdivision thereof, and any agency, department, commission, court,
board, bureau or instrumentality of any of them.

         "HOLDER" means Fleet National Bank as the original owner of the Notes,
and any subsequent owner at the time in question of the Notes.

         "INDEBTEDNESS" means, at a particular date, all indebtedness for money
borrowed or for the deferred purchase price of property and shall include all
capitalized leases.

         "LIEN" means any interest in Property securing an obligation owed to a
Person whether such interest is based on the common law, statute or contract,
and including but not limited to a security interest arising from a mortgage,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" includes but is not limited to
mechanics', materialmens', warehousemens' and carriers' liens and other similar
encumbrances. For the purposes hereof, a Person shall be deemed to be the owner
of Property which it has acquired or holds subject to a conditional sale
agreement or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes.

         "LINE OF CREDIT LOAN" means the loan in the principal amount of
$3,000,000.00 from the Bank to the Company as evidenced by the Line of Credit
Loan Note.

         "LINE OF CREDIT LOAN NOTE" means the promissory note dated the Closing
Date in the principal amount of $3,000,000.00 from the Company in favor of the
Holder as said note may be amended, modified, supplemented, consolidated or
extended from time to time.

         "LOANS" means, collectively, the Term Loan and the Line of Credit Loan.

         "LOAN AGREEMENT" means this loan agreement dated the Closing Date, by
and between the Holder and the Company, as said loan agreement may be modified,
supplemented or amended from time to time.

         "NOTE" means, collectively, the Term Loan Note and the Line of Credit
Loan Note, as each of said notes may be amended, modified, supplemented,
consolidated or extended.

         "NOTE PAYMENT DATE" means each date on which interest or both principal
and interest shall be payable on the Notes according to its terms so long as
such shall be outstanding.

         "PERMITTED ENCUMBRANCES" means (i) Liens for taxes which are not
delinquent or which are being contested in good faith, mechanic's and
materialmen's Liens and other statutory Liens with respect to obligations which
are not overdue or which are being contested in good faith, and Liens resulting
from deposits to secure the payments of workmen's compensation or other social
security or to secure the performance of bids or contracts in the ordinary
course of business, (ii) capitalized lease or purchase

                                       3

<PAGE>

money security interest obligations in the ordinary course of business or
assumed as part of a permitted acquisition, (iii) reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions, restrictions,
leases and other similar title exceptions affecting real estate, (iv) Liens
having as aggregate dollar value not in excess of $100,000 or (v) Liens in favor
of the Bank.

         "PERSON" means an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, and a government or
agency or political subdivision thereof.

         "PLAN" means any plan defined in Section 4021(a) of ERISA in respect of
which the Company or any Subsidiary thereof is an "employer" or a "substantial
employer" as defined in Sections 3(5) and 4001(a)(2) of ERISA, respectively.

         "PRINCIPAL BALANCE" means the aggregate outstanding principal balance
of the Notes from time to time.

         "PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

         "REPORTABLE EVENT" means any reportable event as defined in ERISA.

         "REQUIREMENT" or "LOCAL REQUIREMENT" means any law, ordinance, order,
judgment, decree, rule, regulation, permit, license, authorization, certificate
or approval of a Governmental Authority or a Local Authority respectively.

         "SECURITY AGREEMENT" means the security agreement dated the Closing
Date from the Company in favor of the Holder as security for the Notes, as said
security agreement may be modified, amended, supplemented, consolidated, spread
or assumed from time to time.

         "STATE" means the State of New York.

         "SUBSIDIARY" shall mean for any Person (i) any for-profit entity more
than fifty percent (50%) of the capital stock of which is owned or controlled,
directly or indirectly, by such Person or any Subsidiary and whose accounts are
required to be consolidated with those of said Person in accordance with GAAP
and (ii) any non-profit entity which is controlled, directly or indirectly, by
such Person.

         "SWAP AGREEMENT" means any swap master agreement entered into by the
Company and the Holder in connection with the Term Loan Note, together with any
amendments or supplements thereto or replacements or substitutions thereof.

         "TERM LOAN" means the loan in the principal amount of $13,500,000.00
from the Bank to the Company as evidenced by the Term Loan Note.

         "TERM LOAN NOTE" means the note dated the Closing Date in the principal
amount of $13,500,000.00 from the Company in favor of the Holder as said note
may be amended, modified, supplemented, consolidated or extended from time to
time.

                                       4

<PAGE>



                                    ARTICLE I

                         REPRESENTATIONS AND WARRANTIES


SECTION 101.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants that except as disclosed in Schedule 101
hereto:

         (A) It is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Maryland, possesses full corporate power
and corporate capacity to consummate the transactions contemplated hereby and is
authorized to conduct business in all jurisdictions wherein the nature of its
activities requires such except where the failure to do so would not have a
material adverse effect upon the Company and its Subsidiaries taken as a whole;

         (B) No approval or other action by any Governmental Authority is
required in connection with the execution or performance by the Company of the
Financing Documents;

         (C) The consolidated financial statements of the Company, if any,
heretofore delivered to the Holder have been prepared in accordance with GAAP,
and fairly present in all material respects the respective consolidated
financial conditions of the subjects thereof as of the respective dates thereof,
except, in the case of interim financial statements, for the absence of
footnotes and year-end audit adjustments;

         (D) The Financing Documents and all other documents to be executed by
the Company in connection therewith, when executed and delivered by the
respective parties thereto, will constitute valid and binding obligations of the
Company. The execution and delivery by the Company of the Financing Documents
and the performance of the Financing Documents by the Company (1) have been
authorized by all necessary corporate action and (2) do not and will not
conflict with, or result in any breach of, or constitute a default under the
Company's articles of incorporation or by-laws or any indenture, mortgage, deed
of trust, bank loan or credit agreement or any other agreement or instrument to
which the Company is a party or by which the Company or any of its Property may
be bound for which a valid consent has not been secured except where the failure
to do so would not have a material adverse effect upon the Company and its
Subsidiaries taken as a whole, or result in the creation of any Lien (other than
that created by Permitted Encumbrances) upon or with respect to any Property of
the Company;

         (E) There has been no material adverse change in the business, Property
or financial condition, taken as a whole, of the Company and its subsidiaries
from that shown on the most recent financial statements delivered heretofore to
the Holder;

         (F) As of the date hereof, there are no actions, suits or proceedings
at law or in equity, or before or by any Governmental Authority, pending or, to
the knowledge of the Company, threatened against or affecting the Company or the
Collateral or involving the validity or enforceability of the Financing
Documents or the priority of the Liens thereof which are reasonably likely to
materially adversely affect the financial condition of the Company, and to the
Company's knowledge it is not in default with respect to any material order,
writ, judgment, decree or demand of any court or any Governmental Authority
which default is reasonably likely to materially adversely affect the financial
condition of the Company;

                                       5

<PAGE>


         (G) There is no default under the Financing Documents and no event has
occurred and is continuing which with notice or the passage of time or either
would constitute a default under any thereof;

         (H) All material Federal, state, county, municipal and city income and
other tax returns and other reports and documents required to have been filed by
the Company have been filed and the Company has paid all fees and taxes
indicated as due pursuant to such returns, reports and documents or pursuant to
any assessments received by the Company except which are being contested in good
faith, and the Company knows of no basis for any additional material assessment
in respect of any such taxes which has not been or will not be reserved for in
accordance with GAAP; and

         (I) No Reportable Event or Prohibited Transaction (as defined in
Section 4975 of the Internal Revenue Code) has occurred and is continuing with
respect to any Plan and the Company has not incurred any "accumulated funding
deficiency" (as such term is defined in Section 302 of ERISA).


                                       6

<PAGE>



                                   ARTICLE II

                            COVENANTS OF THE COMPANY


SECTION 201.  AFFIRMATIVE COVENANTS OF THE COMPANY WITH THE HOLDER.

Until the Loans have been paid in full and all other monetary obligations then
due of the Company under the Financing Documents have been satisfied, the
Company covenants with the Holder as follows:

         (A) It will pay to the Holder the Holder's commitment fee and its
reasonable counsel fees and expenses promptly upon receipt of bills therefor
submitted by the Holder at the Closing and will pay all costs and expenses
required to satisfy the conditions of this Loan Agreement; without limiting the
generality of the foregoing, the Company will pay (from moneys advanced
hereunder or otherwise):

                (1) all taxes (other than the Holder's income taxes), filing and
         recording expenses, including documentary stamp and intangible taxes,
         if any in respect of the transactions pursuant hereto;

                (2) the fees and commissions, if any, lawfully due to brokers in
         connection with this transaction; and

                (3) Appraisal fees;

         (B) It will indemnify the Holder from claims of brokers arising by
reason of the Company's acts in connection with the execution and delivery
hereof and of the other Financing Documents executed by it or the consummation
of the transactions contemplated hereby or thereby and from expenses incurred by
the Holder in connection with any such claims (including reasonable attorneys'
fees) and each of the Holder and the Company represent that it has not dealt
with any broker in connection with the Loans nor is aware of such claims of
brokers;

         (C) It will deliver to the Holder on demand if the Holder reasonably
requests such, certified copies of any contracts, bills of sale, statements,
receipted vouchers or agreements, under which the Company claims title to any
materials, fixtures or articles subject to the Lien of the Security Agreement;

         (D) The Holder may apply amounts due hereunder in accordance with the
terms hereof and amounts so applied shall be deemed part of the Loans and shall
be secured by the Security Agreement;

         (E) It will transmit to the Holder, immediately upon receipt thereof,
any material communication adversely affecting the Collateral and will promptly
and reasonably respond to any reasonable inquiry of the Holder made with respect
thereto;

         (F) It will promptly and reasonably respond to any reasonable inquiry
made by the Holder with respect to the Notes or the other Financing Documents or
the transactions contemplated thereby;

         (G) It will notify the Holder of any material adverse change in the
financial condition or business of the Company and furnish such other
information concerning its financial condition and business as may be reasonably
requested by the Holder from time to time;


                                       7
<PAGE>


         (H) The Holder shall have the right to inspect the Collateral including
the right to conduct field examinations thereof at such times as the Holder may
determine in its reasonable discretion, the reasonable cost of which inspections
and examinations should be borne by the Company; provided that if no Event of
Default has occurred and is continuing, such inspections shall be limited to one
during each fiscal year;

         (I) It will give written notice to the Holder within ten (10) days of
becoming aware of any condition or event which constitutes an event of default
beyond any applicable grace or cure period with respect to other outstanding
Indebtedness of the Company in excess of $100,000;

         (J) It will at all times keep adequate books and records, in accordance
with GAAP so that at any time, and from time to time, its financial condition
may be readily determined in all material respects; and, at Holder's request,
make and take away copies thereof;

         (K) It will promptly, and in any event within one hundred twenty (120)
days after the close of its fiscal years, deliver to Holder, an audited
consolidated financial statement of the Company, as of the end of such period
and statements of income, a statement of cash flow, a reconciliation of net
worth, and changes in financial position of the Company for such fiscal year, in
each case setting forth in comparative form the figures for the preceding fiscal
year, all in reasonable detail and accompanied by an opinion thereon (which
shall not be qualified by reason of any limitation imposed by the Company) of
KPMG LLP or any other independent certified public accountant reasonably
satisfactory to Holder to the effect that such financial statements have been
prepared in accordance with GAAP (except for changes in which such accountants
concur) and shall be certified by the Company to fairly present in all material
respects the consolidated financial position and results of operations of the
Company;

         (L) It will promptly, and in any event within one hundred and twenty
(120) days after the close of each fiscal year, furnish to the Holder a
reasonably detailed financial projections and business plan for the Company's
operations for the ensuing fiscal year;

         (M) It will promptly, and in any event within ten (10) days of the
filing thereof, furnish to the Holder a copy of the Company's Form 10-K as filed
with the U.S. Securities and Exchange Commission;

         (N) It will promptly, and in any event within ninety (90) days after
the close of each fiscal quarter, furnish to the Holder a copy of the Company's
Form 10-Q as filed with the U.S. Securities and Exchange Commission;

         (O) It will maintain as of the close of each fiscal quarter on a
consolidated basis for the Company and its Subsidiaries a minimum Current Ratio
of: 1.25 to 1.00 based upon the Company's financial statements for then most
recently ended quarter. Such covenant is to be tested quarterly, beginning on
June 30, 2001, and the "Current Ratio" shall be defined as the ratio of the
Company's current assets to current liabilities;

         (P) It will maintain on a consolidated basis for the Company and its
Subsidiaries a maximum Funded Debt Ratio of: 2.50 to 1.00. Such covenant is to
be tested quarterly, beginning on June 30, 2001, and the "Funded Debt Ratio"
shall be defined as that ratio of (i) the sum of the outstanding principal of
all interest bearing Indebtedness, to (ii) earnings before interest, taxes,
depreciation and amortization and any other non-cash charges ("EBITDA"). For
purposes of the foregoing calculations (i) EBITDA for periods ending on or prior
to June 30, 2002 shall be adjusted to reflect pro-forma cash flow realized from
the assets to be acquired from DuCoa/DCV and (ii) the Funded Debt Ratio shall be
based upon the Company's financial statements for the then most recently ended

                                       8
<PAGE>

four (4) quarters subject to pro-forma adjustments to reflect cash flow realized
from the assets to be acquired from DuCoa/DCV;

         (Q) It will maintain as of the close of each fiscal quarter on a
consolidated basis for the Company and its Subsidiaries a minimum Fixed Charge
Coverage Ratio of: 1.50 to 1.00. Such covenant is to be tested quarterly
beginning on June 30, 2001 and the "Fixed Charge Coverage Ratio" shall be
defined as the ratio of (i) earnings before interest, taxes, depreciation and
amortization and any other non-cash charges less taxes paid less dividends paid
less non-financed capital expenditures, to (ii) required payments of term debt
principal, capital lease payments and interest. Calculations of the Fixed Charge
Coverage Ratio shall be based upon the Company's financial statements for the
then most recently ended four (4) fiscal quarters subject to pro-forma
adjustments to reflect cash flow realized from the assets to be acquired from
DuCoa/DCV;

         (R) It will promptly, and in any event within ninety (90) days after
the end of each fiscal quarter, deliver to Holder a compliance certificate
executed by the Company stating that a review of the activities of the Company
during such fiscal quarter has been made and that, to the best of its knowledge
and belief, the Company has observed, performed and fulfilled each and every
material obligation and covenant contained in the Financing Documents and is not
in default under any of the same and demonstrating the calculation of all
financial ratio covenants;

         (S) It will promptly inform the Holder of any pending or to the
Company's knowledge threatened litigation against the Company or affecting any
of the Company's property, if such litigation or potential litigation could
reasonably be expected to have a material adverse effect on the Company's
consolidated financial condition or to cause an Event of Default;

         (T) It will preserve and maintain its corporate existence, all rights,
licenses, privileges, franchises, certificates and the like necessary for the
operation of its business and the maintenance of its existence where the failure
to maintain the same is reasonably expected to have a material adverse effect
upon the Company, and promptly and properly comply with all laws, statutes,
ordinances and governmental regulations applicable to it or to any of its
property, business operations and transactions where the failure to comply with
the same is reasonably expected to have a material adverse effect upon the
Company;

         (U) It will maintain, with financially sound and reputable insurance
companies or associations, workmen's compensation insurance, liability
insurance, and extended coverage and any other insurance of the kinds usually
carried by companies engaged in business similar to that of the Company, in an
amount not less than full replacement cost on its present and future properties
normally covered by insurance (less reasonable deductibles), against such
casualties, risks and contingencies as are customarily insured against, and at
the Holder's request, deliver to the Holder evidence of the maintenance of such
insurance. With regard to insurance on the Collateral, the Company agrees to
take all steps necessary to have the Holder included on the insurance as loss
payee, and obtain a lender's loss payee endorsement on such policies;

         (V) It will promptly pay when due any and all material taxes,
assessments and other governmental charges upon the Company or against any of
the Company's property, unless the same is being contested in good faith by
appropriate proceedings and reserves consistent with GAAP have been established
therefor;

                                       9
<PAGE>


         (W) It will maintain all of its tangible Property in good condition and
repair, and make all necessary replacements thereof where the failure to do so
would have a material adverse effect upon the Company or upon the value of the
Collateral taken as a whole;

         (X) Other than employee payroll and other minor local business
accounts, it will within a reasonable period following the Closing Date maintain
with the Holder all of the Company's deposit and cash management services. In
addition, it will establish within a reasonable period following the Closing
Date and maintain with the Bank at all times aggregate minimum balances of
$100,000 net of amounts necessary to offset service charges; and

         (Y) It shall furnish to the Holder a copy of a fixed asset Appraisal
with respect to the assets acquired from DuCoa/DCV.


SECTION 202.  NEGATIVE COVENANTS OF THE COMPANY WITH THE HOLDER.

Until the Loans have been paid in full and all other monetary obligations of the
Company then due under the Financing Documents have been satisfied, the Company
covenants with the Holder as follows:

         (A) Neither it nor its Subsidiaries shall mortgage, assign,
hypothecate, grant a security interest in, or encumber any of its assets, except
for Permitted Encumbrances;

         (B) Neither it nor its Subsidiaries shall endorse, guarantee, or
otherwise become surety for or contingently liable upon the obligations of any
Person (provided, however, that the foregoing shall not apply to guaranties by
the Company of obligations of any Subsidiary, guaranties by a Subsidiary of
obligations of the Company, guaranties by a Subsidiary of obligations of another
Subsidiary, security deposits, bonds or performance guaranties in the ordinary
course of business or endorsements of negotiable instruments by the Company in
the ordinary course of business);

         (C) Neither it nor its Subsidiaries shall sell, assign, lease, exchange
or otherwise dispose of any of its assets used or useful in its business valued
at more than Five Hundred Thousand and no/100 Dollars ($500,000.00) in aggregate
in any fiscal year, except inventory or obsolete or unused equipment in the
ordinary course of business;

         (D) Neither it nor its Subsidiaries shall sell any of its assets to any
other Person with the understanding or agreement that such assets shall be
leased back to the Company;

         (E) Neither it nor its Subsidiaries shall make any loans or advances in
excess of $250,000.00 in aggregate principal amount outstanding (combined with
the Company's Subsidiaries) except for loans or advances to employees in the
ordinary course of business, or sell any of its accounts receivables with or
without recourse;

         (F) Neither it nor its Subsidiaries shall change its fiscal year or
methods of accounting;

         (G) Neither it nor its Subsidiaries shall hereafter incur or assume any
Indebtedness for borrowed money in excess of $1,000,000.00 aggregate principal
amount (combined with the Company's Subsidiaries) except for loans between the
Company and its Subsidiaries, loans between Subsidiaries, the contingent
purchase price or purchase price adjustments for the assets to be acquired from
DuCoa/DCV and except to the Holder;

                                       10
<PAGE>


         (H) It shall not assign or transfer, or attempt to so do, any of its
rights, powers, duties or obligations arising pursuant to this Loan Agreement;

         (I) Neither it nor its Subsidiaries shall reorganize, merge or
consolidate with, or acquire, directly or indirectly, all or substantially all
of the assets, property or stock of any company, person or other entity, sell
all or substantially all of its assets or approve a sale of all or substantially
all of its stock or make any other substantial change in its capitalization
(each of the foregoing hereinafter referred to as a "Transaction"), without the
express written consent of the Holder, which consent shall not be unreasonably
withheld; provided, however, that the Company may effect changes in its
authorized capital stock or issuances of capital stock or enter into
transactions between the Company and its Subsidiaries or between such
Subsidiaries absent the prior written consent of the Holder. Additionally, the
Company may enter into a Transaction absent the prior written consent of the
Holder provided that all of the following criteria are met: (i) any business
being acquired must be engaged in a similar or related line of business to that
of the Company or any of its Subsidiaries, (ii) the Transaction (if initiated by
the Company) in question must not be hostile, (iii) the Company must be in full
compliance with all covenants hereunder both prior to and immediately following
(on a pro-forma basis) and (iv) the total consideration for such Transaction
does not exceed $15,000,000;

               (J) Neither it nor its Subsidiaries shall directly or indirectly,
engage in any business other than that currently engaged in by the Company and
business related or analogous thereto (after giving effect to the DuCoa/DCV
acquisition) or business covered by any other Transactions permitted under
subparagraph (I) of this Section 202, discontinue any of its existing lines of
business which materially contribute to the Company's operations, or
substantially alter its method of doing business.


                                       11
<PAGE>



                                   ARTICLE III

           CONDITIONS PRECEDENT TO THE HOLDER'S OBLIGATIONS HEREUNDER


SECTION 301.  CONDITIONS.

The Holder shall not be obligated hereunder to make the Loans unless the
following conditions shall have been satisfied:

         (A) The Holder shall have received on or before the Closing Date the
following all, where applicable, in form and substance satisfactory to the
Holder:

                (1) the executed Notes,

                (2) an executed counterpart of the Security Agreement, the
         Guaranty and the Corporate Guarantor Security Agreement,

                (3) an executed counterpart of this Loan Agreement,

                (4) (a) the commitment fee of the Holder and (b) the Holder's
         reasonable counsel fees,

                (5) the certificates and, upon request of the Holder, policies,
         if available, of insurance required by the Security Agreement
         accompanied by evidence of the payment of the premiums therefor,

         (6)Uniform Commercial Code financing statements or comparable security
instruments to evidence or perfect the security interests created or purported
to be created by the Security Agreement,

                (7) opinions of counsel for the Company and the Corporate
         Guarantor in form and substance reasonably satisfactory to the Holder
         and its counsel,

                (8) Receipt and satisfactory review of final sources and uses
         with respect to the DuCoa/DCV acquisition,

                (9) Receipt and satisfactory review of Executed Environmental
         Indemnification Agreements between Syntex Agribusiness, Inc. and
         DuCoa/DCV and DuCoa/DCV and the Company,

                (10) Receipt and satisfactory review of results of pending
         environmental investigations pertaining to the Verona, Missouri
         facility to be acquired by the Company,

                (11) Receipt and satisfactory review of proforma combined
         balance sheet for the Company prepared by the Company to include the
         business to be acquired,

                (12) Receipt and satisfactory review of asset purchase agreement
         with DuCoa/DCV, and

                                       12
<PAGE>


                (13) Receipt and satisfactory review of opinion of special
         environmental counsel to the Bank regarding environmental issues
         arising out of asset acquisition.

         (B) The Holder's counsel shall have received (and approved as
appropriate) on or before the Closing Date copies of:

                (1) With respect to the Company, an executed closing certificate
         together with a certified copy of the articles of incorporation as
         filed with the Maryland Secretary of State together with all amendments
         thereto, a good standing certificate issued by the Maryland Secretary
         of State, a certificate of authority to conduct business in New York
         State, a certified copy of the by-laws and an approval of the board of
         directors authorizing the execution and delivery and performance of the
         Financing Documents, and

                (2) With respect to the Corporate Guarantor, an executed closing
         certificate together with a certified copy of the articles of
         incorporation as filed with the Delaware Secretary of State together
         with all amendments thereto, a good standing certificate issued by the
         Delaware Secretary of State, a certified copy of the by-laws and an
         approval of the board of directors and shareholders authorizing the
         execution and delivery and performance of the Financing Documents to
         which it is a party, and

                (3) Judgment, Bankruptcy, Lien searches and UCC searches with
         respect to the Company.





                                       13
<PAGE>




                                   ARTICLE IV

                                EVENTS OF DEFAULT


SECTION 401.  EVENTS OF DEFAULT DEFINED.

The following shall constitute Events of Default hereunder and the terms "Event
of Default" or "Default" shall mean, whenever they are used in the Loan
Agreement, any one or more of the following events:

         (A) If the Company fails to comply with any of the covenants or
agreements made, or to be observed, by it in the Loan Agreement, other than a
covenant or agreement specified in subsection (B) below, and such failure shall
have continued for a period of fifteen (15) days after written notice of
non-compliance from the Holder to the Company, provided that if such default
cannot reasonably be cured within said 15-day period, and the Company shall have
commenced action to cure the breach of covenant, condition or agreement within
said 15-day period and thereafter diligently and expeditiously proceeds to cure
the same, such 15-day period shall be extended for so long as the Company shall
require in the exercise of due diligence to cure such default, it being agreed
that no such extension shall be for a period in excess of forty-five (45) days
in the aggregate from the date of such written notice.

         (B) If the Company fails to provide to the Holder the information
required by subsections (K), (L), (M), (N) or (R) of Section 201 hereof and such
failure shall have continued for a period of ten (10) days after written notice
of non-compliance from the Holder to the Company.

         (C) Notwithstanding the foregoing subsection (A) above, the following
shall be immediate Events of Default for which there shall be no cure period
under this Section and under Section 604:

                (1) if a default by the Company occurs in the due and punctual
         payment of any amounts specified to be paid herein or under the other
         Financing Documents (other than any amounts payable on the Maturity
         Date or any earlier date on which the entire Principal Balance together
         with all accrued but unpaid interest and all other sums evidenced or
         secured by the Financing Documents shall be due and payable in full)
         and such default continues for ten (10) days;

                (2) if the Company fails to pay any amount due on the Maturity
         Date or any earlier date on which the entire Principal Balance together
         with all accrued but unpaid interest and all other sums evidenced or
         secured by the Financing Documents shall be due and payable in full;

                (3) if the Company fails to comply with any of the non-monetary
         covenants made by it in the Loan Agreement for which a specific time
         period is set forth other than as set forth in subsection (B) hereof;

                (4) if the Company fails to comply with the covenants set forth
         in subsections (O), (P), or (Q) of Section 201 hereof;

                (5) if a non-monetary Event of Default (as defined therein)
         beyond any applicable grace or cure period under the Security
         Agreement, the Corporate Guarantor Security Agreement or the Swap
         Agreement shall occur;


                                       14
<PAGE>


                (6) if at any time any material representation or warranty made
         by the Company herein or in any other instrument or document delivered
         by the Company or the Corporate Guarantor to the Holder in connection
         with the Loans shall be incorrect in a material manner;

                (7) if at any time any insurance policy required to be
         maintained pursuant to any of the Financing Documents shall be
         canceled, terminated or lapse and shall not have been replaced prior to
         the effective date of such cancellation, termination or lapse by a
         policy covering the same matters as the lapsed policy, which new policy
         shall comply with all requirements in the Financing Documents relating
         to such type of insurance;

                (8) if the Company or the Corporate Guarantor shall assign or
         convey or attempt to assign or convey any of its rights, duties or
         obligations under the Loan Agreement or the other Financing Documents;

                (9) if the Company shall mortgage, grant a security interest
         with respect to, encumber or otherwise transfer or convey all or any
         portion of the Collateral or any interest therein, except as permitted
         under the terms of this Loan Agreement or the other Financing
         Documents;

                (10) if by order of a court of competent jurisdiction a
         custodian, trustee, receiver or liquidator of the Collateral or any
         part thereof, or of the Company or the Corporate Guarantor, shall be
         appointed and such order shall not be discharged or dismissed or stayed
         within sixty (60) days after such appointment;

                (11) (1) the dissolution or winding-up of the Company or the
         Corporate Guarantor; (2) the filing by the Company or the Corporate
         Guarantor of a voluntary petition under Title 11 of the United States
         Code or any other federal or state bankruptcy statute; (3) the failure
         by the Company or the Corporate Guarantor within sixty (60) days to
         lift any execution, garnishment or attachment of such consequence as
         will impair the Company's or the Corporate Guarantor's, as the case may
         be, ability to carry out its obligations hereunder and under the other
         Financing Documents to which it is a party; (4) the commencement of a
         case under Title 11 of the United States Code against the Company or
         the Corporate Guarantor as the debtor or commencement under any other
         federal or state bankruptcy statute of a case, action or proceeding
         against any of the foregoing and continuation of such case, action or
         proceeding without dismissal or stay for a period of sixty (60) days;
         (5) the filing, grant or entry of any order for relief by a court of
         competent jurisdiction under Title 11 of the United States Code or any
         other federal or state bankruptcy statute with respect to the debts of
         the Company or the Corporate Guarantor; or (6) in connection with any
         insolvency or bankruptcy case, action or proceeding, appointment by
         final order, judgment or decree of a court of competent jurisdiction of
         a receiver or trustee of the whole or a substantial portion of the
         Collateral or of the Company or the Corporate Guarantor unless such
         order, judgment or decree is vacated, dismissed or dissolved within
         sixty (60) days of its issuance;

                (12) if any final judgment or a series of final judgments for
         the payment of money in excess of $250,000 in the aggregate not covered
         by insurance shall be rendered against the Company or the Corporate
         Guarantor and the Company or the Corporate Guarantor, as the case may
         be, shall not discharge the same or cause it to be discharged within
         sixty (60) days from the entry thereof, or shall not appeal therefrom
         or from the order, decree or process upon which or pursuant to which
         said judgment was granted, based or entered, and secure a stay of
         execution pending such appeal;

                                       15
<PAGE>


                (13) if a notice of federal or state tax lien which affects
         title to the Collateral is filed and not discharged or removed or
         stayed from the record within sixty (60) days of such filing;

                (14) if the Company or the Corporate Guarantor shall default
         beyond any applicable grace or cure period under any agreement or
         document relating to any lending transaction, other than transactions
         contemplated by the Financing Documents, now or hereafter in effect
         with the Holder;

                (15) if the proforma combined balance sheet delivered to the
         Bank pursuant to Article III hereof is materially and adversely
         different from that set forth in the Company's Form 8-K required to be
         filed with the Securities and Exchange Commission.

Notwithstanding anything to the contrary set forth herein or in any other
Financing Document, the occurrence of an Event of Default under (and as defined
in) the Swap Agreement shall only constitute an Event of Default hereunder if
the Event of Default under the Swap Agreement (1) is a monetary Event of Default
thereunder or (2) would have a material adverse impact upon the financial
condition of the Company and its Subsidiaries taken as a whole.


SECTION 402.  JURY TRIAL WAIVER.

THE COMPANY AND THE HOLDER MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS LOAN AGREEMENT OR ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE HOLDER RELATING TO THE
ADMINISTRATION OF THE LOANS OR ENFORCEMENT OF THE NOTES, AND AGREE THAT NEITHER
PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, THE
COMPANY HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE COMPANY CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE HOLDER HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE HOLDER WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR THE HOLDER TO ACCEPT THE NOTES AND MAKE THE LOANS.


SECTION 403.  RIGHT OF SET OFF.

The Company hereby grants to the Holder, a continuing lien, security interest
and right of setoff as security for all liabilities and obligations to the
Holder, whether now existing or hereafter arising, upon and against all
deposits, credits, collateral and property, now or hereafter in the possession,
custody, safekeeping or control of the Holder or any entity under the control of
FleetBoston Financial Corporation and its successors and assigns, or in transit
to any of them. At any time following the occurrence and during the continuance
of an Event of Default, without demand or notice (any such notice being
expressly waived by the



                                       16
<PAGE>

Company), the Holder may set off the same or any part thereof and apply the same
to any liability or obligation of the Company even though unmatured and
regardless of the adequacy of any other collateral securing the Notes. ANY AND
ALL RIGHTS TO REQUIRE THE HOLDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT
TO ANY OTHER COLLATERAL WHICH SECURES THE NOTES, PRIOR TO EXERCISING ITS RIGHT
OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
COMPANY, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.


SECTION 404.  EXPENSES INCURRED IN CONNECTION WITH ENFORCEMENT.

The Company shall pay on demand all reasonable expenses of the Holder in
connection with the preparation, administration, default, collection, waiver or
amendment of loan terms, or in connection with the Holder's exercise,
preservation or enforcement of any of its rights, remedies or options hereunder,
including, without limitation, reasonable fees of outside legal counsel or the
allocated costs of in-house legal counsel, accounting, consulting, brokerage or
other similar professional fees or expenses, and any reasonable fees or expenses
associated with travel or other costs relating to any appraisals or examinations
conducted in connection with the loan or any collateral therefor, and the amount
of all such expenses shall, until paid, bear interest at the rate applicable to
principal hereunder (including any default rate) and be an obligation secured by
any collateral.


SECTION 405.  EFFECT OF UNENFORCEABILITY.

Unenforceability for any reason of any provision of this Loan Agreement shall
not limit or impair the operation or validity of any other provision of this
Loan Agreement or any of the other Financing Documents.






                                       17
<PAGE>




                                    ARTICLE V

                               GENERAL CONDITIONS


SECTION 501.  GENERAL CONDITIONS OF THE LOAN AGREEMENT.

The following conditions shall be applicable throughout the term of the Loan
Agreement:

         (A) All computations of interest under the Note shall be made on the
basis of a three hundred sixty (360) day year and the actual number of days
elapsed;

         (B) (1) The Holder may at any time pledge or assign all or any portion
of its rights under the Notes and the other Financing Documents to any of the
twelve (12) Federal Reserve Banks organized under Section 4 of the Federal
Reserve Act, 12 U.S.C. Section 341. No such pledge or assignment or enforcement
thereof shall release the Holder from its obligations under any of the Financing
Documents.

                (2) The Holder shall have the unrestricted right at any time and
         from time to time, and to grant to one or more banks or other financial
         institutions (each, a "Participant") participating interests in the
         Holder's obligation to lend hereunder and/or any or all of the loans
         held by the Holder hereunder. In the event of any such grant by the
         Holder of a participating interest to a Participant, whether or not
         upon notice to the Company, the Holder shall remain responsible for the
         performance of its obligations hereunder and the Company shall continue
         to deal solely and directly with the Holder in connection with the
         Holder's rights and obligations hereunder.

                (3) The Holder shall have the unrestricted right at any time or
         from time to time, to assign all or any portion of its rights and
         obligations hereunder and under the other Financing Documents to one or
         more banks or other financial institutions (each, an "Assignee"), and
         the Company agrees that it shall execute, or cause to be executed, such
         documents, including without limitation, amendments to this Loan
         Agreement and to the other Financing Documents as the Holder shall deem
         necessary to effect the foregoing. In addition, at the request of the
         Holder and any such Assignee, the Company shall issue one or more new
         promissory notes, as applicable, to any such Assignee and, if the
         Holder has retained any of its rights and obligations hereunder
         following such assignment, to the Holder, which new promissory notes
         shall be issued in replacement of, but not in discharge of, the
         liability evidenced by the promissory note held by the Holder prior to
         such assignment and shall reflect the amount of the respective
         commitments and loans held by such Assignee and the Holder after giving
         effect to such assignment. Upon the execution and delivery of
         appropriate assignment documentation, amendments and any other
         documentation required by the Holder in connection with such
         assignment, and the payment by Assignee of the purchase price agreed to
         by the Holder, and such Assignee, such Assignee shall be a party to
         this Loan Agreement and shall have all of the rights and obligations of
         the Holder hereunder and under the other Financing Documents to the
         extent that such rights and obligations have been assigned by the
         Holder pursuant hereto and to the assignment documentation between the
         Holder and such Assignee, and the Holder shall be released from its
         obligations hereunder and thereunder to a corresponding extent.

                (4) Provided no Event of Default has occurred and is continuing
         and except with respect to an assignment or transfer of the Loans
         mandated by a Governmental Authority, the Company shall have the right
         to approve the identity of any proposed Assignee or Participant
         pursuant to subsections (B) (2) and B (3) hereof which approval shall
         not be unreasonably withheld, delayed or conditioned.



                                       18
<PAGE>

         Except as aforesaid, the right of the Holder to assign or grant a
         participation interest shall not require notice to or consent of the
         Company.

                (5) The Holder may furnish any information concerning the
         Company in its possession from time to time to prospective Assignees
         and Participants, provided that the Holder shall require any such
         prospective Assignee or Participant to agree in writing for the benefit
         of the Company to maintain the confidentiality of such information.

         (C) All corporate proceedings taken in connection with the transactions
provided for herein, all appraisals, agreements, contracts, certificates and
other documents and instruments required by the Loan Agreement or the other
Financing Documents and the persons responsible for the execution and
preparation thereof, all sureties, guarantors, insurers, shall be satisfactory
to the Holder, and all policies of insurance, agreements, certificates and other
documents and instruments so required shall be genuine, valid, subsisting,
binding and enforceable in all respects upon the parties thereto except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
laws relating to or affecting the enforcement of creditors' rights generally and
except as enforceability may be limited by general equitable principles, and the
Holder's counsel shall have received copies (or certified copies where
appropriate in such counsel's reasonable judgment) of all agreements, documents
and instruments which they may request in connection therewith;

         (D) Any condition of the Loan Agreement which requires the submission
of evidence of the existence or nonexistence of a specified fact or facts
implies as a condition the existence or nonexistence, as the case may be, of
such fact or facts and the Holder shall, at all times, be free independently to
establish such existence or nonexistence but need not do such;

         (E) [Intentionally Omitted];

         (F) [Intentionally Omitted];

         (G) Neither this Loan Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought;

         (H) The Company shall from time to time upon request of the Holder
deliver to the Holder such other documents and instruments (including estoppel
certificates) as the Holder shall reasonably request;

         (I) All notices, certificates and other communications hereunder shall
be in writing and shall be sufficiently given and shall be deemed given when (1)
delivered to the applicable address stated below by registered or certified
mail, return receipt requested, or by such other means as shall provide the
sender with documentary evidence of such delivery or (2) delivery is refused by
the Company or the Holder, as the case may be, as evidenced by the affidavit of
the Person who attempted to effect such delivery. The addresses to which
notices, certificates and other communications hereunder shall be delivered are
as follows:

                                       19
<PAGE>


               TO THE COMPANY:

               Balchem Corporation
               P.O. Box 175
               Slate Hill, New York  10973
               Attention:  Dino A. Rossi, President

               WITH A COPY TO:

               Golenbock, Eiseman, Assor & Bell
               437 Madison Avenue
               New York, New York  10022
               Attention:  Nathan E. Assor, Esq.


               TO THE HOLDER:

               Fleet National Bank
               NY EH 34303E
               Peter D. Kiernan Plaza
               Albany, New York 12207
               Attention:  Corporate Banking Division

               WITH A COPY TO:

               Lemery MacKrell Greisler LLC
               10 Railroad Place
               Saratoga Springs, New York 12866
               Attention:  James A. Carminucci, Esq.


The Company and the Holder may, by notice given hereunder, designate any further
or different addresses to which subsequent notices, certificates and other
communications shall be sent;

         (J) This Loan Agreement and the rights and obligations of the parties
hereunder shall be construed and interpreted in accordance with the laws of the
State of New York (the "Governing State") (excluding the laws applicable to
conflicts or choice of law).

                THE COMPANY AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
         LOAN AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE GOVERNING STATE OR
         ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE
         JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
         BEING MADE UPON THE COMPANY BY MAIL AT THE ADDRESS SET FORTH HEREIN.
         THE COMPANY HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
         HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT
         IS BROUGHT IN AN INCONVENIENT FORUM;

                                       20
<PAGE>


         (K) This Loan Agreement may be executed in any number of counterparts
all of which taken together shall constitute one and the same instrument and any
of the parties or signatories hereto may execute this Loan Agreement by signing
any such counterparts;

         (L) The Holder shall at all times and at any time have the right,
privilege and power to waive any of the obligations of the Company hereunder and
such waiver shall not be deemed a modification of this Loan Agreement;

         (M) This Loan Agreement is intended by the parties as the final,
complete and exclusive statement of the transactions evidenced hereby. All prior
contemporaneous promises, agreements and understandings, whether oral or
written, are deemed to be superceded by this Loan Agreement, and no party is
relying on any promise, agreement or understanding not set forth in this Loan
Agreement;

         (N) Except to the extent otherwise specifically provided, the terms,
covenants and conditions of this Loan Agreement are not intended to supersede
the terms, covenants and conditions of the other Financing Documents, but shall
be in addition thereto; no right or remedy conferred upon the Holder in this
Loan Agreement is intended to be exclusive of any other right or remedy
contained in this Loan Agreement or any of the other Financing Documents or now
or hereafter available to the Holder at law, in equity, by statute or otherwise;

         (O) Nothing contained in this Section shall be deemed to preclude the
Holder from enforcing any of the other rights of the Holder, except as expressly
prohibited by this Section;

         (P) Waivers by Holder of any proof required hereunder does not imply or
constitute waiver of any other proof(s) or request(s);

         (Q) In the event any agreement contained herein should be breached by
any party and thereafter such breach should be waived by any other party, such
waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other breach hereunder;

         (R) Upon receipt of an affidavit of an officer of the Holder as to the
loss, theft, destruction or mutilation of the Notes or any other security
document which is not of public record, and, in the case of any such loss,
theft, destruction or mutilation, upon surrender and cancellation of such Notes
or other security document, the Holder will issue, in lieu thereof, a
replacement Notes or other security document in the same principal amount
thereof and otherwise of like tenor.

         (S) The Table of Contents, titles and headings of the paragraphs of
this Loan Agreement have been inserted for convenience of reference only and are
not intended to summarize or otherwise describe the subject matter of such
paragraphs and shall not be given any consideration in the construction of this
Loan Agreement.

                                       21
<PAGE>



                                       A-3

        IN WITNESS WHEREOF, the parties have caused this Loan Agreement to be
executed in their respective names by their Authorized Representatives all as of
the day and year first above written.

                                    BALCHEM CORPORATION


                                    By:    /s/ Frank J. Fitzpatrick
                                           -----------------------------------
                                    Name:  Frank J. Fitzpatrick
                                           -----------------------------------
                                    Title: Controller and Assistant Secretary
                                           -----------------------------------



                                    FLEET NATIONAL BANK


                                    By:  /s/ Karen D. Finnerty
                                         -------------------------------------
                                         Karen D. Finnerty, Vice President


STATE OF NEW YORK       )
                        )ss.:
COUNTY OF NEW YORK      )

         On the 30 day of May, in the year 2001 before me personally came Frank
J. Fitzpatrick_, to me known, who, being by me duly sworn, did depose and say
that he/she/they reside(s) in _____________________; that he/she/they is(are)
the Controller & Assistant Secretary of BALCHEM CORPORATION, the corporation
described in and which executed the above instrument; and that he/she/they
signed his/her/their name(s) thereto by authority of the board of directors of
said corporation.

                                                               /s/ Jane A. Dwyer
                                                               -----------------
                                                               Notary Public


STATE OF NEW YORK       )
                        )ss.:
COUNTY OF NEW YORK      )

         On the 30 day of May, in the year 2001 before me personally came KAREN
D. FINNERTY to me known, who, being by me duly sworn, did depose and say that
he/she/they reside(s) in _____________________; that he/she/they is(are) the
VICE PRESIDENT of FLEET NATIONAL BANK, the national banking association
described in and which executed the above instrument; and that he/she/they
signed his/her/their name(s) thereto by authority of the board of directors of
said corporation.



                                                               /s/ Jane A. Dwyer
                                                               -----------------
                                                               Notary Public


<PAGE>


                         Schedule 101 to Loan Agreement

               The matters referred to in Item 1 or Item 3 of the Company's
Annual Report on Form 10-K for the year ended December 31, 2000.



<PAGE>


                                      NOTE

Albany, New York                                                    June 1, 2001
$13,500,000.00

         BALCHEM CORPORATION, a Maryland corporation having an address of P. O.
Box 175, Slate Hill, New York 10973 (the "Company"), acknowledges itself
indebted and for value received does hereby promise to pay to the order of FLEET
NATIONAL BANK a national banking association having an office at 69 State
Street, Albany, New York 12201 (the "Holder"), or its successors or assigns, the
principal sum of THIRTEEN MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($13,500,000.00), with interest thereon as set forth below.

SECTION 1. DEFINITION OF TERMS. The following words and terms as used in this
Note shall have the following meanings unless the context or use indicates
another or different meaning or intent:

               "ADJUSTED LIBOR RATE" means a rate per annum subject to
               adjustment approximately each one month, from and after the
               Closing Date equal to the Libor Rate plus one and one quarter
               percent (1.25%).

               "BUSINESS DAY" means, in respect of any date that is specified in
               this Note to be subject to adjustment in accordance with the
               Following Business Day Convention, a day which commercial banks
               settle payment in (i) London, if the payment obligation is
               calculated by reference to any Libor Rate or (ii) New York, if
               the payment obligation is calculated by reference to any Prime
               Rate.

               "DEFAULT RATE" means a rate per annum equal to two percent (2%)
               above the rate of interest otherwise applicable to the Note.

               "FLOATING RATE" means a variable rate per annum equal to the
               Prime Rate.

               FOLLOWING BUSINESS DAY CONVENTION" shall mean that an adjustment
               will be made if that date would otherwise fall on a day that is
               not a Business Day so that the date will be the first following
               day that is a Business Day.

               "INTEREST RATE PERIOD" means each one month, or slightly longer
               or shorter period during which a quoted Libor Rate is in effect
               hereunder.

               "LIBOR RATE" means the rate per annum as determined on the basis
               of the offered rates for deposits in U.S. Dollars for the
               applicable Interest Rate Period which appears on the Telerate
               page 3750 as of 11:00 a.m. London time on the day which is two
               (2) London Banking Days prior to the first day of the Interest
               Rate Period in question; provided, however, if the rate described
               above does not appear on the Telerate System on any applicable
               interest determination date, the Libor Rate shall be the rate
               (rounded upward if necessary, to the nearest one-hundred
               thousandth of a percentage point) determined on the basis of the
               offered rates for deposits in U.S. Dollars for the applicable
               Interest Rate Period which are offered by four major banks in the
               London Interbank Market at approximately 11:00 a.m. London time
               on the day which is two (2) London Banking Days prior to the
               first day of the Interest Rate Period in question as selected by
               the Holder. The principal London office of each of the four major
               London banks will be requested to provide a quotation of its U.S.
               dollar deposit offered rate. If at least two such quotations are
               provided, the



<PAGE>

               rate for that date will be the arithmetic mean of the quotations.
               If fewer than two quotations are provided as requested, then the
               Libor Rate will be determined on the basis of the rates quoted
               for loans in U.S. Dollars to leading European banks for the
               applicable Interest Rate Period as offered by major banks in New
               York City at approximately 11:00 a.m. New York City time on the
               day which is two (2) London Banking Days prior to the first day
               of the Interest Rate Period in question. Notwithstanding anything
               to the contrary set forth herein, in the event the Board of
               Governors of the United States Federal Reserve System shall
               impose a Reserve Percentage with respect to Libor deposits of the
               Holder, then for any period during which said Reserve Percentage
               shall apply, the Libor Rate shall equal the rate as determined
               above divided by an amount equal to one (1) minus said Reserve
               Percentage. Reserve Percentage shall mean the maximum aggregate
               reserve requirement (including all basic, supplemental, marginal
               and other reserves) which is imposed on member banks of the
               Federal Reserve System against "Euro-currency Liabilities" as
               defined in Regulation D. In the event the Holder is unable to
               obtain any such quotation as provided above, it will be deemed
               that the Libor Rate cannot be determined and the Floating Rate
               shall apply to the Principal Balance until such time as the Libor
               Rate can be determined.

               "LONDON BANKING DAY" shall mean any date on which commercial
               banks are open for business in London, England.

               "MATURITY DATE" means June 1, 2009.

               "PRIME RATE" means the per annum rate of interest announced by
               the Holder from time to time as the "Fleet Bank Prime Rate",
               which rate is a reference point for determining interest rates
               charged on certain loans and is not necessarily the lowest rate
               at which the Holder lends. The interest rate applicable to the
               Principal Balance based upon the Prime Rate shall change when and
               as said "Fleet Bank Prime Rate" is raised or lowered at the
               Holder and shall be effective the same date of such change,
               whether or not notice is given to the Company.

               "PRINCIPAL BALANCE" means the outstanding principal balance of
               this Note from time to time.

All other capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Loan Agreement (as hereinafter
defined).

SECTION 2. INTEREST; PAYMENTS. (A) Subject to the provisions of Section 6 of
this Note, commencing on the Closing Date and continuing thereafter up to and
including the Maturity Date, interest (calculated on the Principal Balance
hereof and based upon the actual number of days elapsed over a 360 day year)
shall accrue at a rate per annum equal to the Adjusted Libor Rate and shall be
payable monthly as set forth in Section 2(B) hereof. In the event the Principal
Balance remains outstanding after the Maturity Date, interest (calculated on the
Principal Balance hereof and based upon the actual number of days elapsed over a
360-day year) shall accrue at a rate per annum equal to the Default Rate.

               (B) Commencing July 1, 2001 and continuing on the first calendar
day of each calendar month thereafter up to and including September 1, 2001,
payments of accrued interest hereunder shall be due and payable. Commencing on
October 1, 2001 and continuing on the first calendar day of each calendar month
thereafter during the term hereof, monthly payments of accrued interest
hereunder together with equal monthly payments of principal in an amount
sufficient to fully amortize the Principal Balance over the remaining term
hereof shall be due and owing.

               (C) In the event that any portion of any payment due hereunder is
not made within ten (10) days of the date such payment became due, the Company
shall pay to the Holder on demand a late payment


                                      2
<PAGE>

charge equal to five percent (5%) of the portion of any such payment not paid
within such ten (10) day period provided, however, that such late payment charge
shall not exceed $10,000.00 in the aggregate per incident and shall not exceed
$10,000 in the aggregate upon the maturity or acceleration of the Principal
Balance.

               (D) Notwithstanding anything to the contrary herein contained, on
the Maturity Date, the entire outstanding principal amount hereof and all
accumulated, accrued and unpaid interest thereon shall be due and payable.

               (E) All payments received pursuant to this Note shall be applied
first to the payment of all fees, expenses, and other amounts due to the Holder
(excluding principal and interest), then to accrued, accumulated and unpaid
interest, and the balance in reduction of the Principal Balance hereof, provided
that should an Event of Default have occurred and be continuing, payments
received hereunder shall be applied at the discretion of the Holder.

               (F) All payments of interest and principal are to be made for the
account of Fleet National Bank, 69 State Street, Albany, New York 12201 or at
such other place as the Holder may direct the Company by written notice. All
payments shall be in lawful money of the United States in immediately available
funds and are subject to the Following Business Day Convention with respect to
date of payment.

SECTION 3. PREPAYMENT, MANDATORY REDEMPTION. (A) The Company may upon at least
three (3) prior Business Days' notice to the Holder (which notice shall be
irrevocable) prepay the Principal Balance and any such prepayment shall occur
only on the last day of an Interest Rate Period. The Company shall pay to the
Holder, upon request of the Holder, such amount or amounts as shall be
sufficient (in the reasonable opinion of the Holder) to compensate it for any
loss, cost, or expense incurred as a result of: (i) any prepayment on a date
other than the last day of an Interest Rate Period or (ii) any failure by the
Company to prepay on the date for prepayment specified in the Company's written
notice. Without limiting the foregoing, in the event the Company should elect to
prepay all or a portion of the Principal Balance during any time when the
Adjusted LIBOR Rate is in effect, the Company shall pay to the Holder a "yield
maintenance fee" in an amount computed as follows: the current rate for United
States Treasury securities (bills on a discounted basis shall be converted to a
bond equivalent) with a maturity date closest to the last day of the Interest
Rate Period then in effect as to which the prepayment is made, shall be
subtracted from the LIBOR Rate in effect at the time of prepayment. If the
result is zero or a negative number, there shall be no yield maintenance fee. If
the result is a positive number, then the resulting percentage shall be
multiplied by the amount of the Principal Balance being prepaid. The resulting
amount shall be divided by 360 and multiplied by the number of days remaining
until the last day of the Interest Rate Period then in effect as to which the
prepayment is made. Said amount shall be reduced to present value calculated by
using the above referenced United States Treasury securities rate and the number
of days remaining until the last day of the Interest Rate Period then in effect
to which prepayment is made. The resulting amount shall be the yield maintenance
fee due to the Holder upon prepayment.

               (B) The Company shall pay a yield maintenance premium calculated
above as though the Company had exercised a right of prepayment with respect to
any other reduction in the Principal Balance (a "Principal Reduction") which
reduces the Principal Balance to less than the scheduled Principal Balance as of
the date such Principal Reduction is made, including without limitation any
Principal Reduction resulting from:

                             (i) the acceleration by the Holder of the unpaid
               Principal Balance of this Note pursuant to the acceleration
               provisions contained in this Note and/or the Security Agreement
               upon an occurrence of any Event of Default by the Company,
               including without limitation, violation by


                                       3

<PAGE>

               the Company of the restrictions set forth in the Loan Agreement
               or any other Financing Document on the sale, transfer, or
               encumbrance of the Collateral; or

                             (ii) any satisfaction or release of the Security
               Agreement by foreclosure (whether by power of sale or by judicial
               proceeding), deed in lieu of foreclosure, or any other means; or

                             (iii) damage or destruction to, or condemnation of
               the Collateral and election by the Holder or the Company, as the
               case may be, not to restore the Collateral and which results in a
               prepayment or partial prepayment.

SECTION 4. SECURITY. This Note is secured and entitled to the security given by
a security agreement dated the date hereof (as amended or supplemented from time
to time, the "Security Agreement") from the Company in favor of the Holder.

               The loan evidenced by this Note is being made pursuant to the
terms, provisions and conditions of a certain loan agreement dated the date
hereof (as amended or supplemented from time to time, the "Loan Agreement") by
and between the Company and the Holder.

SECTION 5. DOCUMENTS. Reference is hereby made to the Security Agreement and the
Loan Agreement and to all amendments and supplements thereto for the provisions,
among others, with respect to the nature and extent of the security, the rights,
duties and obligations of the Company and the Holder and the terms upon which
this Note is or may be secured.

SECTION 6. DEFAULT; ACCELERATION. The entire unpaid Principal Balance of this
Note, together with all accrued and unpaid interest due hereon, may be declared
immediately due and payable by the Holder upon the occurrence and during the
continuance of an "Event of Default" as defined in the Loan Agreement provided,
however, that from and after the date of any such declaration, the outstanding
Principal Balance hereof and all accrued and unpaid interest thereon shall be
due and payable, interest shall continue to accrue on the unpaid Principal
Balance to the date of payment at a rate per annum equal to the Default Rate.

SECTION 7. COVENANT AGAINST USURY. All agreements between the Company and the
Holder are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of maturity of the indebtedness
evidenced hereby or otherwise, shall the amount paid or agreed to be paid to the
Holder for the use or the forbearance of the indebtedness evidenced hereby
exceed the maximum permissible under applicable law. As used herein, the term
"applicable law" shall mean the law in effect as of the date hereof provided,
however that in the event there is a change in the law which results in a higher
permissible rate of interest, then this Note shall be governed by such law as of
its effective date. In this regard, it is expressly agreed that it is the intent
of the Company and the Holder in the execution, delivery and acceptance of this
Note to contract in strict compliance with the laws of the State of New York
from time to time in effect. If, under or from any circumstances whatsoever,
fulfillment of any provision hereof or of any law of the Financing Documents at
the time of performance of such provision shall be due, shall involve
transcending the limit of such validity prescribed by applicable law, then the
obligation to be fulfilled shall automatically be reduced to the limits of such
validity, and if under or from circumstances whatsoever the Holder should ever
receive as interest an amount which would exceed the highest lawful rate, such
amount which would be excessive interest shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest. This
provision shall control every other provision of all agreements between the
Company and the Guarantors and the Holder.

                                        4
<PAGE>


SECTION 8. WAIVER OF DILIGENCE, PRESENTMENT, DEMAND, ETC. The Company hereby
waives with respect to this Note: diligence, presentment, demand for payment,
filing of claims with a court in the event of bankruptcy of the Company or any
other person or entity liable in respect to this Note, any right to require a
proceeding first against the Company or any other such Person; protest, notice
of dishonor or nonpayment of any such liabilities and any other notice and all
demands whatsoever except as specifically set forth in this Note or any of the
other Financing Documents.

SECTION 9. WAIVER, CHANGE, MODIFICATION OR DISCHARGE. The provisions of this
Note may not be waived, changed, modified or discharged orally, but only by
agreement in writing, signed by the party against whom any enforcement of any
waiver, change, modification or discharge is sought.

SECTION 10. TRANSFER AND ASSIGNMENT OF NOTE; PLEDGE OF RIGHTS; PARTICIPATION.
(A) The Holder may at any time pledge all or any portion of its rights under
this Note and the other Financing Documents to any of the twelve (12) Federal
Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C.
Section 341. No such pledge or enforcement thereof shall release the Holder from
its obligations under any of the Financing Documents.

               (B) The Holder shall have the unrestricted right at any time and
from time to time, to grant to one or more banks or other financial institutions
(each, a "Participant") participating interests in the Holder's obligation to
lend hereunder and/or any or all of the loans held by the Holder hereunder. In
the event of any such grant by the Holder of a participating interest to a
Participant, whether or not upon notice to the Company, the Holder shall remain
responsible for the performance of its obligations hereunder and the Company
shall continue to deal solely and directly with the Holder in connection with
the Holder's rights and obligations hereunder.

               The Holder shall have the unrestricted right at any time or from
time to time, to assign all or any portion of its rights and obligations
hereunder and under the other Financing Documents to one or more banks or other
financial institutions (each, an "Assignee"), and the Company agrees that it
shall execute, or cause to be executed, such documents, including without
limitation, amendments to this Loan Agreement and to the other Financing
Documents as the Holder shall deem necessary to effect the foregoing. In
addition, at the request of the Holder and any such Assignee, the Company shall
issue one or more new promissory notes, as applicable, to any such Assignee and,
if the Holder has retained any of its rights and obligations hereunder following
such assignment, to the Holder, which new promissory notes shall be issued in
replacement of, but not in discharge of, the liability evidenced by the
promissory note held by the Holder prior to such assignment and shall reflect
the amount of the respective commitments and loans held by such Assignee and the
Holder after giving effect to such assignment. Upon the execution and delivery
of appropriate assignment documentation, amendments and any other documentation
required by the Holder in connection with such assignment, and the payment by
Assignee of the purchase price agreed to by the Holder, and such Assignee, such
Assignee shall be a party to this Loan Agreement and shall have all of the
rights and obligations of the Holder hereunder and under the other Financing
Documents to the extent that such rights and obligations have been assigned by
the Holder pursuant hereto and to the assignment documentation between the
Holder and such Assignee, and the Holder shall be released from its obligations
hereunder and thereunder to a corresponding extent.

               Provided no Event of Default has occurred and is continuing and
except with respect to an assignment or transfer of the Loans mandated by a
Governmental Authority, the Company shall have the right to approve the identity
of any Participant or Assignee pursuant to this subsection (B), which approval
shall not be unreasonably withheld, delayed or conditioned. Except as aforesaid,
the right of the Holder to assign or grant a participation interest shall not
require notice to or consent of the Company.

                                        5
<PAGE>


         The Holder may furnish any  information  concerning  the Company in its
possession from time to time to prospective Assignees and Participants, provided
that the Holder shall require any such  prospective  Assignee or  Participant to
agree in writing for the benefit of the Company to maintain the  confidentiality
of such information.

SECTION 11. JURY TRIAL WAIVER. THE COMPANY AND THE HOLDER (BY ACCEPTANCE OF THIS
NOTE) MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT
TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS NOTE OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING,
WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR
ACTIONS OF THE HOLDER RELATING TO THE ADMINISTRATION OF THE LOAN OR ENFORCEMENT
OF THIS NOTE, AND AGREE THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH
ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. EXCEPT AS PROHIBITED BY LAW, THE COMPANY HEREBY WAIVES ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES. THE COMPANY CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE
HOLDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE HOLDER WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR THE HOLDER TO ACCEPT THIS NOTE AND MAKE
THE LOAN.

SECTION 12. RIGHT OF SET OFF. The Company hereby grants to the Holder, a
continuing lien, security interest and right of setoff as security for all
liabilities and obligations to the Holder, whether now existing or hereafter
arising, upon and against all deposits, credits, collateral and property, now or
hereafter in the possession, custody, safekeeping or control of the Holder or
any entity under the control of FleetBoston Financial Corporation and its
successors and assigns, or in transit to any of them. At any time following the
occurrence and during the continuance of an Event of Default, without demand or
notice (any such notice being expressly waived by the Company), the Holder may
set off the same or any part thereof and apply the same to any liability or
obligation of the Company even though unmatured and regardless of the adequacy
of any other collateral securing this Note. ANY AND ALL RIGHTS TO REQUIRE THE
HOLDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL
WHICH SECURES THIS NOTE, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO
SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE COMPANY, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.

SECTION 13. EXPENSES INCURRED IN CONNECTION WITH ENFORCEMENT. The Company shall
pay on demand all reasonable expenses of the Holder in connection with the
preparation, administration, default, collection, waiver or amendment of loan
terms, or in connection with the Holder's exercise, preservation or enforcement
of any of its rights, remedies or options hereunder, including, without
limitation, reasonable fees of outside legal counsel or the allocated costs of
in-house legal counsel, accounting, consulting, brokerage or other similar
professional fees or expenses, and any reasonable fees or expenses associated
with travel or other costs relating to any appraisals or examinations conducted
in connection with the loan or any collateral therefor, and the amount of all
such expenses shall, until paid, bear interest at the rate applicable to
principal hereunder (including any default rate) and be an obligation secured by
any collateral.

                                       6

<PAGE>


SECTION 14. CHOICE OF LAW. This Note and the rights and obligations of the
parties hereunder shall be construed and interpreted in accordance with the laws
of the State of New York (the "Governing State") (excluding the laws applicable
to conflicts or choice of law).

         THE COMPANY  AGREES THAT ANY SUIT FOR THE  ENFORCEMENT OF THIS NOTE MAY
BE BROUGHT IN THE COURTS OF THE  GOVERNING  STATE OR ANY FEDERAL  COURT  SITTING
THEREIN AND CONSENTS TO THE NONEXCLUSIVE  JURISDICTION OF SUCH COURT AND SERVICE
OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE  COMPANY BY MAIL AT THE  ADDRESS
SET FORTH HEREIN.  THE COMPANY  HEREBY  WAIVES ANY OBJECTION  THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT
IS BROUGHT IN AN INCONVENIENT FORUM.

SECTION 15. MERGER. This Note is intended by the parties as the final, complete
and exclusive statement of the transactions evidenced by this Note. All prior
contemporaneous promises, agreements and understandings, whether oral or
written, are deemed to be superceded by this Note, and no party is relying on
any promise, agreement or understanding not set forth in this Note. This Note
may not be amended or modified except by a written instrument describing such
amendment or modification executed by the Company and the Holder.

SECTION 16. USE OR PROCEEDS. No portion of the proceeds of this Note shall be
used, in whole or in part, for the purpose of purchasing or carrying any "margin
stock" as such term is defined in Regulation U of the Board of Governors of the
Federal Reserve System.

SECTION 17. LOST OR DAMAGED NOTE. Upon receipt of an affidavit of an officer of
the Holder as to the loss, theft, destruction or mutilation of this Note or any
other security document which is not of public record, and, in the case of any
such loss, theft, destruction or mutilation, upon surrender and cancellation of
such Note or other security document, the Holder will issue, in lieu thereof, a
replacement Note or other security document in the same principal amount thereof
and otherwise of like tenor.


                                       7

<PAGE>


         IN WITNESS WHEREOF,  the Company has executed this instrument as of the
day and year first above written.


                                    BALCHEM CORPORATION


                                    By:    /s/ Frank J. Fitzpatrick
                                           ----------------------------------
                                    Name:  Frank J. Fitzpatrick
                                           ----------------------------------
                                    Title: Controller and Assistant Secretary
                                           ----------------------------------

STATE OF NEW YORK      )
                       )ss.:
COUNTY OF NEW YORK     )

         On the 30 day of May, in the year 2001 before me personally  came Frank
J.  Fitzpatrick,  to me known,  who, being by me duly sworn,  did depose and say
that he/she/they  reside(s) in  _____________________;  that he/she/they is(are)
the Controller & Assistant  Secretary of BALCHEM  CORPORATION,  the  corporation
described  in and which  executed  the above  instrument;  and that  he/she/they
signed  his/her/their  name(s) thereto by authority of the board of directors of
said corporation.

                                                               /s/ Jane A. Dwyer
                                                               -----------------
                                                               Notary Public



                                       8

<PAGE>


                                PROMISSORY NOTE
                           (Revolving Line of Credit)

$3,000,000.00                                                       June 1, 2001
                                                                Albany, New York


FOR VALUE RECEIVED, the undersigned, BALCHEM CORPORATION, a corporation
organized and existing under the laws of the State of Maryland and having an
address of P. O. Box 175, Slate Hill, New York 10973 (herein called the
"Company"), hereby promises to pay to the order of Fleet National Bank, a
national banking association organized and existing under the laws of the United
States of America, its successors and assigns (herein called the "Payee" or the
"Bank"), at such Payee's main office at 69 State Street, Albany, New York 12201,
or such other location as the Payee shall designate in writing from time to
time, the unpaid amount of all sums that have been advanced to or for the
benefit of the Company in accordance with the terms hereof in an amount not to
exceed the principal sum of Three Million and no/100 Dollars ($3,000,000.00),
together with interest on the disbursed, unpaid principal, or, if less, the
aggregate unpaid principal amount due hereunder, together with interest at the
rate specified below until paid in full. The records of the Payee maintained in
the ordinary course of business shall be prima facie evidence of the existence
and amounts of the Company's obligations recorded therein. All computations of
interest under this Note shall be made on the basis of a three hundred sixty
(360) day year and the actual number of days elapsed.

DEFINITIONS. As used herein, the following terms shall have the following
meanings:

         "Adjusted Libor Rate" - Means a rate per annum subject to adjustment
approximately each one month, two months or three months, as applicable equal to
the Libor Rate plus one percent (1.00%).

         "Applicable Rate" - Shall mean the Adjusted Libor Rate or the Floating
Rate.

         "Business Day" - In respect of any date that is specified in this Note
to be subject to adjustment in accordance with applicable Following Business Day
Convention, a day which commercial banks settle payment in (i) London if the
payment obligation is calculated by reference to any Libor Rate, or (ii) New
York, if the payment obligation is calculated by reference to any Floating Rate.

         "Default Rate" - A per annum rate to two percent (2%) above the rate of
interest otherwise applicable to the Note.

         "Election Notice" - The Loan Portion and Interest Rate Election notice
to be delivered by the Company to the Bank from time to time in the form of
Exhibit "A" attached hereto, in which the Company shall indicate a Loan Portion
an Interest Rate Election and an Interest Rate Election Period. The Election
Notice shall also serve as a request by the Company for a Loan advance from the
Bank.

         "Event of Default" - Any of those events defined as an Event of Default
under the Loan Agreement.

         "Floating Rate" - The variable per annum rate of interest so designated
from time to time by Fleet National Bank as its prime rate. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate being
charged to any customer. Any change in this interest rate shall be effective on
the day the change in such rate occurs, whether or not notice has been given to
the Company.

<PAGE>

         "Following Business Day Convention" - The convention for adjusting any
relevant date if it would otherwise fall on a day that is not a Business Day.
The term "Business Day" when used in conjunction with the term "Following
Business Day Convention" and a date, shall mean that an adjustment will be made
if that date would otherwise fall on a day that is not a Business Day so that
the date will be the first following day that is a Business Day.

         "Interest Rate Election" - An election on the part of the Company to
choose the Adjusted Libor Rate or the Floating Rate to be charged on each Loan
Portion.

         "Interest Rate Election Period" - The time period during which interest
is to accrue on a Loan Portion at the Applicable Rate as elected by the Company;
provided however, (1) in the event of an election to have the Adjusted Libor
Rate apply to a Loan Portion, such time period shall be a one month period and
(2) that in no event shall any Interest Rate Election Period extend beyond the
Maturity Date of this Loan.

         "Libor Interest Rate Period" - The one month, two month or three month,
as applicable, (or slightly longer or shorter) period during which the Adjusted
Libor Rate is in effect.

         "Libor Rate" - The rate per annum as determined on the basis of the
offered rates for deposits in U.S. Dollars for a period of time equal to the
applicable Libor Interest Rate Period which appears on the Telerate page 3750 as
of 11:00 a.m. London time on the day which is two (2) London Banking Days prior
to the first day of the Libor Interest Rate Period in question. In the event
such rate does not appear on the Telerate System on any applicable interest
determination date, the Libor Rate shall mean the rate (rounded upwards, if
necessary, to the nearest one hundred-thousandth of a percentage point)
determined on the basis of the offered rates for deposits in U.S. dollars for a
period of time equal to the applicable Libor Interest Rate Period which are
offered by four major banks in the London Interbank Market at approximately
11:00 a.m. London time on the day which is two (2) London Banking Days prior to
the first day of the Libor Interest Rate Period in question as selected by the
Bank. The principal London office of each of the four major London banks will be
requested to provide a quotation of its U. S. dollar deposit offered rate. If at
least two such quotations are provided, the rate for that date will be the
arithmetic mean of the quotations. In the event less than two quotations are
provided as requested, then the rate will be determined on the basis of the
rates quoted for loans in U.S. Dollars to leading European banks for a period of
time comparable to such Libor Interest Rate Period offered by major banks in New
York City at approximately 11:00 a.m. New York City time on the day which is two
(2) London Banking Days prior to the first day of the Libor Interest Rate Period
in question. In the event that the Bank is unable to obtain any such quotation
as provided above, it will be deemed that Libor cannot be determined in which
event the interest rate applicable hereto shall be the Floating Rate until such
time as the Libor Rate can be determined. Notwithstanding anything to the
contrary set forth herein, in the event the Board of Governors of the United
States Federal Reserve System shall impose a Reserve Percentage with respect to
Libor deposits of the Bank, then for any period during which said Reserve
Percentage shall apply, Libor shall equal the amount as determined above divided
by an amount equal to one (1) minus said Reserve Percentage. "Reserve
Percentage" shall mean the maximum aggregate reserve requirement (including all
basic, supplemental, marginal and other reserves) which is imposed on member
banks of the Federal Reserve System against "Euro-currency Liabilities" as
defined in Regulation D. "Banking Day" shall mean, in respect of any city, any
date on which commercial banks are open for business in that city.

         "Loan" - The Loan of up to $3,000,000.00 by the Lender to the Company
that is the subject of this Note.

                                       2
<PAGE>


         "Loan Agreement" - Means the loan agreement dated the date hereof by
and between the Company and the Bank, as such may be amended or supplemented
from time to time.

         "Loan Portion" - Each advance of Loan proceeds by the Bank to the
Company, each of which advances will be treated separately for the purposes of
computing interest. Each such advance shall accrue interest at the Adjusted
Libor Rate or the Floating Rate, as selected by the Company.

         "Maturity Date" - May 31, 2002.

         "Security Agreement" - Means the security agreement dated the date
hereof from the Company in favor of the Bank, as such security agreement may be
amended or supplemented from time to time.

ADVANCES. Advances under this Note shall be reflected on the records of the
Payee. In absence of an Event of Default by the Company, as the Company makes
repayments of principal, it shall be permitted to re-borrow hereunder until the
Maturity Date. When requesting each advance of Loan proceeds from the Bank, the
Company shall deliver to the Bank an Election Notice setting forth the Loan
Portion, and indicating an Interest Rate Election and an Interest Rate Election
Period for such Loan Portion. In the case of an Adjusted Libor Rate Interest
Rate Election, the Interest Rate Election for each Loan Portion shall remain in
effect until expiration of the Interest Rate Election Period for that Loan
Portion. Prior to the end of the Interest Rate Election Period at issue, the
Company shall deliver to the Bank a new Election Notice designating the new
Interest Rate Election to apply to the Loan Portion. In the event the Company
fails to deliver an Election Notice to the Bank prior to the expiration of any
Interest Rate Election period, interest shall accrue on that Loan Portion at the
Floating Rate until the Company again makes an Interest Rate Election. Once
chosen, the Loan Portion and the Interest Rate Election shall remain in effect
until the expiration of the Interest Rate Election Period. Notwithstanding
anything to the contrary set forth herein, (i) there shall be no more than three
(3) Loan Portions outstanding at any one time bearing interest at the Adjusted
Libor Rate and no more than one (1) Loan Portion outstanding at any one time
bearing interest at the Floating Rate and (ii) the Company's ability to elect to
have the Adjusted Libor Rate apply to the Loan or a Loan Portion shall be
conditioned upon the absence of an Event of Default that is then continuing.

PAYMENTS. In the event the entire amount of any payment due hereunder is not
paid within ten (10) days after the same is due a late fee equal to five percent
(5%) of the required payment will be charged by the Payee provided, however,
that such late fee shall not exceed $10,000.00 in the aggregate per incident and
shall not exceed $10,000 in the aggregate upon the maturity or acceleration of
the Principal Balance.

               Accrued interest shall be payable on the first day of the month
immediately succeeding the date of this Note, and on the first day of each
succeeding month thereafter during the term of this note and all disbursed
unpaid principal together with accrued interest will be paid in full no later
than the Maturity Date. All payments shall be applied first to the payment of
all fees, expenses and other amounts due to the Payee (excluding principal and
interest), then to accrued interest, and the balance on account of outstanding
principal; provided, however that after the occurrence of an Event of Default,
payments will be applied to the obligations of the Company to the Payee as the
Payee determines in its sole discretion. All payments shall be in lawful money
of the United States in immediately available funds, without counterclaim or set
off and free and clear of and without any deduction or withholding for, any
taxes or other payments, and are subject to the Following Business Day
Convention with respect to date of payment.

                                       3

<PAGE>


PREPAYMENT. In the event the Company prepays any Loan Portion carrying interest
at the Floating Rate, there shall be no prepayment premium or penalty. The
Company may prepay a Libor Advance only upon at least three (3) Business Days
prior written notice to the Bank (which notice shall be irrevocable), and any
such prepayment shall occur only on the last day of the Libor Interest Rate
Period. The Company shall pay to the Bank, upon request of the Bank, such amount
or amounts as shall be sufficient (in the reasonable opinion of the Bank) to
compensate it for any loss, cost or expense incurred as a result of: (i) any
payment of a Libor Advance on a date other than the last day of the Interest
Rate Election Period for such Libor Advance, (ii) any failure by the Company to
borrow a Libor Advance on the date specified in the Election Notice, or (iii)
any failure by the Company to pay a Libor Advance on the date for payment
specified in said written notice. Without limiting the foregoing, in the event
the Company should elect to prepay all or a portion of the Principal Balance
during any time when the Adjusted LIBOR Rate is in effect, the Company shall pay
to the Bank a yield maintenance fee in an amount computed as follows: the
current rate for United States Treasury securities (bills on a discounted basis
shall be converted to a bond equivalent) with a maturity date closest to the
last day of the Libor Interest Rate Period as to which the prepayment is made
shall be subtracted from the Libor Rate in effect at the time of prepayment. If
the result is zero or a negative number, there shall be no yield maintenance
fee. If the result is a positive number, then the resulting percentage shall be
multiplied by the amount of the Principal Balance being prepaid. The resulting
amount shall be divided by 360 and multiplied by the number of days remaining
until the last day of the Libor Interest Rate Period as to which the prepayment
is made. Said amount shall be reduced to present value calculated by using the
above referenced United States Treasury security rate and the number of days
remaining in the Libor Interest Rate Period as to which prepayment is made. The
resulting amount shall be the yield maintenance fee due to the Bank upon
prepayment. If by reason of an Event of Default the Bank elects to declare this
Note to be immediately due and payable, then any yield maintenance fee with
respect to a prepayment shall become due and payable in the same manner as
though the Company had exercised such right of prepayment.

DEFAULT. Upon the occurrence of one or more Events of Default under the Loan
Agreement, the entire principal and interest on this Note shall become
immediately due and payable without presentment or protest or other notice of
demand, all of which are expressly waived by the Company. If the Bank, in its
sole and absolute discretion, elects not to demand payment by the Company,
notwithstanding said failure to demand, the Bank shall be under no obligation to
make advances pursuant to the terms of this Note unless and until the Event of
Default is cured to the satisfaction of the Bank.

         If an Event of Default should occur and be continuing or after the
Maturity Date or after judgment has been rendered on this Note, all Loan
Portions shall bear interest at the Default Rate until the earlier of (i) the
Event of Default is cured, or (ii) all Loan Portions are paid in full.

         The powers and remedies given hereby shall not be exclusive of any
other powers and remedies available to the Payee. No course of dealings between
the Company and the Payee and no delay on the part of the Payee in exercising
any rights with respect to any default shall operate as a waiver of any rights
of the Payee. Failure upon the part of the Payee to exercise any rights with
respect to any default shall not operate as a waiver of any rights with respect
to any other default.

         Interest after maturity (whether by acceleration or otherwise) shall be
payable at the Default Rate set forth herein until this Note is paid in full.

PARTIAL INVALIDITY. If any provision of this Note or the application of it to
any person or circumstance, shall be invalid or unenforceable, the remainder of
this Note or the application of that

                                       4

<PAGE>

provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected and every other provision of
this Note shall be valid and fully enforceable.

WAIVER, CHANGE, MODIFICATION OR DISCHARGE. This Note may not be waived, changed,
modified or discharged orally, but only by agreement in writing signed by the
party against whom any enforcement of any waiver, change, modification or
discharge is sought.

COVENANT AGAINST USURY. All agreements between the Company and the Bank are
hereby expressly limited so that in no contingency or event whatsoever, whether
by reason of acceleration of maturity of the indebtedness evidenced hereby or
otherwise, shall the amount paid or agreed to be paid to the Bank for the use or
the forbearance of the indebtedness evidenced hereby exceed the maximum
permissible under applicable law. As used herein, the term "applicable law"
shall mean the law in effect as of the date hereof provided, however that in the
event there is a change in the law which results in a higher permissible rate of
interest, then this Note shall be governed by such law as of its effective date.
In this regard, it is expressly agreed that it is the intent of the Company and
the Bank in the execution, delivery and acceptance of this Note to contract in
strict compliance with the laws of the State of New York from time to time in
effect. If, under or from any circumstances whatsoever, fulfillment of any
provision hereof at the time of performance of such provision shall be due,
shall involve transcending the limit of such validity prescribed by applicable
law, then the obligation to be fulfilled shall automatically be reduced to the
limits of such validity, and if under or from circumstances whatsoever the Bank
should ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal balance evidenced hereby and not to the payment of
interest. This provision shall control every other provision of all agreements
between the Company and the Bank.

WAIVER OF DILIGENCE, PRESENTMENT, DEMAND, ETC. The Company hereby waives with
respect to this Note: diligence, presentment, demand for payment, filing of
claims with a court in the event of bankruptcy of the Company or any other
person or entity liable in respect to this Note, any right to require a
proceeding first against the Company or any other such person; protest, notice
of dishonor or nonpayment of any such liabilities and any other notice and all
demands whatsoever except as specifically set forth in this Note.

TRANSFER AND ASSIGNMENT OF NOTE; PLEDGE OF RIGHTS; PARTICIPATION. (A) The Bank
may at any time pledge all or any portion of its rights under this Note to any
of the twelve (12) Federal Reserve Banks organized under Section 4 of the
Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or enforcement
thereof shall release the Bank from its obligations hereunder.

               (B) The Bank shall have the unrestricted right at any time and
from time to time, and without the consent of or notice to the Company, to grant
to one or more banks or other financial institutions (each, a "Participant")
participating interests in the Bank's obligation to lend hereunder and/or any or
all of the loans held by the Bank hereunder. In the event of any such grant by
the Bank of a participating interest to a Participant, whether or not upon
notice to the Company, the Bank shall remain responsible for the performance of
its obligations hereunder and the Company shall continue to deal solely and
directly with the Bank in connection with the Bank's rights and obligations
hereunder.

               The Bank shall have the unrestricted right at any time or from
time to time, to assign all or any portion of its rights and obligations
hereunder and under the other Financing Documents to one or more banks or other
financial institutions (each, an "Assignee"), and the Company agrees that it
shall execute, or cause to be executed, such documents, including without
limitation, amendments to this Loan Agreement and to the other Financing
Documents as the Bank shall deem necessary to effect the

                                       5

<PAGE>

foregoing. In addition, at the request of the Bank and any such Assignee, the
Company shall issue one or more new promissory notes, as applicable, to any such
Assignee and, if the Bank has retained any of its rights and obligations
hereunder following such assignment, to the Bank, which new promissory notes
shall be issued in replacement of, but not in discharge of, the liability
evidenced by the promissory note held by the Bank prior to such assignment and
shall reflect the amount of the respective commitments and loans held by such
Assignee and the Bank after giving effect to such assignment. Upon the execution
and delivery of appropriate assignment documentation, amendments and any other
documentation required by the Bank in connection with such assignment, and the
payment by Assignee of the purchase price agreed to by the Bank, and such
Assignee, such Assignee shall be a party to this Loan Agreement and shall have
all of the rights and obligations of the Bank hereunder and under the other
Financing Documents to the extent that such rights and obligations have been
assigned by the Bank pursuant hereto and to the assignment documentation between
the Bank and such Assignee, and the Bank shall be released from its obligations
hereunder and thereunder to a corresponding extent.

         Provided no Event of Default has occurred and is continuing and except
with respect to an assignment or transfer of the Loans mandated by a
Governmental Authority, the Company shall have the right to approve the identity
of any Participant or Assignee under this subsection (B), which approval shall
not be unreasonably withheld, delayed or conditioned. Except as aforesaid, the
right of the Bank to assign or grant a participation interest shall not require
notice to or consent of the Company.

         The Bank may furnish any information concerning the Company in its
possession from time to time to prospective Assignees and Participants, provided
that the Bank shall require any such prospective Assignee or Participant to
agree in writing for the benefit of the Company to maintain the confidentiality
of such information.

JURY TRIAL WAIVER. THE COMPANY AND THE BANK (BY ACCEPTANCE OF THIS NOTE)
MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A
TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS NOTE OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING,
WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR
ACTIONS OF THE BANK RELATING TO THE ADMINISTRATION OF THE LOAN OR ENFORCEMENT OF
THIS NOTE, AND AGREE THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION
WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
EXCEPT AS PROHIBITED BY LAW, THE COMPANY HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES. THE COMPANY CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE
BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER
CONSITITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THIS NOTE AND MAKE THE
LOAN.

RIGHT OF SET OFF. The Company hereby grants to the Bank, a continuing lien,
security interest and right of setoff as security for all liabilities and
obligations to the Bank, whether now existing or hereafter arising, upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of the Bank or any entity under the
control of FleetBoston Financial Corporation and its successors and assigns or
in transit to any of them. At any time following the occurrence and during the
continuance of an Event of Default, without demand or notice (any such notice
being expressly waived by the Company), the Bank may set off the same or any
part thereof and apply the same

                                       6

<PAGE>

to any liability or obligation of the Company even though unmatured and
regardless of the adequacy of any other collateral securing this Note. ANY AND
ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT
TO ANY OTHER COLLATERAL WHICH SECURES THIS NOTE, PRIOR TO EXERCISING ITS RIGHT
OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
COMPANY, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

EXPENSES INCURRED IN CONNECTION WITH ENFORCEMENT. The Company shall pay on
demand all reasonable expenses of the Payee in connection with the preparation,
administration, default, collection, waiver or amendment of loan terms, or in
connection with the Payee's exercise, preservation or enforcement of any of its
rights, remedies or options hereunder, including, without limitation, reasonable
fees of outside legal counsel or the allocated costs of in-house legal counsel,
accounting, consulting, brokerage or other similar professional fees or
expenses, and any reasonable fees or expenses associated with travel or other
costs relating to any appraisals or examinations conducted in connection with
the loan or any collateral therefor, and the amount of all such expenses shall,
until paid, bear interest at the rate applicable to principal hereunder
(including any default rate) and be an obligation secured by any collateral.

CHOICE OF LAW. This Note and the rights and obligations of the parties hereunder
shall be construed and interpreted in accordance with the laws of the State of
New York (the "Governing State") (excluding the laws applicable to conflicts or
choice of law).

         THE COMPANY AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY
BE BROUGHT IN THE COURTS OF THE GOVERNING STATE OR ANY FEDERAL COURT SITTING
THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE
OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE COMPANY BY MAIL AT THE ADDRESS
SET FORTH HEREIN. THE COMPANY HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT
IS BROUGHT IN AN INCONVENIENT FORUM.

MERGER. This Note is intended by the parties as the final, complete and
exclusive statement of the transactions evidenced by this Note. All prior
contemporaneous promises, agreements and understandings, whether oral or
written, are deemed to be superceded by this Note, and no party is relying on
any promise, agreement or understanding not set forth in this Note. This Note
may not be amended or modified except by a written instrument describing such
amendment or modification executed by the Company and the Bank.

USE OR PROCEEDS. No portion of the proceeds of this Note shall be used, in whole
or in part, for the purpose of purchasing or carrying any "margin stock" as such
term is defined in Regulation U of the Board of Governors of the Federal Reserve
System.

                                       7

<PAGE>


LOST OR DAMAGED NOTE. Upon receipt of an affidavit of an officer of the Bank as
to the loss, theft, destruction or mutilation of this Note or any other security
document which is not of public record, and, in the case of any such loss,
theft, destruction or mutilation, upon surrender and cancellation of such Note
or other security document, the Bank will issue, in lieu thereof, a replacement
Note or other security document in the same principal amount thereof and
otherwise of like tenor.


                                       BALCHEM CORPORATION


                                       By:    /s/ Frank J. Fitzpatrick
                                              ----------------------------------
                                       Name:  Frank J. Fitzpatrick
                                              ----------------------------------
                                       Title: Controller and Assistant Secretary


STATE OF NEW YORK          )
                           )ss.:
COUNTY OF                  )

               On the 30 day of May, in the year 2001 before me personally came
Frank J. Fitzpatrick__, to me known, who, being by me duly sworn, did depose and
say that he/she/they reside(s) in _____________________; that he/she/they
is(are) the Controller & Assistant Secretary of BALCHEM CORPORATION, the
corporation described in and which executed the above instrument; and that
he/she/they signed his/her/their name(s) thereto by authority of the board of
directors of said corporation.

                                                               /s/ Jane A. Dwyer
                                                               -----------------
                                                               Notary Public


                                       8

<PAGE>



                                       A-1
                                   EXHIBIT "A"

                             FORM OF ELECTION NOTICE


BORROWER: BALCHEM CORPORATION

DATE:  _________________


All Capitalized terms carry the meanings as defined in the Promissory Note dated
June 1, 2001 (the "Note").

This Notice serves as the Election Notice required under the Note for the
purpose of selecting an Adjusted Libor Rate or the Floating Rate and an Interest
Rate Election Period for a Loan Portion.

Account to Credit:                            _________________________


Loan Portion:                                 $________________________**


Interest Rate Election                        ADJUSTED LIBOR RATE**
                                                           ___ One Month
                                                           ___ Two Month
                                                           ___ Three Month




                                              FLOATING RATE


Adjusted Libor Rate (if chosen):                        _____________%

Date of next Interest Rate Election Period:     _____________________
Subject to confirmation and verification by Bank.



Authorized by:               BALCHEM CORPORATION

                             By:_______________________________
                                  Authorized Representative


- ---------------------
**Libor Rate Election must be received not less than two (2) Banking Days prior
to the first day of the intended advance.



                                      A-1
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.2
<SEQUENCE>4
<FILENAME>exhibit4-2_39462.txt
<TEXT>



                                                                   Exhibit 4.2


- --------------------------------------------------------------------------------



                              BCP INGREDIENTS, INC.

                                       TO

                              FLEET NATIONAL BANK,
                                    AS HOLDER



               ==================================================

                                    GUARANTY

               ==================================================



                               DATED JUNE 1, 2001



- --------------------------------------------------------------------------------

<PAGE>


                                    GUARANTY

     THIS GUARANTY dated June 1, 2001 (the "Guaranty") from BCP INGREDIENTS,
INC., a Delaware corporation having an address of c/o Balchem Corporation, P. O.
Box 175, Slate Hill, New York 10973 (the "Guarantor") to FLEET NATIONAL BANK, a
national banking association organized and existing under the laws of the United
States and having an office at 69 State Street, Albany, New York 12201 (the
"Holder");

                              W I T N E S S E T H:

     WHEREAS, the Holder has extended certain loans to Balchem Corporation (the
"Company") (collectively, the "Loans") the repayment of which is evidenced by a
line of credit loan note dated the date hereof in the principal amount of
$3,000,000 and a term loan note dated the date hereof in the principal amount of
$13,500,000 (as modified or supplemented or extended from time to time,
collectively, the "Notes"); and

     WHEREAS, the Loan is being made pursuant to the provisions, terms and
conditions of a loan agreement dated the date hereof (as modified or
supplemented from time to time, the "Loan Agreement") by and between the Company
and the Holder; and

     WHEREAS, the proceeds of the Loan will be made available to the Company
upon the terms and conditions set forth in the Loan Agreement; and

     WHEREAS, in connection with the making of the Loan, the Company has offered
to have the Guarantor guaranty repayment of the Notes as set forth herein; and

     WHEREAS, the Guarantor specifically approves the terms of the Notes and the
other Financing Documents; and

     WHEREAS, the Guarantor is willing to enter into this Guaranty in order to
induce the Holder to make the Loan and thereby achieve interest cost and other
savings to the Company;

     NOW, THEREFORE, for good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties agree as follows:


<PAGE>

                                    ARTICLE I

                         REPRESENTATIONS AND WARRANTIES
                                OF THE GUARANTOR


The Guarantor does hereby represent and warrant to the Holder that:

SECTION 1.1. AUTHORITY OF THE GUARANTOR. The Guarantor represents and warrants
that it is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, possesses full corporate power
and corporate capacity to consummate the transactions contemplated hereby and is
authorized to conduct business in all jurisdictions wherein the nature of its
activities requires such except where the failure to do so would not have a
material adverse effect upon the Guarantor.

SECTION 1.2. NO VIOLATION OF RESTRICTIONS. The Guaranty and all other documents
to be executed by the Guarantor in connection therewith, when executed and
delivered by the respective parties thereto, will constitute valid and binding
obligations of the Guarantor. The execution and delivery by the Guarantor of the
Financing Documents to which it is a party and the performance thereof by the
Guarantor (1) have been authorized by all necessary corporate action and (2) do
not and will not conflict with, or result in any breach of, or constitute a
default under the Guarantor's articles of incorporation or by-laws or any
indenture, mortgage, deed of trust, bank loan or credit agreement or any other
agreement or instrument to which the Guarantor is a party or by which the
Guarantor or any of its Property may be bound for which a valid consent has not
been secured except where the failure to do so would not have a material adverse
effect upon the Guarantor, or result in the creation of any Lien (other than
that created by the Financing Documents) upon or with respect to any Property of
the Guarantor.

SECTION  1.3.   GOVERNMENTAL  CONSENT.  No  approval  or  other  action  by  any
Governmental   Authority  is  required  in  connection  with  the  execution  or
performance by the Guarantor of the Guaranty.

SECTION 1.4. PENDING LITIGATION. As of the date hereof, there are no actions,
suits or proceedings at law or in equity, or before or by any Governmental
Authority, pending or, to the knowledge of the Guarantor, threatened against or
affecting the Guarantor which are reasonably likely to materially adversely
affect the financial condition of the Guarantor and of the Company taken as a
whole or involving the validity or enforceability of the Financing Documents to
which it is a party or the priority of the Liens thereof, and to the Guarantor's
knowledge it is not in default with respect to any material order, writ,
judgment, decree or demand of any court or any Governmental Authority.

SECTION 1.5. NO DEFAULTS. No event has occurred and no condition exists which,
upon the execution of this Guaranty, would constitute an Event of Default under
Article III hereof.

SECTION 1.6. TAXES. All material Federal, state, county, municipal and city
income and other tax returns and other reports and documents required to have
been filed by the Guarantor have been filed and the Guarantor has paid all fees
and taxes indicated as due pursuant to such returns, reports and documents or
pursuant to any assessments received by the Guarantor, and the Guarantor knows
of no basis for any additional material assessment in respect of any such taxes
which has not been or will not be reserved for in accordance with GAAP.

                                       2
<PAGE>

                                   ARTICLE II

                            COVENANTS AND AGREEMENTS

SECTION 2.1. GUARANTY OF PAYMENT. (A) The Guarantor hereby irrevocably and
unconditionally guarantees to the Holder full and prompt payment of moneys
sufficient to pay, or to provide for the payment of, the outstanding principal
balance of the Notes together with premium, if any, thereon and accrued and
unpaid interest thereon (the "Guaranteed Amount"). The Guarantor hereby
irrevocably and unconditionally agrees that, upon the occurrence of an Event of
Default and the acceleration of the principal balance of the Notes then
outstanding by the Holder, the Guarantor will, upon written demand by the
Holder, promptly pay such Guaranteed Amount.

     (B) All payments by the Guarantor shall be paid in lawful money of the
United States of America in immediately available funds.

     (C) Each and every default in payment of the principal of or interest on
the Notes shall give rise to a separate cause of action hereunder, and separate
suits may be brought hereunder by the Holder as each cause of action arises.

     (D) The Guarantor shall pay to the Holder all reasonable costs and expenses
(including reasonable legal fees) incurred by the Holder in the protection of
any of its rights or in the pursuance of any of its remedies in respect of this
Guaranty.

SECTION 2.2. OBLIGATIONS UNCONDITIONAL. The obligations of the Guarantor under
this Guaranty shall be absolute and unconditional and shall remain in full force
and effect and, to the extent permitted by law, such obligations shall not be
affected, modified or impaired by any state of facts or the happening from time
to time of any event including, without limitation, any of the following,
whether or not with notice to or the consent of the Guarantor:

     (A) the invalidity, irregularity, illegality or unenforceability of, or any
defect in, (1) the Notes, (2) the other Financing Documents, or (3) any
collateral security for any thereof;

     (B) any present or future law or order of any government (de jure or de
facto) or of any agency thereof purporting to reduce, amend or otherwise affect
the Notes or any other obligation of the Company or any other obligor or to vary
any terms of payment;

     (C) any claim of immunity on behalf of the Company or any other obligor or
with respect to any Property of the Company or any other obligor;

     (D) the waiver, compromise, settlement, release or termination of any or
all of the obligations, covenants or agreements of (1) the Company under the
Notes or any of the other Financing Documents, (2) a co-guarantor of the Notes;

     (E) the failure to give notice to the Guarantor of the occurrence of an
Event of Default under the Financing Documents;

     (F) the transfer, assignment or mortgaging, or the purported or attempted
transfer, assignment or mortgaging, of all or any part of the interest of the
Company in the Collateral, or any failure of or defect in the title with respect
to the Company's interest in the Collateral;

                                       3
<PAGE>

     (G) the release, sale, exchange, surrender or other change in any security
for payment of the Notes;

     (H) the extension of the time for payment of any principal of or interest
or premium on the Notes owing or payable on such Notes or under this Guaranty or
of the time for performance of any other obligations, covenants or agreements
under or arising out of the other Financing Documents;

     (I) the modification or amendment (whether material or otherwise) of any
obligation, covenant or agreement set forth in the Notes or any other Financing
Document;

     (J) the taking of, or the omission to take, any of the actions referred to
in the Financing Documents;

     (K) any failure, omission or delay on the part of the Holder or any other
Person to enforce, assert or exercise any right, power or remedy conferred on
the Holder or such other Person in this Guaranty or the other Financing
Documents;

     (L) the voluntary or involuntary liquidation, dissolution, sale or other
disposition of all or substantially all the assets, marshaling of assets and
liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition with creditors or
readjustment of, or other similar proceedings affecting the Company or any of
the assets of any of them, or any contest of the validity of the Financing
Documents, in any such proceedings;

     (M) any event or action that would, in the absence of this Section 2.2,
result in the release or discharge of the Guarantor from the performance or
observance of any obligation, covenant or agreement contained in this Guaranty;

     (N) the default or failure of the Guarantor fully to perform any of its
obligations set forth in this Guaranty; or

     (O) any other circumstances which might otherwise constitute a legal or
equitable discharge or defense of a surety or a guarantor.

SECTION 2.3. WAIVERS BY THE GUARANTOR. The Guarantor hereby waives with respect
to the Notes, the other Financing Documents, the Guaranty and the indebtedness
evidenced thereby the following: diligence; presentment; demand for payment; any
right to require a proceeding first against the Company or any other such
Person; protest; notice of dishonor or nonpayment of any such liabilities and
any other notice and all demands whatsoever. The Guarantor hereby waives notice
from the Holder and the Company (A) of the execution and delivery of the Notes,
and (B) of acceptance of, or notice and proof of reliance on, the benefits of
this Guaranty.

SECTION 2.4. DISCHARGE OF THE GUARANTOR'S OBLIGATIONS AND TERMINATION OF THIS
GUARANTY. This Guaranty shall terminate and the obligations of the Guarantor
created hereunder shall be discharged when all amounts due under the Financing
Documents have been paid in full except as set forth below. On the date of such
discharge, the Guarantor shall be released from any and all conditions, terms,
covenants or restrictions created or placed upon them by this Guaranty and the
Guarantor shall not have any further obligation or liability hereunder.

SECTION 2.5. OTHER SECURITY. The Holder may pursue its rights and remedies under
this Guaranty notwithstanding (A) any other guaranty of or security for the
Notes or the obligations or liabilities of the Company under the Security
Agreement, the Corporate Guarantor Security Agreement or the other

                                       4
<PAGE>

Financing Documents, and (B) any action taken or omitted to be taken by, any
other Holder or any other Person to enforce any of the rights or remedies under
such other guaranty or with respect to any other security.

SECTION 2.6. NO SET-OFF BY THE GUARANTOR. No set-off, counterclaim, reduction or
diminution of an obligation, or any defense of any kind or nature (other than
payment in full of the Guaranteed Amount) which the Guarantor has or may have
with respect to a claim under this Guaranty, shall be available hereunder to the
Guarantor against the Holder.

SECTION 2.7. NATURE OF GUARANTY. (A) The Guaranty is a guaranty of payment and
not of collection, and the Guarantor hereby waives any right to require that any
action be brought against any other Person or to require that resort be had to
any security or to any balance of any fund or credit held by the Holder in favor
of the Company or any other Person prior to the Holder proceeding under the
Guaranty. If at any time any payment of the principal of, premium, if any, on or
interest on the Notes or any other amount payable by the Company and guaranteed
by the Guarantor pursuant to Section 2.1 hereof is rescinded or is otherwise
required to be restored or returned upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, the Guarantor's obligations
hereunder with respect to such payment shall be reinstated as though such
payment had been due but not made at such time.

     (B) All of the rights and remedies of this Guaranty shall inure to the
benefit of the Holder.

SECTION 2.8. SUBORDINATION OF DEBT. During the term of the Guaranty, the
Guarantor agrees with the Holder that upon the occurrence and continuance of an
Event of Default if the Holder so requests, any and all indebtedness of the
Company owed to the Guarantor shall be collected, enforced and received by the
Guarantor as trustee for the Holder and paid over to the Holder on account of
the indebtedness of the Company to the Holder, but without reducing or affecting
in any manner the liability of the Guarantor under the other provisions of this
Guaranty except to the extent the principal amount of such outstanding
indebtedness shall have been reduced by such payment.

                                       5
<PAGE>

                                   ARTICLE III

                                EVENTS OF DEFAULT

SECTION 3.1. DEFAULT REMEDIES. If an Event of Default exists, the Holder may
proceed to enforce the provisions hereof and to exercise any other rights,
powers and remedies available to the Holder. The Holder, in its sole discretion,
shall have the right to proceed first and directly against the Guarantor under
this Guaranty without proceeding against or exhausting any other remedies which
it may have and without resorting to any other security held by the Holder.

SECTION 3.2. REMEDIES; WAIVER AND NOTICE. (A) No remedy herein conferred upon or
reserved to the Holder is intended to be exclusive of any other available remedy
or remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Guaranty or now or hereafter
existing at law or in equity or by statute.

     (B) No delay or omission to exercise any right or power accruing upon the
occurrence of any Event of Default hereunder shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right or power
may be exercised from time to time and as often as may be deemed expedient.

     (C) In order to entitle the Holder to exercise any remedy reserved to it in
this Guaranty, it shall not be necessary to give any notice, other than such
notice as may be expressly required in this Guaranty.

     (D) In the event any provision contained in this Guaranty should be
breached by any party and thereafter duly waived by the other party so empowered
to act, such waiver shall be limited to the particular breach so waived and
shall not be deemed to waive any other breach hereunder.

     (E) No waiver, amendment, release or modification of this Guaranty shall be
established by conduct, custom or course of dealing.

SECTION 3.3. RIGHT OF SET-OFF. The guarantor hereby grants to the Holder, a
continuing lien, security interest and right of setoff as security for all
liabilities and obligations to the Holder, whether now existing or hereafter
arising, upon and against all deposits, credits, collateral and property, now or
hereafter in the possession, custody, safekeeping or control of the Holder or
any entity under the control of FleetBoston Financial Corporation and its
successors and assigns, or in transit to any of them. At any time following the
occurrence and during the continuance of an Event of Default, without demand or
notice (any such notice being expressly waived by the Guarantor), the Holder may
set off the same or any part thereof and apply the same to any liability or
obligation of the Guarantor even though unmatured and regardless of the adequacy
of any other collateral securing the Notes. ANY AND ALL RIGHTS TO REQUIRE THE
HOLDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL
WHICH SECURES THE NOTES, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO
SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE GUARANTOR, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.

SECTION 3.4. EXPENSES INCURRED IN CONNECTION WITH ENFORCEMENT. The Guarantor
shall pay on demand all reasonable expenses of the Holder in connection with the
preparation, administration, default, collection, waiver or amendment of loan
terms, or in connection with the Holder's exercise, preservation or enforcement
of any of its rights, remedies or options hereunder, including, without
limitation, reasonable fees of outside legal counsel or the allocated costs of
in-house legal counsel, accounting, consulting, brokerage or other similar
professional fees or expenses, and any reasonable fees or expenses associated
with travel or other costs relating to any appraisals or examinations conducted
in

                                        6
<PAGE>

connection with the loan or any collateral therefor, and the amount of all such
expenses shall, until paid, bear interest at the rate applicable to principal
hereunder (including any default rate) and be an obligation secured by any
collateral.


                                       7
<PAGE>

                                   ARTICLE IV

                           INTERPRETATION OF GUARANTY

SECTION 4.1. ACCOUNTING PRINCIPLES. Where the character or amount of any asset
or liability or item of income or expense is required to be determined or
consolidated or other accounting computation is required to be made for the
purposes of this Guaranty, this shall be done in accordance with generally
accepted accounting principles at the time in effect, to the extent applicable,
except where such principles are inconsistent with the requirements of this
Guaranty.

SECTION 4.2. DIRECTLY OR INDIRECTLY. Where any provision in this Guaranty refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.

SECTION 4.3. GOVERNING LAW. This Guaranty and the rights and obligations of the
parties hereunder shall be construed and interpreted in accordance with the laws
of the State of New York (the "Governing State") (excluding the laws applicable
to conflicts or choice of law).

     THE GUARANTOR AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS LOAN
AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE GOVERNING STATE OR ANY FEDERAL
COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE GUARANTOR BY
MAIL AT THE ADDRESS SET FORTH HEREIN. THE GUARANTOR HEREBY WAIVES ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH
COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT FORUM.

SECTION 4.4. DEFINITIONS. All defined terms used herein and not otherwise
defined herein being used herein with the same meanings as set forth in the Loan
Agreement. As used herein, all words of masculine gender shall mean and include
correlative words of feminine and neuter genders.

                                       8
<PAGE>

                                    ARTICLE V

                                  MISCELLANEOUS


SECTION 5.1. OBLIGATIONS ARISE ON DELIVERY OF THE NOTES. The obligations of the
Guarantor hereunder shall arise absolutely and unconditionally when the Notes
shall have been executed and delivered by the Company to the Holder.

SECTION 5.2. SURVIVAL. All warranties, representations, and covenants made by
the Guarantor herein shall be deemed to have been relied upon by the Holder and
shall survive the delivery to the Holder of this Guaranty regardless of any
investigation made by the Holder.

SECTION 5.3. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the
successors and permitted assigns of the Guarantor. The provisions of this
Guaranty are intended to be for the benefit of the Holder, its successors and
assigns.

SECTION 5.4. NOTICES. (A) All notices, certificates and other communications
under this Guaranty shall be in writing and shall be sufficiently given and
shall be deemed given when: (1) delivered to the applicable address stated in
subsection (B) hereof by registered or certified mail, return receipt requested
or by such other means as shall provide the sender with documentary evidence of
such delivery, or (2) delivery is refused by the Guarantor or the Holder, as the
case may be, as evidenced by the affidavit of the Person who attempted to effect
such delivery;

     (B) The addresses to which communications under this Guaranty shall be
delivered are as follows:

         TO THE GUARANTOR:

         BCP Ingredients, Inc.
         c/o Balchem Corporation
         P.O. Box 175
         Slate Hill, New York  10973
         Attention:  Dino A. Rossi, President

         WITH A COPY TO:

         Golenbock, Eiseman, Assor & Bell
         437 Madison Avenue
         New York, New York  10022
         Attention:  Nathan E. Assor, Esq.

         TO THE HOLDER:

         Fleet National Bank
         NY EH 34303E
         Peter D. Kiernan Plaza
         Albany, New York 12207
         Attention:  Corporate Banking Division

                                       9
<PAGE>

         WITH A COPY TO:

         Lemery MacKrell Greisler LLC
         10 Railroad Place
         Saratoga Springs, New York  12866
         Attention:  James A. Carminucci, Esq.


     (C) The Guarantor and the Holder may by notice given hereunder designate
any further or different addresses to which subsequent notices, certificates and
other communications shall be sent.

SECTION 5.5. ENTIRE UNDERSTANDING; COUNTERPARTS. This Guaranty constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and may be executed simultaneously in several counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

SECTION 5.6. AMENDMENTS. No amendment, change, modification, alteration or
termination of this Guaranty shall be made except upon the written consent of
the Guarantor and the Holder.

SECTION 5.7. PARTIAL INVALIDITY. The invalidity or unenforceability of any one
or more phrases, sentences, clauses or sections in this Guaranty shall not
affect the validity or enforceability of the remaining portions of this Guaranty
or any part thereof.

SECTION 5.8. SECTION HEADINGS NOT CONTROLLING. The headings of the several
sections of this Guaranty have been prepared for convenience of reference only
and shall not control, affect the meaning or be taken as an interpretation of
any provision of this Guaranty.

SECTION 5.9. JURY TRIAL WAIVER. THE GUARANTOR AND THE HOLDER MUTUALLY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS GUARANTY OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE HOLDER
RELATING TO THE ADMINISTRATION OF THE LOANS OR ENFORCEMENT OF THE NOTES, AND
AGREE THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS
PROHIBITED BY LAW, THE GUARANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE
GUARANTOR CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE HOLDER HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE HOLDER WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR THE HOLDER TO ACCEPT THE GUARANTY AND MAKE THE LOANS.

                                       10
<PAGE>


     IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the day
and year first above written.

                                             BCP INGREDIENTS, INC.


                                             By: /s/ Frank J. Fitzpatrick
                                                 -------------------------------
                                             Name: Frank J. Fitzpatrick
                                                   -----------------------------
                                             Title: Secretary and Treasurer
                                                    ----------------------------



Accepted:

FLEET NATIONAL BANK, as Holder


By: /s/
    ----------------------------------------
      Karen D. Finnerty, Vice President



STATE OF NEW YORK          )
                           )ss.:
COUNTY OF NEW YORK         )

     On the 30 day of May, in the year 2001 before me personally came Frank J.
Fitzpatrick, to me known, who, being by me duly sworn, did depose and say that
he/she/they reside(s) in _____________________; that he/she/they is(are) the
Secretary and Treasurer of BCP INGREDIENTS, INC., the corporation described in
and which executed the above instrument; and that he/she/they signed
his/her/their name(s) thereto by authority of the board of directors of said
corporation.

                                                 /s/ Jane A. Dwyer
                                              -----------------------
                                                   Notary Public
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.3
<SEQUENCE>5
<FILENAME>exhibit4-3_39462.txt
<TEXT>


                                                                   Exhibit 4.3



- --------------------------------------------------------------------------------





                               BALCHEM CORPORATION


                                       TO


                               FLEET NATIONAL BANK



         ==============================================================

                               SECURITY AGREEMENT

         ==============================================================



                               DATED JUNE 1, 2001



- --------------------------------------------------------------------------------



THIS SECURITY AGREEMENT (A) AFFECTS TANGIBLE AND INTANGIBLE PERSONAL PROPERTY,
(B) CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS, (C) IS INTENDED TO CONSTITUTE A
SECURITY AGREEMENT UNDER THE UNIFORM COMMERCIAL CODE AND (D) SECURES AN
OBLIGATION UNDER WHICH THE INTEREST RATE MAY VARY FROM TIME TO TIME.


<PAGE>


                               SECURITY AGREEMENT


     THIS SECURITY AGREEMENT (the "Security Agreement") dated June 1, 2001 from
BALCHEM CORPORATION, a business corporation organized and existing under the
laws of the State of Maryland and having an address of P.O. Box 175, Slate Hill,
New York 10973 (the "Company"), to FLEET NATIONAL BANK, a national banking
association organized and existing under the laws of the United States having an
address of 69 State Street, Albany, New York 12201 (the "Holder");


                              W I T N E S S E T H:


     WHEREAS, the Holder will make the Loans (as herein defined) to the Company,
the repayment of which is evidenced the Notes (as herein defined) from the
Company in favor of the Holder; and

     WHEREAS, as security for the payment of principal, premium, if any and
interest on the Notes, the Company intends to grant the Holder a security
interest in certain of the assets of the Company as hereinafter set forth;

     NOW, THEREFORE, THIS SECURITY AGREEMENT FURTHER WITNESSETH:


<PAGE>


                                    ARTICLE I

                                   DEFINITIONS

SECTION 1.01. DEFINITIONS OF TERMS. The following words and terms if used in
this document shall have the following meanings unless the context or use
indicates another or different meaning or intent and the singular shall include
the plural and the plural shall include the singular, as the context may
require:

     "CLOSING" means the closing with respect to the execution and delivery of
the Notes by the Company to the Holder.

     "CLOSING DATE" means the date of the execution and delivery of the Notes by
the Company to the Holder.

     "COLLATERAL" shall have the definition assigned to such term in Section
2.01 hereof.

     "COMPANY" means Balchem Corporation, a Maryland corporation having an
address of P.O. Box 175, Slate Hill, New York 10973 and its permitted successors
and permitted assigns.

     "CORPORATE GUARANTOR" means BCP Ingredients, Inc., a Delaware corporation,
and its successors and permitted assigns.

     "CORPORATE GUARANTOR SECURITY AGREEMENT" means the security agreement dated
the Closing Date from the Corporate Guarantor in favor of the Holder as security
for the Notes, as said security agreement may be modified, amended,
supplemented, consolidated, spread or assumed from time to time.

     "DEFAULT RATE" shall have the meaning assigned to such term in the Notes.

     "ENVIRONMENTAL COMPLIANCE AGREEMENT" means the environmental compliance
agreement dated the date hereof from the Company and the Corporate Guarantor in
favor of the Holder, as said environmental compliance agreement may be amended
or supplemented from time to time.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as the
same may from time to time be amended or supplemented, and all regulations
promulgated thereunder.

     "EVENT OF DEFAULT" shall have the meaning assigned to such term in Section
5.01 hereof.

     "FINANCING DOCUMENTS" means the Notes, the Security Agreement, the
Guaranty, the Corporate Guarantor Security Agreement, the Loan Agreement, the
Swap Agreement, the Environmental Compliance Agreement and any other document
now or hereafter executed by the Company or the Corporate Guarantor by or in
favor of the Holder which affects the rights of the Holder in or to the
Collateral, in whole or in part, or which evidences, secures or guarantees any
sum due under the Notes or any of the other Financing Documents.

     "GAAP" means generally accepted accounting principles as then in effect,
which shall include the official interpretations thereof by the Financial
Accounting Standards Board, consistently applied.

     "GOVERNMENTAL AUTHORITY" means the United States, the State and any
political subdivision thereof, and any agency, department, commission, court,
board, bureau or instrumentality of any of them.

                                       2
<PAGE>

     "GUARANTY" means the guaranty dated the Closing Date from the Corporate
Guarantor in favor of the Holder, as said Guaranty may be modified, amended or
supplemented from time to time.

     "HOLDER" means Fleet National Bank as the original owner of the Notes, and
any subsequent owner at the time in question of the Notes.

     "INDEBTEDNESS" shall have the definition assigned to such term in Section
2.01 hereof.

     "LIEN" means any interest in Property securing an obligation owed to a
Person whether such interest is based on the common law, statute or contract,
and including but not limited to a security interest arising from a mortgage,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" includes but is not limited to
mechanics', materialmens', warehousemens' and carriers' liens and other similar
encumbrances. For the purposes hereof, a Person shall be deemed to be the owner
of Property which it has acquired or holds subject to a conditional sale
agreement or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes.

     "LINE OF CREDIT LOAN" means the loan in the principal amount of
$3,000,000.00 from the Bank to the Company as evidenced by the Line of Credit
Loan Note.

     "LINE OF CREDIT LOAN NOTE" means the promissory note dated the Closing Date
in the principal amount of $3,000,000.00 from the Company in favor of the Holder
as said note may be amended, modified, supplemented, consolidated or extended
from time to time.

     "LOANS" means, collectively, the Term Loan and the Line of Credit Loan.

     "LOAN AGREEMENT" means the loan agreement dated the Closing Date, by and
between the Holder and the Company, as said loan agreement may be modified,
supplemented or amended from time to time.

     "NET PROCEEDS" means so much of the gross proceeds with respect to which
that term is used as remain after payment of all expenses, costs and taxes
(including attorneys' fees) incurred in obtaining such gross proceeds.

     "NOTE" means, collectively, the Term Loan Note and the Line of Credit Loan
Note, as each of said notes may be amended, modified, supplemented, consolidated
or extended.

     "NOTE PAYMENT DATE" means each date on which interest or both principal and
interest shall be payable on the Notes according to its terms so long as such
shall be outstanding.

     "PERMITTED ENCUMBRANCES" means (A) Liens for taxes which are not delinquent
or which are being contested in good faith, mechanic's and materialmen's Liens
and other statutory Liens with respect to obligations which are not overdue or
which are being contested in good faith, and Liens resulting from deposits to
secure the payments of workmen's compensation or other social security or to
secure the performance of bids or contracts in the ordinary course of business,
(ii) capitalized lease or purchase money security interest obligations in the
ordinary course of business or assumed as part of a permitted acquisition, (iii)
reservations, exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions, leases and other similar title exceptions affecting
real estate, (iv) Liens having as aggregate dollar value not in excess of
$100,000 or (v) Liens in favor of the Bank.

     "PERSON" means an individual, partnership, corporation, limited liability
company, trust or unincorporated organization, and a government or agency or
political subdivision thereof.

                                       3
<PAGE>

     "PLAN" means any plan defined in Section 4021(a) of ERISA in respect of
which the Company or any Subsidiary thereof is an "employer" or a "substantial
employer" as defined in Sections 3(5) and 4001(a)(2) of ERISA, respectively.

     "PRINCIPAL BALANCE" means the aggregate outstanding principal balance of
the Notes from time to time.

     "PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

     "REPORTABLE EVENT" means any reportable event as defined in ERISA.

     "REQUIREMENT" or "LOCAL REQUIREMENT" means any law, ordinance, order,
judgment, decree, rule, regulation, permit, license, authorization, certificate
or approval of a Governmental Authority or a Local Authority respectively.

     "SECURITY AGREEMENT" means this security agreement dated the Closing Date
from the Company in favor of the Holder as security for the Notes, as said
security agreement may be modified, amended, supplemented, consolidated, spread
or assumed from time to time.

     "STATE" means the State of New York.

     "SUBSIDIARY" shall mean for any Person (i) any for-profit entity more than
fifty percent (50%) of the capital stock of which is owned or controlled,
directly or indirectly, by such Person or any Subsidiary and whose accounts are
required to be consolidated with those of said Person in accordance with GAAP
and (ii) any non-profit entity which is controlled, directly or indirectly, by
such Person.

     "SWAP AGREEMENT" means any swap master agreement entered into by the
Company and the Holder in connection with the Term Loan Note, together with any
amendments or supplements thereto or replacements or substitutions thereof.

     "TERM LOAN" means the loan in the principal amount of $13,500,000.00 from
the Bank to the Company as evidenced by the Term Loan Note.

     "TERM LOAN NOTE" means the note dated the Closing Date in the principal
amount of $13,500,000.00 from the Company in favor of the Holder as said note
may be amended, modified, supplemented, consolidated or extended from time to
time.

                                       4
<PAGE>

                                   ARTICLE II

                               SECURITY AGREEMENT;
                       GRANTING CLAUSES; GENERAL COVENANTS

SECTION 2.01. GRANTING CLAUSES. The Company, in consideration of the making of
the Loans by the Holder and for other good and valuable consideration, receipt
of which is hereby acknowledged, and in order to secure (1) the payment of the
principal of, premium, if any, and interest on the Term Loan Note, issued in the
original amount of Thirteen Million Five Hundred Thousand Dollars ($13,500,000)
according to its tenor and effect (2) the payment of the principal of, premium,
if any, and interest on the Line of Credit Loan Note, issued in the original
amount not to exceed Three Million Dollars ($3,000,000) according to its tenor
and effect, (3) the payment of all other sums required to be paid hereunder and
under the other Financing Documents and (4) the performance and observance by
the Company of all of the covenants, agreements, representations and warranties
herein and in the other Financing Documents (collectively, the "Indebtedness");
and in order to secure the Indebtedness; hereby warrant, assign, mortgage,
hypothecate, pledge, and grant a security interest in, set over and confirm unto
the Holder and its respective successors and assigns, all of the estate, right,
title and interest of the Company in, to and under any and all of the following
described property (the "Collateral") whether now owned or held or hereafter
acquired:

     (A) All right, title and interest of the Company in all articles of
personal property and all appurtenances, wherever located, and now or
hereinafter owned by the Company, including, but not limited to, all equipment,
materials, furnishings, and machinery, (excluding, however, pipes, screens,
heating, lighting, plumbing, ventilation, air conditioning systems and other
fixtures appurtenant to or affixed to real property) together with any and all
products of any of the above, all substitutions, replacements, additions or
accessories therefor;

     (B) All of the Company's now owned and hereafter acquired or arising
accounts (also known as accounts receivable) inventory, supplies, returned and
repossessed goods, instruments, contract rights, chattel paper, choses in action
and general intangibles, including, but not limited to, all corporate names,
trademarks, trade names, goodwill, patents, and copyrights, but excluding
corporate stock in any of the Company's Subsidiaries and contract rights which
by their terms are not assignable absent the consent of a third party;

     (C) Any and all moneys and securities from time to time held by the Holder
under the terms of the Security Agreement and/or the Loan Agreement, and any and
all other Property of every name and nature, from time to time hereinafter by
delivery or by writing of any kind conveyed, mortgaged, pledged, assigned or
transferred as and for additional security hereunder by the Company or by anyone
on its behalf or with its written consent in favor of the Holder;

     (D) All right, title and interest of the Company in the Swap Agreement and
each transaction entered into thereunder (including, without limitation, all
amounts payable or deliverable thereunder);

     (E) All proceeds of and any unearned premiums on any insurance policies
covering the foregoing, including, without limitation, the right to receive and
apply the proceeds of any insurance or judgments, or settlements made in lieu
thereof, for damage to any of the foregoing;

     (F) The right, in the name and on behalf of the Company, to appear in and
defend any action or proceeding brought with respect to the above or any part
thereof and to commence any action or proceeding to protect the interest of the
Holder with respect thereto;

     (G) All other proceeds of the conversion, whether voluntary or involuntary,
of the above or any other Property or rights encumbered or conveyed hereby into
cash or liquidated claims, including, without limitation, all hazard insurance,
Condemnation and other awards relating to the Collateral; and

                                       5
<PAGE>


     (H) All extensions, additions, substitutions and accessions with respect to
any of the foregoing.

     TO HAVE AND TO HOLD the foregoing Collateral unto the Holder and its
successors and assigns forever subject to Section 6.05 hereof.

SECTION 2.02. SECURITY AGREEMENT. The Collateral includes all rights and
interest, whether tangible or intangible in nature, of the Company in the
Collateral. This Security Agreement shall constitute a security agreement under
the Uniform Commercial Code of the State so that the Holder shall have and may
enforce a security interest in any or all of the Collateral, such security
interest to attach at the earliest moment permitted by law and also to include
and attach to all additions and accessions thereto, all substitutions and
replacements therefor, all proceeds thereof, including insurance and
Condemnation proceeds, and all contract rights, rental or lease payments and
general intangibles of the Company obtained in connection with or relating to
the Collateral as well as any and all items of Property in the foregoing
classifications which are hereafter acquired. The Company shall, at the request
of the Holder, deliver to the Holder, any and all further instruments which the
Holder shall require in order to further secure and perfect the Lien of the
Security Agreement. Pursuant to the Uniform Commercial Code of the State, the
Company hereby authorizes the Holder to execute and file UCC Financing
Statements and continuation statements, at the expense of the Company, without
the necessity of the Company's signature as debtor if the Holder shall determine
that such are necessary or advisable in order to perfect its security interest
in any of the Collateral covered by this Security Agreement, and shall pay to
the Holder, on demand, any reasonable expenses incurred by the Holder in
connection with the preparation, execution and filing of such statements and any
continuation statements that may be filed by the Holder without the necessity of
the Company's signature as debtor.

SECTION 2.03. INFORMATION UNDER UNIFORM COMMERCIAL CODE. The following
information is stated in order to facilitate filings under the Uniform
Commercial Code of the State: The Secured Party is Fleet National Bank, having
an office at P.O. Box 2984, Hartford, Connecticut 06101-2984, CT EH 4151MT. The
Debtor is Balchem Corporation having its principal office at P.O. Box 175, Slate
Hill, New York 10973.

SECTION 2.04. PERFORMANCE OF COVENANTS. The Company hereby covenants that it
will faithfully observe and perform, or cause to be observed and performed, at
all times any and all covenants, undertakings, stipulations and provisions on
its part to be observed or performed contained in the Security Agreement.

SECTION 2.05. PRIORITY OF LIEN OF SECURITY AGREEMENT; DISCHARGE OF LIENS AND
ENCUMBRANCES. (A) The Company hereby covenants that the Company has the right to
grant a security interest in and Lien on the Collateral, and Company will
warrant and defend title to the Collateral against all claims and demands.

     (B) The Company shall not permit or create or suffer to be permitted or
created any Lien, except for Permitted Encumbrances, upon the Collateral or any
part thereof.

     (C) To the extent the Company is permitted under the provisions of any of
the Financing Documents to dispose of items of Collateral, the same shall be
deemed upon such disposition to be free and clear of all Liens granted to the
Holder, and the Holder agrees at the cost and expense of the Company to execute
UCC release statements so as to reflect of record the release of said items from
the Lien of this Security Agreement or other appropriate evidence of the release
of such Liens as the Company may reasonably request.

                                       6
<PAGE>

                                   ARTICLE III

                  REPRESENTATIONS AND WARRANTIES AND COVENANTS.


SECTION 3.01. REPRESENTATIONS AND WARRANTIES AND COVENANTS OF THE COMPANY. The
Company represents and warrants as follows:

     (A) (1) The Company has good title to the Collateral, subject only to
Permitted Encumbrances and (2) this Security Agreement is and will remain a
valid and enforceable Lien on the Collateral, except as items of Collateral are
disposed of as permitted by the Financing Documents.

     (B) The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Maryland and possesses full
corporate power and corporate capacity to enter into the Security Agreement and
the other Financing Documents and to mortgage and pledge the Collateral in the
manner and to the extent herein set forth, and the Security Agreement and the
other Financing Documents constitute valid and enforceable obligations according
to their terms except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other laws relating to or affecting the
enforcement of creditors' rights generally and except as enforceability may be
limited by general equitable principles.

     (C) Neither the execution and delivery of the Security Agreement and the
other Financing Documents, the consummation of the transactions contemplated
hereby and thereby nor the fulfillment of or compliance with the provisions
hereof or thereof will conflict with or result in a breach of any of the terms,
conditions or provisions of the articles of incorporation or by-laws of the
Company or of any order, judgment, law, restriction, agreement or instrument to
which the Company is a party of by which it is bound except to the extent the
foregoing would not have a material adverse effect upon the business, operations
or financial condition of the Company (and with respect to such orders,
judgments, laws, restrictions, agreements and instruments, its Subsidiaries
taken as a whole) or materially and adversely effect the Lien on the Collateral
granted hereunder, or result in the creation or imposition of any Lien (except
Permitted Encumbrances) of any nature upon any of the Property of the Company
under the terms of any such instrument or agreement.

     (D) The chief executive office and other places of business of the Company,
the Collateral and the books and records relating to the Collateral are, and
have been during the four month period prior to the date hereof (or in the case
of a new business, from the date of commencement of said business), located at
the address(es) set forth in Schedule 3.01 hereto and the Company will not
change the same, or merge or consolidate with any person or change its name,
without prior written notice to the Holder.

     (E) In its discretion, the Holder may at any time and from time to time,
after an Event of Default has occurred and is continuing, in its name or the
Company's or otherwise, notify any account debtor or obligor of any account
contact, document, instrument, chattel paper or general intangible included in
the Collateral to make payment to the Holder.

     (F) In its discretion, the Holder may, at any time and from time to time,
after an Event of Default has occurred and is continuing, demand, sue for,
collect or receive any money or property at any time payable or receivable on
account of or in exchange for, or make any compromise or settlement deemed
desirable to the Holder with respect to, any Collateral, and/or extend the time
of payment, arrange for payment in installments, or otherwise modify the terms
of, or release, any Collateral or obligations, all without notice to or consent
by the Company and without otherwise discharging or affecting the obligations,
the Collateral or the security interest granted herein.

                                       7
<PAGE>

                                   ARTICLE IV

                 MAINTENANCE, MODIFICATION, TAXES AND INSURANCE

SECTION 4.01. MAINTENANCE AND MODIFICATIONS OF COLLATERAL. The Company agrees
that during the period that the Notes are outstanding it will (1) keep the
tangible Collateral in good condition and repair and preserve the same against
waste, loss and damage, ordinary wear and tear excepted, and (2) make all
necessary repairs and replacements to the tangible Collateral or any part
thereof (whether ordinary or extraordinary, structural or nonstructural,
foreseen or unforeseen), in each instance where the failure to do so would have
a material adverse effect upon the Company and its Subsidiaries taken as a whole
or materially diminish the value of the Collateral (as defined in the Loan
Agreement) taken as a whole.

SECTION 4.02. TAXES, ASSESSMENTS AND UTILITY CHARGES. (A) Except as otherwise
permitted by the Financing Documents, the Company shall pay or cause to be paid,
as the same respectively become due, (1) all material taxes and governmental
charges of any kind whatsoever which may at any time be lawfully assessed or
levied against or with respect to the Collateral, (2) all utility and other
charges, including "service charges", incurred or imposed for the operation,
maintenance, use, occupancy, upkeep and improvement of the Collateral, and (3)
all assessments and charges of any kind whatsoever lawfully made by any
Governmental Authority for public improvements, provided that, with respect to
special assessments or other governmental charges that may lawfully be paid in
installments over a period of years, the Company shall be obligated hereunder to
pay only such installments as are required to be paid during all periods that
sums payable by the Company hereunder are due and owing.

     (B) Notwithstanding the provisions of subsection (A) of this Section 4.02,
the Company may in good faith actively contest any such taxes, assessments and
other charges, provided that the Company shall have paid such taxes, assessments
and other charges if required by law to do so or provided that (1) the Company
first shall have notified the Holder in writing of such contest, (2) no Event of
Default exists hereunder or under the other Financing Documents and (3) the
Company shall have set aside reserves for any such taxes, assessments and other
charges in accordance with GAAP. Otherwise, such taxes, assessments or other
charges shall be paid promptly by the Company or, at the Company's option,
secured by the Company's posting a bond in form and substance satisfactory to
the Holder.

SECTION 4.03. INSURANCE REQUIRED. At all times that the Notes are outstanding,
the Company shall maintain insurance with respect to the Collateral against such
risks and for such amounts as are customarily insured against by businesses of
like size and type, paying, as the same become due and payable, all premiums
with respect thereto, including, but not necessarily limited to:

     (A) Insurance protecting the interests of the Company as insured and the
Holder as mortgagee and loss payee, as their interests may appear, against loss
or damage to the Collateral by fire, lightning, vandalism, malicious mischief
and other perils and casualties normally insured against with a uniform extended
coverage endorsement, such insurance at all times when combined with that
maintained by the Corporate Guarantor to be in an amount not less than the
unpaid principal amount of the Notes outstanding; provided, however, that the
Company may insure all or a portion of the Collateral under a blanket insurance
policy or policies covering not only the Collateral or portions thereof but
other Property.

     (B) To the extent applicable, workers' compensation insurance, disability
benefits insurance and such other forms of insurance which the Company is
required by law to provide, covering loss resulting from injury, sickness,
disability or death of employees of the Company.

     (C) Insurance protecting the Company and the Holder against loss or losses
from liabilities imposed by law or assumed in any written contract and arising
from personal injury or death or damage to the property of others caused by any
accident or occurrence, with limits of not less than $2,000,000 per person per
accident or occurrence on account of personal injury, including death resulting
therefrom, and

                                       8
<PAGE>

$2,000,000 per accident or occurrence on account of damage to the property of
others, excluding liability imposed upon the Company by any applicable workers'
compensation law, and a separate commercial umbrella liability policy in excess
of the basic coverage stated above protecting the Company and the Holder with a
limit of not less than $3,000,000.

     (D) If requested by the Holder, customary policies of insurance against
loss or damage to any air conditioning, heating or ventilation system, steam
boilers or other high pressure machinery, if any in an amount satisfactory to
the Holder.

     (E) Other insurance coverage required by any Governmental Authority in
connection with any Requirement.

SECTION 4.04. ADDITIONAL PROVISIONS RESPECTING INSURANCE. All insurance required
by Section 4.03 hereof shall be procured and maintained in financially sound and
generally recognized responsible insurance companies selected by the Company and
authorized to write such insurance in the State and satisfactory to the Holder.
The Company or companies issuing the policies required by Sections 4.03(A) shall
be rated "A" or better by A.M. Best Co., Inc. in the most recent edition of
Best's Key Rating Guide. Such insurance may be written with deductible amounts
comparable to those on similar policies carried by other companies engaged in
businesses similar in size, character and other respects to those in which the
Company is engaged. All policies evidencing the insurance required by Section
4.03 (A) hereof shall name the Company as insured and the Holder as mortgagee
and loss payee under a lender's loss payable endorsement, as their interests may
appear, and all policies evidencing the insurance required by Section 4.03
hereof shall provide for at least thirty (30) days' written notice to the
Company and the Holder prior to cancellation, lapse, reduction in policy limits
or material change in coverage thereof. The insurance required by Sections
4.03(A) and 4.03(D) hereof shall be fully paid for and shall contain a standard
non-contributory mortgagee endorsement in favor of the Holder as mortgagee and
loss payee. All insurance required hereunder shall be in form and content
reasonably satisfactory to the Holder. Certificates satisfactory in form and
substance to the Holder to evidence all insurance required hereby shall be
delivered to the Holder on or before the Closing Date. The Company shall deliver
to the Holder on or before the first Business Day of each calendar year
thereafter a certificate dated not earlier than the immediately preceding
December l reciting that there is in full force and effect, with a term covering
at least the next succeeding calendar year, insurance in the amounts and of the
types required by Sections 4.03 and 4.04 hereof. Prior to the expiration of any
such policy, the Company shall furnish to the Holder evidence that the policy
has been renewed or replaced or is no longer required hereby.

     (B) All premiums with respect to the insurance required by Section 4.03
hereof shall be paid by the Company; provided, however, that if the premiums are
not timely paid, the Holder may pay such premiums and the Company shall pay
immediately upon demand all sums so expended by the Holder, together with
interest, to the extent permitted by law, at the Default Rate from the date on
which such payment was due until the date on which the payment is made.

     (C) The Company shall give the Holder prompt notice of any material loss
covered by the insurance required in this Article, and any Net Proceeds of
insurance claims received by the Company shall promptly be paid over to the
Holder to be held by the Holder to the extent required and in accordance with
the provisions of Section 4.05 hereof.

     (D) (1) The Company shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under Section 4.03 unless the Holder is included therein as a named insured with
loss payable to Holder under a standard non-contributory mortgage endorsement of
the above described character. The Company shall immediately notify the Holder
whenever any such separate insurance is taken out and shall promptly deliver to
the Holder the policy or policies of such insurance.

                                       9
<PAGE>

     (2) Each of the policies required pursuant to Section 4.03 hereof shall
waive any right of subrogation against any Person insured under such policy, and
shall waive any right of the insurers to any set-off or counterclaim or any
other deduction, whether by attachment or otherwise, in respect of any liability
of any Person insured under such policy.

SECTION 4.05. APPLICATION OF NET PROCEEDS OF INSURANCE. The Net Proceeds of the
insurance carried pursuant to the provisions of Section 4.03 hereof shall be
applied as follows: (A) the Net Proceeds of the insurance required by Section
4.03(A) and 4.03(D) hereof shall, provided no Event of Default has occurred and
is continuing, be paid to the Company and applied toward the replacement or
restoration of the particular items for which a claim was made provided however
that in the event the Net Proceeds exceed $5,000,000 or exceed the Principal
Balance, the Net Proceeds shall, at the option of the Holder, be applied toward
payment of Debt Service Payments payable pursuant to the Notes and the payment
of the Company's obligations hereunder and (B) the Net Proceeds of the insurance
required by Section 4.03(B), 4.03(C) and 4.03(E) hereof shall be applied toward
extinguishment or satisfaction of the liability with respect to which such
insurance proceeds may be paid.

                                       10
<PAGE>

                                    ARTICLE V

                         EVENTS OF DEFAULT AND REMEDIES


SECTION 5.01. EVENTS OF DEFAULT DEFINED. The following shall be "Events of
Default" under the Security Agreement and the terms "Event of Default" or
"default" shall mean, whenever they are used in the Security Agreement, any one
or more of the following events:

     (A) If the Company fails to comply with any of the covenants or agreements
made, or to be observed, by it in the Security Agreement, other than a covenant
or agreement specified in subsection (B) below, and such failure shall have
continued for a period of fifteen (15) days following written notice of
non-compliance from the Holder to the Company, provided that if such default
cannot reasonably be cured within said fifteen (15)-day period and the Company
shall have commenced action to cure the breach of covenant within said fifteen
(15)-day period and, thereafter, diligently and expeditiously proceeds to cure
the same, such fifteen (15) day period shall be extended for so long as the
Company shall require, in the exercise of due diligence, to cure such default,
it being agreed that no such extension shall be for a period in excess of forty
five (45) days in the aggregate from the date of such written notice;

     (B) Notwithstanding the foregoing subsection (A) above, the following shall
be immediate Events of Default for which there shall be no cure period under
this Section:

          (1) if a default by the Company occurs in the due and punctual payment
     of any amounts specified to be paid herein or under any of the other
     Financing Documents (other than any amounts payable on the Maturity Date or
     any earlier date on which the entire Principal Balance together with all
     accrued but unpaid interest and all other sums evidenced or secured by the
     Financing Documents shall be due and payable in full) and such default
     continues for ten (10) days;

          (2) an Event of Default beyond any applicable grace or cure period
     shall occur under the Loan Agreement;

SECTION 5.02. ACCELERATION; ANNULMENT OF ACCELERATION. (A) Upon the occurrence
of an Event of Default hereunder, the Holder may, by notice in writing delivered
to the Company declare the whole of the Indebtedness immediately due and
payable, whereupon the same shall become and be immediately due and payable,
anything in the Security Agreement or any other Financing Documents to the
contrary notwithstanding. In such event, there shall be due and payable the
total amount of Indebtedness plus all accrued but unpaid interest thereon and
all interest which will accrue thereon to the date of payment.

     (B) At any time after the principal of the Notes shall have been so
declared to be due and payable and before the entry of final judgment or decree
in any suit, action or proceeding instituted on account of such default, or
before the completion of the enforcement of any other remedy under the Security
Agreement, the Holder may at its option annul such declaration and its
consequences. No such annulment shall extend to or affect any subsequent Event
of Default or impair any right consequent thereon.

SECTION 5.03. ENFORCEMENT OF REMEDIES. (A) Upon the occurrence and continuance
of any Event of Default, the Holder may proceed forthwith to protect and enforce
its rights under the Security Agreement, and the other Financing Documents by
such suits, actions or proceedings as it shall deem appropriate, including,
without limitation, an action to foreclose the Lien of the Security Agreement,
in which case the Collateral or any interest therein may be sold for cash or
credit in one or more interests and in any order or manner.

     (B) The Holder may sue for, enforce payment of and receive any amounts due
or becoming due from the Company for principal, premium, if any, interest or
otherwise under any of the provisions of the

                                       11
<PAGE>

Security Agreement or the other Financing Documents, without prejudice to any
other right or remedy of the Holder.

     (C) Regardless of the happening of an Event of Default, the Holder may
institute and maintain such suits and proceedings as it may be advised shall be
necessary to prevent any impairment of the security under the Security Agreement
by any acts which may be unlawful or in violation of the Security Agreement, or
to preserve or protect the interests of the Holder.

     (D) The Holder shall have the right to appear in and defend any action or
proceeding brought with respect to the Collateral and to bring any action or
proceeding, in the name and on behalf of the Company, which the Holder, in its
discretion, determines should be brought to protect their interests in the
Collateral.

     (E) Upon the occurrence and continuance of any Event of Default hereunder,
the Company, upon demand of the Holder, shall forthwith surrender the possession
of, and it shall be lawful for the Holder, to take possession of, all or any
part of the Collateral, together with the books, papers and accounts of the
Company pertaining thereto, and to hold, operate and manage the same, and from
time to time to make all needed repairs and improvements as the Holder shall
deem wise; and the Holder may sell the Collateral or any part thereof, or lease
the Collateral or any part thereof in the name and for the account of the
Company, collect, receive and sequester the rents, revenues, earnings, income,
products and profits therefrom, and pay out of the same all proper costs and
expenses of taking, holding, leasing, selling and managing the Collateral, ___
including reimbursement for expenses reasonably and actually incurred by the
Holder and its agents and counsel, and any charges of the Holder hereunder, and
any taxes and other charges prior to the Lien of the Security Agreement which
the Holder may deem it wise to pay, and all expenses of such repairs and
improvements, and apply the remainder of the moneys so received in accordance
with the provisions of Section 5.05 hereof.

     Whenever all monetary payments then due under the Notes and the other
Financing Documents shall have been paid and no Event of Default shall be
continuing, the Holder shall surrender possession to the Company; the same right
of entry, however, to exist upon any subsequent Event of Default.

     (F) The Holder may exercise any and/or all of the rights and remedies
available to a secured party under the New York Uniform Commercial Code in such
order and in such manner as the Holder, in its sole discretion, may determine;
provided, however, that the expenses of retaking, holding, preparing for sale or
the like as provided thereunder shall include reasonable attorneys' fees and
other actual expenses of the Holder and shall be additionally secured by this
Security Agreement.

     (G) Notwithstanding anything herein contained to the contrary, the Company
or anyone claiming through or under either of them (1) will not (a) at any time
insist upon, or plead, or in any manner whatever claim or take any benefit or
advantage of any stay or extension or moratorium law, any exemption from
execution or sale of the Collateral or any part thereof, wherever enacted, now
or at any time hereafter in force, which may affect the covenants and terms of
performance of the Security Agreement, (b) claim, take or insist upon any
benefit or advantage of any law now or hereafter in force providing for the
valuation or appraisal of the Collateral, or any part thereof, prior to any sale
or sales thereof which may be made pursuant to any provision hereof, or pursuant
to the decree, judgment or order of any court of competent jurisdiction, or (c)
after any such sale or sales, claim or exercise any right under any statute
heretofore or hereafter enacted to redeem the Property so sold or any part
thereof, (2) hereby expressly waive all benefit or advantage of any such law or
laws, and (3) covenant not to hinder, delay or impede the execution of any power
herein granted or delegated to the Holder, but to suffer and permit the
execution of every power as though no such law or laws had been made or enacted.
The Company for itself and all who may claim under it, waives, to the extent
that it lawfully may, all right to have the Collateral marshaled upon any
foreclosure hereof.

                                       12
<PAGE>

SECTION 5.04. APPOINTMENT OF RECEIVERS. Upon the occurrence and continuance of
an Event of Default hereunder and upon the filing of a suit or commencement of
other judicial proceedings to enforce the rights of the Holder under the
Security Agreement, the Holder shall be entitled, as a matter of right, without
notice and without regard to the adequacy of any security for the debt secured
hereby, to the appointment of a receiver or receivers of the Collateral and of
the revenues and receipts thereof, pending the conclusion of such proceedings
and any appeal therefrom, with such powers as the court making such appointment
shall confer. The receiver shall be entitled to occupational rent from an
owner/occupant and may upon non-payment of said rent evict the owner/occupant.

SECTION 5.05. APPLICATION OF MONEYS. The Net Proceeds received by the Holder or
pursuant to any right given or action taken under the provisions of this Article
V shall, during the continuance of an Event of Default hereunder, be applied (A)
first, to the payment of the fees, costs and expenses reasonably incurred by the
Holder to operate the Collateral and protect and enforce its rights hereunder
and under the other Financing Documents, including reasonable attorney's fees;
(B) second, to the payment of all installments of interest then due and payable
on the Notes; (C) third, to the payment of unpaid principal of and premium, if
any, on the Notes, whether or not then due and payable; (D) fourth, to the
payment of any sum or charge (other than principal or interest) evidenced or
secured by the Security Agreement and all interest payable thereon; (E) fifth,
to the payment of interest on principal amounts then due and payable under any
other Financing Document; and (F) sixth, the balance thereof to be applied in
reduction of principal amounts then due and payable under or any other Financing
Document, with any excess remaining to be paid to the Company.

SECTION 5.06. REMEDIES CUMULATIVE. No remedy herein conferred upon or reserved
to the Holder is intended to be exclusive of any other available remedy, but
each and every such remedy shall be cumulative and in addition to every other
remedy given under the Security Agreement or under any other Financing Document
now or hereafter existing at law or in equity. No delay or omission to exercise
any right or power accruing upon any default shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right and power
may be exercised from time to time and as often as may be deemed expedient. In
order to entitle the Holder to exercise any remedy reserved to it of them in
this Article V, it shall not be necessary to give any notice, other than such
notice as may be expressly required in the Security Agreement.

SECTION 5.07. TERMINATION OF PROCEEDINGS. In case any proceeding taken by the
Holder on account of any Event of Default shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Holder,
then the Holder and the Company shall be restored to their former positions and
rights hereunder, and all rights, remedies and powers of the Holder shall
continue as if no such proceeding had been taken.

SECTION 5.08. WAIVER AND NON-WAIVER OF EVENT OF DEFAULT. (A) The Holder may, in
its discretion, agree to waive, in writing, any Event of Default hereunder and
its consequences and annul any acceleration in accordance with Section 5.02
hereof. No such waiver shall extend to or affect any other existing or any
subsequent Event of Default.

     (B) The failure of the Holder to insist upon strict performance of any term
hereof shall not be deemed to be a waiver of any term of the Security Agreement.
The Company shall not be relieved of the Company's obligations hereunder by
reason of (1) failure of the Holder to comply with any request of the Company to
take any action to foreclose the Security Agreement or otherwise enforce any of
the provisions hereof, (2) the release, regardless of consideration, of the
whole or any part of the Collateral, or (3) any agreement or stipulation by the
Holder extending the time of payment or otherwise modifying or supplementing the
terms of the Security Agreement or any of the other Financing Documents. The
Holder may resort for the payment of the Indebtedness to any other security held
by the Holder pursuant to the Financing Documents in such order and manner as
the Holder, in its discretion, may elect. The Holder may take action to recover
the Indebtedness, or any portion thereof, or to enforce any covenant hereof
without

                                       13
<PAGE>

prejudice to the right of the Holder thereafter to foreclose the Security
Agreement. The rights of the Holder under the Security Agreement shall be
separate, distinct and cumulative and none shall be given effect to the
exclusion of the others. No act of the Holder shall be construed as an election
to proceed under any one provision herein to the exclusion of any other
provision. No waiver of any right of the Holder shall be effective unless it is
in a writing signed by an officer of the Holder.

SECTION 5.09. REPAYMENT AND SECURING OF EXPENSES PAID BY THE HOLDER. In the
event the Holder shall pay any premiums on any policies of insurance required to
be maintained or procured by Section 4.03 hereof, or in the event the Holder
shall expend any funds for the payment of any unpaid taxes or assessments upon
the Collateral, or expend any funds in payment of any unpaid installments under
any applicable agreement for payments in lieu of taxes with any taxing entity or
pay or perform any other obligation of the Company under any of the Financing
Documents, then in any such event such payment shall be deemed to be secured by
the Security Agreement and shall be payable to the Holder in the manner provided
and with interest as provided herein, or if not so provided therein, shall be
payable on demand as an additional payment under the other Financing Documents
with interest at the rate of the Default Rate or the maximum amount permitted by
law, whichever is less.

SECTION 5.10. OTHER ACTIONS BY THE HOLDER. Regardless of the happening of an
Event of Default, the Holder may institute and maintain such suits and
proceedings as it shall deem necessary or expedient to prevent any impairment of
the security under the Security Agreement by any acts which may be unlawful or
in violation of the Security Agreement, or to preserve or protect the interests
of the Holder.

                                       14
<PAGE>


                                   ARTICLE VI

                                  MISCELLANEOUS


SECTION 6.01. LIMITATION OF RIGHTS. With the exception of rights herein
expressly conferred, nothing expressed or mentioned in or to be implied from the
Security Agreement or the other Financing Documents is intended or shall be
construed to give to any Person, other than the parties hereto or thereto, and
their successors and assigns, any right, remedy or claim under or with respect
to the Security Agreement or any covenants, conditions and provisions herein
contained. The Security Agreement and all of the covenants, conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
parties hereto and their successors and assigns as herein provided.

SECTION 6.02. LAWS. If any law or ordinance is enacted or adopted which imposes
a tax, either directly or indirectly, on the Security Agreement, the Company
will pay, or cause to be paid, such tax, with interest and penalties thereon, if
any.

SECTION 6.03. REVENUE STAMPS. If at any time any Governmental Authority shall
require revenue or other stamps to be affixed to the Security Agreement, the
Company will pay, or cause to be paid, the same, with interest and penalties
thereon, if any.

SECTION 6.04. FURTHER ASSURANCE. The Company will execute and procure for the
Holder and cause to be done any further conveyances, instruments or acts of
further assurance as the Holder shall reasonably require to perfect the security
of the Holder in the Collateral intended now or hereafter to be covered by the
Security Agreement or otherwise for carrying out the intention of facilitating
the performance of the terms of the Security Agreement.

SECTION 6.05. SATISFACTION OF SECURITY AGREEMENT. Upon the payment in full of
all of the amounts due under the Notes and any monetary obligation then due and
payable under the other Financing Documents, and adequate provision has been
made for any indemnification or defense for any then-pending claims against the
Holder of the Holder which the Holder is then entitled to under the terms of any
of the Financing Documents, the Holder by acceptance of the Security Agreement,
agrees to execute and deliver, any and all instruments necessary and/or
appropriate to discharge the Lien of the Security Agreement of record and to
terminate UCC Financing Statements.

SECTION 6.06. SEVERABILITY. (A) If any provision of the Security Agreement
shall, for any reason, be held or shall, in fact, be inoperative or
unenforceable in any particular case, such circumstance shall not render the
provision in question inoperative or unenforceable in any other case or
circumstance or render any other provision herein contained inoperative or
unenforceable.

     (B) The invalidity of any one or more phrases, sentences, clauses,
paragraphs or sections in the Security Agreement shall not affect the remaining
portions of the Security Agreement or any part thereof.

SECTION 6.07. NOTICES. All notices, certificates and other communications
hereunder shall be in writing and shall be sufficiently given and shall be
deemed given when (A) sent to the applicable address stated below by registered
or certified mail, return receipt requested, postage prepaid, or by such other
means (including, without limitation, overnight delivery) as shall provide the
sender with documentary evidence of such delivery, or (B) delivery is refused by
the addressee, as evidenced by the affidavit of the Person who attempted to
effect such delivery or such other evidence of such attempted delivery. The
addresses to which notices, certificates and other communications hereunder
shall be delivered are as follows:

                                       15
<PAGE>

         TO THE COMPANY:

         Balchem Corporation
         P.O. Box 175
         Slate Hill, New York  10973
         Attention:  Dino A. Rossi, President

         WITH A COPY TO:

         Golenbock, Eiseman, Assor & Bell
         437 Madison Avenue
         New York, New York  10022
         Attention:  Nathan E. Assor, Esq.


         TO THE HOLDER:

         Fleet National Bank
         NY KP 0250
         Peter D. Kiernan Plaza
         Albany, New York 12207
         Attention:  Corporate Banking Division

         WITH A COPY TO:

         Lemery MacKrell Greisler LLC
         10 Railroad Place
         Saratoga Springs, New York 12866
         Attention:  James A. Carminucci, Esq.


The Company and the Holder may, by notice given hereunder, designate any further
or different addresses to which subsequent notices, certificates and other
communications shall be sent.

SECTION 6.08. COUNTERPARTS. The Security Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.

SECTION 6.09. TABLE OF CONTENTS AND SECTION HEADINGS NOT CONTROLLING. The table
of contents and the headings of the several articles and sections of the
Security Agreement have been prepared for convenience of reference only and
shall not control, affect the meaning of or be taken as an interpretation of any
provision of the Security Agreement.

SECTION 6.10. AMENDMENT, ETC. Neither the Security Agreement nor any provisions
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.

SECTION 6.11. WAIVER OF NOTICE. Whenever in the Security Agreement the giving of
notice by mail or otherwise is required, the giving of such notice may be waived
in writing by the Person or Persons entitled to receive such notice.

                                       16
<PAGE>

SECTION 6.12.  INDEMNIFICATION; SUBROGATION; WAIVER OF OFFSET.

     (a) The Company shall indemnify, defend and hold the Holder harmless
against: (i) any and all claims for brokerage, leasing, finders or similar fees
which may be made relating to the Loans claiming to have dealt with the Company,
and (ii) against any and all liability, obligations, losses, damages, penalties,
claims, actions, suits, costs, and expenses (including its reasonable attorneys'
fees, together with reasonable appellate counsel fees, if any) of whatever kind
or nature which may be imposed on or incurred by the Holder at any time pursuant
either to a judgment or decree or other order entered into by a court or
administrative agency or to a settlement reasonably approved by the Company,
which judgment, decree, order or settlement relates in any way to or arises out
of the offer, sale or lease of the Collateral and/or the ownership, use, or
operation of any portion of the Collateral.

     (b) If the Holder is made a party defendant to any litigation concerning
the loan which is the subject of the Notes, this Security Agreement, the
Collateral, or any part thereof, or any interest therein, or the occupancy
thereof, then the Company shall indemnify, defend and hold the Holder harmless
from all liability by reason of said litigation, including reasonable attorneys'
fees (together with reasonable appellate counsel fees, if any) and expenses
incurred by the Holder in any such litigation, whether or not any such
litigation is prosecuted to judgment. If the Holder commences an action against
the Company to enforce any of the terms hereof or to prosecute any breach by the
Company of any of the terms hereof or to recover any sum secured hereby and the
Holder prevails thereunder, the Company shall pay to the Holder such reasonable
attorneys' fees (together with reasonable appellate counsel fees, if any) and
expenses. The right to such attorneys fees (together with reasonable appellate
counsel fees, if any) and expenses shall be deemed to have accrued on the
commencement of such action, and shall be enforceable whether or not such action
is prosecuted to judgment. If an Event of Default occurs hereunder, the Holder
may employ an attorney or attorneys to protect its rights hereunder, and in the
event of such employment following any such Event of Default, the Company shall
pay the Holder reasonable attorneys' fees (together with reasonable appellate
counsel fees, if any) and expenses incurred by the Holder, whether or not an
action is actually commenced against the Company by reason of such breach.

     (c) A waiver of subrogation shall be obtained by the Company from its
insurance carrier and, consequently, the Company waives any and all right to
claim or recover against the Holder, its officers, employees, agents and
representatives, for loss of or damage to the Company, the Collateral, the
Company's property or the property of others under the Company's control from
any cause insured against or required to be insured against by the provisions of
this Security Agreement.

     (d) All sums payable by the Company hereunder shall be paid without notice
(except as may otherwise be provided herein), demand, counterclaim, set-off,
deduction or defense and without abatement, suspension, deferment, diminution or
reduction, and the obligations and liabilities of the Company hereunder shall in
no way be released, discharged or otherwise affected by reason of: (i) any
damage to or destruction of or any condemnation or similar taking of the
Collateral or any part thereof; (ii) any restriction or prevention of or
interference with any use of the Collateral or any part thereof; (iii) any title
defect or encumbrance affecting the Collateral or any part thereof by title
superior or otherwise; (iv) any bankruptcy, insolvency, reorganization,
composition, adjustment, dissolution, liquidation, or other like proceeding
relating to the Holder, or any action taken with respect to this Security
Agreement by any trustee or receiver of the Holder, or by any court, in such
proceeding; or (v) any other occurrence whatsoever, whether similar or
dissimilar to the foregoing, whether or not the Company shall have notice or
knowledge of any of the foregoing. The Company waives all rights now or
hereafter conferred by statute or otherwise to any abatement, suspension,
deferment, diminution, or reduction of any sum secured hereby and payable by the
Company.

                                       17
<PAGE>


SECTION 6.13. LOST OR DAMAGED NOTES. Upon receipt of an affidavit of an officer
of the Holder as to the loss, theft, destruction or mutilation of the Notes or
any other security document which is not of public record, and, in the case of
any such loss, theft, destruction or mutilation, upon surrender and cancellation
of such Notes or other security document, the Holder will issue, in lieu
thereof, a replacement Notes or other security document in the same principal
amount thereof and otherwise of like tenor.

SECTION 6.14. COVENANT AGAINST USURY. All agreements between the Company and the
Holder are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of maturity of the indebtedness
evidenced hereby or otherwise, shall the amount paid or agreed to be paid to the
Holder for the use or the forbearance of the indebtedness evidenced hereby
exceed the maximum permissible under applicable law. As used herein, the term
"applicable law" shall mean the law in effect as of the date hereof provided,
however that in the event there is a change in the law which results in a higher
permissible rate of interest, then this Agreement shall be governed by such law
as of its effective date. In this regard, it is expressly agreed that it is the
intent of the Company and the Holder in the execution, delivery and acceptance
of this Agreement to contract in strict compliance with the laws of the State of
New York from time to time in effect. If, under or from any circumstances
whatsoever, fulfillment of any provision hereof or of any law of the Financing
Documents at the time of performance of such provision shall be due, shall
involve transcending the limit of such validity prescribed by applicable law,
then the obligation to be fulfilled shall automatically be reduced to the limits
of such validity, and if under or from circumstances whatsoever the Holder
should ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal balance evidenced hereby and not to the payment of
interest. This provision shall control every other provision of all agreements
between the Company and the Holder.

SECTION 6.15. JURY TRIAL WAIVER. THE COMPANY AND THE HOLDER (BY ACCEPTANCE OF
THIS SECURITY AGREEMENT) MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS SECURITY AGREEMENT OR
ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE HOLDER RELATING TO THE
ADMINISTRATION OF THE LOAN OR ENFORCEMENT OF THIS SECURITY AGREEMENT, AND AGREE
THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS
PROHIBITED BY LAW, THE COMPANY HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE
COMPANY CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE HOLDER HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE HOLDER WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR THE HOLDER TO ACCEPT THE NOTES AND MAKE THE LOANS.

SECTION 6.16. RIGHT OF SET OFF. The Company hereby grants to the Holder, a
continuing lien, security interest and right of setoff as security for all
liabilities and obligations to the Holder, whether now existing or hereafter
arising, upon and against all deposits, credits, collateral and property, now or
hereafter in the possession, custody, safekeeping or control of the Holder or
any entity under the control of FleetBoston Financial Corporation and its
successors and assigns, or in transit to any of them. At any time following the
occurrence and during the continuance of an Event of Default, without demand or
notice (any such notice being expressly waived by the Company), the Holder may
set off the same or any part thereof and apply the same to any liability or
obligation of the Company even though unmatured and regardless of the adequacy
of any other collateral securing the Notes. ANY AND ALL RIGHTS TO REQUIRE THE

                                       18
<PAGE>

HOLDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL
WHICH SECURES THE NOTE, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO
SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE COMPANY OR ANY GUARANTOR, ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

SECTION 6.17. EXPENSES INCURRED IN CONNECTION WITH ENFORCEMENT. The Company
shall pay on demand all reasonable expenses of the Holder in connection with the
preparation, administration, default, collection, waiver or amendment of loan
terms, or in connection with the Holder's exercise, preservation or enforcement
of any of its rights, remedies or options hereunder, including, without
limitation, reasonable fees of outside legal counsel or the allocated costs of
in-house legal counsel, accounting, consulting, brokerage or other similar
professional fees or expenses, and any reasonable fees or expenses associated
with travel or other costs relating to any appraisals or examinations conducted
in connection with the Loans or the Collateral therefor, and the amount of all
such expenses shall, until paid, bear interest at the rate applicable to
principal hereunder (including any default rate) and be an obligation secured by
any collateral.

SECTION 6.18. CHOICE OF LAW. This Security Agreement and the rights and
obligations of the parties hereunder shall be construed and interpreted in
accordance with the laws of the State of New York (the "Governing State")
(excluding the laws applicable to conflicts or choice of law).

     THE COMPANY AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS SECURITY
AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE GOVERNING STATE OR ANY FEDERAL
COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE COMPANY BY
MAIL AT THE ADDRESS SET FORTH HEREIN. THE COMPANY HEREBY WAIVES ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH
COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT FORUM.

SECTION 6.19. MERGER. This Security Agreement is intended by the parties as the
final, complete and exclusive statement of the transactions evidenced by this
Security Agreement. All prior contemporaneous promises, agreements and
understandings, whether oral or written, are deemed to be superceded by this
Security Agreement, and no party is relying on any promise, agreement or
understanding not set forth in this Security Agreement. This Security Agreement
may not be amended or modified except by a written instrument describing such
amendment or modification executed by the Company and the Holder.

                                       19
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have duly executed this Security
Agreement as of the day and year first above written.

                                     BALCHEM CORPORATION


                                     By: /s/ Frank J. Fitzpatrick
                                         --------------------------------------
                                     Name: Frank J. Fitzpatrick
                                           ------------------------------------
                                     Title: Controller and Assistant Secretary
                                            -----------------------------------



                                     FLEET NATIONAL BANK


                                     By: /s/ Karen D. Finnerty
                                         --------------------------------------
                                         Karen D. Finnerty, Vice President

STATE OF NEW YORK          )
                           )ss.:
COUNTY OF  NEW YORK        )

     On the 30 day of May, in the year 2001 before me personally came Frank J.
Fitzpatrick, to me known, who, being by me duly sworn, did depose and say that
he/she/they reside(s) in _____________________; that he/she/they is(are) the
Controller & Assistant Secretary of BALCHEM CORPORATION, the corporation
described in and which executed the above instrument; and that he/she/they
signed his/her/their name(s) thereto by authority of the board of directors of
said corporation.

                                             /s/ Jane A. Dwyer
                                             -----------------
                                               Notary Public


STATE OF NEW YORK          )
                           )ss.:
COUNTY OF NEW YORK         )

         On the 30 day of May, in the year 2001 before me personally came KAREN
D. FINNERTY to me known, who, being by me duly sworn, did depose and say that
he/she/they reside(s) in _____________________; that he/she/they is(are) the
VICE PRESIDENT of FLEET NATIONAL BANK, the national banking association
described in and which executed the above instrument; and that he/she/they
signed his/her/their name(s) thereto by authority of the board of directors of
said corporation.

                                               /s/ Jane A. Dwyer
                                               -----------------
                                                 Notary Public


<PAGE>


                                  SCHEDULE 3.01


2007 Route 284
Slate Hill, New York  10973


95 Balchem Lane
Highway 17
Green Pond, South Carolina  29446


299 Extension Street
Verona, Missouri  65769

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.4
<SEQUENCE>6
<FILENAME>exhibit4-4_39462.txt
<TEXT>


                                                                   Exhibit 4.4



- --------------------------------------------------------------------------------



                              BCP INGREDIENTS, INC.


                                       TO


                               FLEET NATIONAL BANK




 ===============================================================================

                               SECURITY AGREEMENT

 ===============================================================================



                               DATED JUNE 1, 2001


- --------------------------------------------------------------------------------



             THIS SECURITY  AGREEMENT (A) AFFECTS  TANGIBLE AND
             INTANGIBLE   PERSONAL   PROPERTY,   (B)   CONTAINS
             AFTER-ACQUIRED   PROPERTY   PROVISIONS,   (C)   IS
             INTENDED TO CONSTITUTE A SECURITY  AGREEMENT UNDER
             THE  UNIFORM  COMMERCIAL  CODE AND (D)  SECURES AN
             OBLIGATION  UNDER WHICH THE INTEREST RATE MAY VARY
             FROM TIME TO TIME.


<PAGE>


                               SECURITY AGREEMENT


         THIS SECURITY AGREEMENT (the "Security Agreement") dated June 1, 2001
from BCP INGREDIENTS, INC., a business corporation organized and existing under
the laws of the State of Delaware and having an address of c/o Balchem
Corporation, P.O. Box 175, Slate Hill, New York 10973 (the "Corporate
Guarantor"), to FLEET NATIONAL BANK, a national banking association organized
and existing under the laws of the United States having an address of 69 State
Street, Albany, New York 12201 (the "Holder");


                              W I T N E S S E T H:


         WHEREAS, the Holder will make the Loans (as herein defined) to the
Company (as herein defined), the repayment of which is evidenced the Notes (as
herein defined) from the Company in favor of the Holder; and

         WHEREAS, the Corporate Guarantor will guaranty repayment of the Notes
pursuant to the Guaranty (as herein defined); and

         WHEREAS, as additional security for the payment of principal, premium,
if any and interest on the Notes, the Corporate Guarantor intends to grant the
Holder a security interest in certain of the assets of the Corporate Guarantor
as hereinafter set forth;

           NOW, THEREFORE, THIS SECURITY AGREEMENT FURTHER WITNESSETH:




<PAGE>


                                    ARTICLE I

                                   DEFINITIONS

SECTION 1.01. DEFINITIONS OF TERMS. The following words and terms if used in
this document shall have the following meanings unless the context or use
indicates another or different meaning or intent and the singular shall include
the plural and the plural shall include the singular, as the context may
require:

         "CLOSING" means the closing with respect to the execution and delivery
of the Notes by the Company to the Holder.

         "CLOSING DATE" means the date of the execution and delivery of the
Notes by the Company to the Holder.

         "COLLATERAL" shall have the definition assigned to such term in Section
2.01 hereof.

         "COMPANY" means Balchem Corporation, a Maryland corporation having an
address of P.O. Box 175, Slate Hill, New York 10973 and its permitted successors
and permitted assigns.

         "CORPORATE GUARANTOR" means BCP Ingredients, Inc., a Delaware
corporation, and its successors and permitted assigns.

         "CORPORATE GUARANTOR SECURITY AGREEMENT" means this security agreement
dated the Closing Date from the Corporate Guarantor in favor of the Holder as
security for the Notes, as said security agreement may be modified, amended,
supplemented, consolidated, spread or assumed from time to time.

         "DEFAULT RATE" shall have the meaning assigned to such term in the
Notes.

         "ENVIRONMENTAL COMPLIANCE AGREEMENT" means the environmental compliance
agreement dated the date hereof from the Company and the Corporate Guarantor in
favor of the Holder, as said environmental compliance agreement may be amended
or supplemented from time to time.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may from time to time be amended or supplemented, and all regulations
promulgated thereunder.

         "EVENT OF DEFAULT" shall have the meaning assigned to such term in
Section 5.01 hereof.

         "FINANCING DOCUMENTS" means the Notes, the Security Agreement, the
Guaranty, the Corporate Guarantor Security Agreement, the Loan Agreement, the
Swap Agreement, the Environmental Compliance Agreement and any other document
now or hereafter executed by the Company or the Corporate Guarantor by or in
favor of the Holder which affects the rights of the Holder in or to the
Collateral, in whole or in part, or which evidences, secures or guarantees any
sum due under the Notes or any of the other Financing Documents.

         "GAAP" means generally accepted accounting principles as then in
effect, which shall include the official interpretations thereof by the
Financial Accounting Standards Board, consistently applied.

         "GOVERNMENTAL AUTHORITY" means the United States, the State and any
political subdivision thereof, and any agency, department, commission, court,
board, bureau or instrumentality of any of them.


                                       2
<PAGE>


         "GUARANTY" means the guaranty dated the Closing Date from the Corporate
Guarantor in favor of the Holder, as said Guaranty may be modified, amended or
supplemented from time to time.

         "HOLDER" means Fleet National Bank as the original owner of the Notes,
and any subsequent owner at the time in question of the Notes.

         "INDEBTEDNESS" shall have the definition assigned to such term in
Section 2.01 hereof.

         "LIEN" means any interest in Property securing an obligation owed to a
Person whether such interest is based on the common law, statute or contract,
and including but not limited to a security interest arising from a mortgage,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" includes but is not limited to
mechanics', materialmens', warehousemens' and carriers' liens and other similar
encumbrances. For the purposes hereof, a Person shall be deemed to be the owner
of Property which it has acquired or holds subject to a conditional sale
agreement or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes.

         "LINE OF CREDIT LOAN" means the loan in the principal amount of
$3,000,000.00 from the Bank to the Company as evidenced by the Line of Credit
Loan Note.

         "LINE OF CREDIT LOAN NOTE" means the promissory note dated the Closing
Date in the principal amount of $3,000,000.00 from the Company in favor of the
Holder as said note may be amended, modified, supplemented, consolidated or
extended from time to time.

         "LOANS" means, collectively, the Term Loan and the Line of Credit Loan.

         "LOAN AGREEMENT" means the loan agreement dated the Closing Date, by
and between the Holder and the Company, as said loan agreement may be modified,
supplemented or amended from time to time.

         "NET PROCEEDS" means so much of the gross proceeds with respect to
which that term is used as remain after payment of all expenses, costs and taxes
(including attorneys' fees) incurred in obtaining such gross proceeds.

         "NOTE" means, collectively, the Term Loan Note and the Line of Credit
Loan Note, as each of said notes may be amended, modified, supplemented,
consolidated or extended.

         "NOTE PAYMENT DATE" means each date on which interest or both principal
and interest shall be payable on the Notes according to its terms so long as
such shall be outstanding.

         "PERMITTED ENCUMBRANCES" means (A) Liens for taxes which are not
delinquent or which are being contested in good faith, mechanic's and
materialmen's Liens and other statutory Liens with respect to obligations which
are not overdue or which are being contested in good faith, and Liens resulting
from deposits to secure the payments of workmen's compensation or other social
security or to secure the performance of bids or contracts in the ordinary
course of business, (ii) capitalized lease or purchase money security interest
obligations in the ordinary course of business or assumed as part of a permitted
acquisition, (iii) reservations, exceptions, encroachments, easements, rights of
way, covenants, conditions, restrictions, leases and other similar title
exceptions affecting real estate, (iv) Liens having as aggregate dollar value
not in excess of $100,000 or (v) Liens in favor of the Bank.


                                       3
<PAGE>


         "PERSON" means an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, and a government or
agency or political subdivision thereof.

         "PLAN" means any plan defined in Section 4021(a) of ERISA in respect of
which the Company or any Subsidiary thereof is an "employer" or a "substantial
employer" as defined in Sections 3(5) and 4001(a)(2) of ERISA, respectively.

         "PRINCIPAL BALANCE" means the aggregate outstanding principal balance
of the Notes from time to time.

         "PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

         "REPORTABLE EVENT" means any reportable event as defined in ERISA.

         "REQUIREMENT" or "LOCAL REQUIREMENT" means any law, ordinance, order,
judgment, decree, rule, regulation, permit, license, authorization, certificate
or approval of a Governmental Authority or a Local Authority respectively.

         "SECURITY AGREEMENT" means this security agreement dated the Closing
Date from the Company in favor of the Holder as security for the Notes, as said
security agreement may be modified, amended, supplemented, consolidated, spread
or assumed from time to time.

         "STATE" means the State of New York.

         "SUBSIDIARY" shall mean for any Person (i) any for-profit entity more
than fifty percent (50%) of the capital stock of which is owned or controlled,
directly or indirectly, by such Person or any Subsidiary and whose accounts are
required to be consolidated with those of said Person in accordance with GAAP
and (ii) any non-profit entity which is controlled, directly or indirectly, by
such Person.

         "SWAP AGREEMENT" means any swap master agreement entered into by the
Company and the Holder in connection with the Term Loan Note, together with any
amendments or supplements thereto or replacements or substitutions thereof.

         "TERM LOAN" means the loan in the principal amount of $13,500,000.00
from the Bank to the Company as evidenced by the Term Loan Note.

         "TERM LOAN NOTE" means the note dated the Closing Date in the principal
amount of $13,500,000.00 from the Company in favor of the Holder as said note
may be amended, modified, supplemented, consolidated or extended from time to
time.


                                       4
<PAGE>


                                   ARTICLE II

                               SECURITY AGREEMENT;
                       GRANTING CLAUSES; GENERAL COVENANTS

SECTION 2.01. GRANTING CLAUSES. The Corporate Guarantor, in consideration of the
making of the Loans by the Holder and for other good and valuable consideration,
receipt of which is hereby acknowledged, and in order to secure (1) the payment
of the principal of, premium, if any, and interest on the Term Loan Note, issued
in the original amount of Thirteen Million Five Hundred Thousand Dollars
($13,500,000) according to its tenor and effect (2) the payment of the principal
of, premium, if any, and interest on the Line of Credit Loan Note, issued in the
original amount not to exceed Three Million Dollars ($3,000,000) according to
its tenor and effect, (3) the payment of all other sums required to be paid
hereunder and under the other Financing Documents and (4) the performance and
observance by the Company of all of the covenants, agreements, representations
and warranties herein and in the other Financing Documents (collectively, the
"Indebtedness"); and in order to secure the Indebtedness; hereby warrant,
assign, mortgage, hypothecate, pledge, and grant a security interest in, set
over and confirm unto the Holder and its respective successors and assigns, all
of the estate, right, title and interest of the Corporate Guarantor in, to and
under any and all of the following described property (the "Collateral") whether
now owned or held or hereafter acquired:

         (A) All right, title and interest of the Corporate Guarantor in all
articles of personal property and all appurtenances, wherever located, and now
or hereinafter owned by the Corporate Guarantor, including, but not limited to,
all equipment, materials, furnishings, and machinery, (excluding, however,
pipes, screens, heating, lighting, plumbing, ventilation, air conditioning
systems and other fixtures appurtenant to or affixed to real property) together
with any and all products of any of the above, all substitutions, replacements,
additions or accessories therefor;

         (B) All of the Corporate Guarantor's now owned and hereafter acquired
or arising accounts (also known as accounts receivable) inventory, supplies,
returned and repossessed goods, instruments, contract rights, chattel paper,
choses in action and general intangibles, including, but not limited to, all
corporate names, trademarks, trade names, goodwill, patents, and copyrights, but
excluding contract rights which by their terms are not assignable absent the
consent of a third party;

         (C) Any and all moneys and securities from time to time held by the
Holder under the terms of the Security Agreement and/or the Loan Agreement, and
any and all other Property of every name and nature, from time to time
hereinafter by delivery or by writing of any kind conveyed, mortgaged, pledged,
assigned or transferred as and for additional security hereunder by the
Corporate Guarantor or by anyone on its behalf or with its written consent in
favor of the Holder;

         (D) All right, title and interest of the Corporate Guarantor in the
Swap Agreement and each transaction entered into thereunder (including, without
limitation, all amounts payable or deliverable thereunder);

         (E) All proceeds of and any unearned premiums on any insurance policies
covering the foregoing, including, without limitation, the right to receive and
apply the proceeds of any insurance or judgments, or settlements made in lieu
thereof, for damage to any of the foregoing;

         (F) The right, in the name and on behalf of the Corporate Guarantor, to
appear in and defend any action or proceeding brought with respect to the above
or any part thereof and to commence any action or proceeding to protect the
interest of the Holder with respect thereto;

                                       5
<PAGE>


         (G) All other proceeds of the conversion, whether voluntary or
involuntary, of the above or any other Property or rights encumbered or conveyed
hereby into cash or liquidated claims, including, without limitation, all hazard
insurance, Condemnation and other awards relating to the Collateral; and

         (H) All extensions, additions, substitutions and accessions with
respect to any of the foregoing.

         TO HAVE AND TO HOLD the foregoing Collateral unto the Holder and its
successors and assigns forever subject to Section 6.05 hereof.

SECTION 2.02. SECURITY AGREEMENT. The Collateral includes all rights and
interest, whether tangible or intangible in nature, of the Corporate Guarantor
in the Collateral. This Security Agreement shall constitute a security agreement
under the Uniform Commercial Code of the State so that the Holder shall have and
may enforce a security interest in any or all of the Collateral, such security
interest to attach at the earliest moment permitted by law and also to include
and attach to all additions and accessions thereto, all substitutions and
replacements therefor, all proceeds thereof, including insurance and
Condemnation proceeds, and all contract rights, rental or lease payments and
general intangibles of the Corporate Guarantor obtained in connection with or
relating to the Collateral as well as any and all items of Property in the
foregoing classifications which are hereafter acquired. The Corporate Guarantor
shall, at the request of the Holder, deliver to the Holder, any and all further
instruments which the Holder shall require in order to further secure and
perfect the Lien of the Security Agreement. Pursuant to the Uniform Commercial
Code of the State, the Corporate Guarantor hereby authorizes the Holder to
execute and file UCC Financing Statements and continuation statements, at the
expense of the Corporate Guarantor, without the necessity of the Corporate
Guarantor's signature as debtor if the Holder shall determine that such are
necessary or advisable in order to perfect its security interest in any of the
Collateral covered by this Security Agreement, and shall pay to the Holder, on
demand, any reasonable expenses incurred by the Holder in connection with the
preparation, execution and filing of such statements and any continuation
statements that may be filed by the Holder without the necessity of the
Corporate Guarantor's signature as debtor.

SECTION 2.03. INFORMATION UNDER UNIFORM COMMERCIAL CODE. The following
information is stated in order to facilitate filings under the Uniform
Commercial Code of the State: The Secured Party is Fleet National Bank, having
an office at P.O. Box 2984, Hartford, Connecticut 06101-2984, CT EH 4151MT. The
Debtor is Balchem Corporation having its principal office at P.O. Box 175, Slate
Hill, New York 10973.

SECTION 2.04. PERFORMANCE OF COVENANTS. The Corporate Guarantor hereby covenants
that it will faithfully observe and perform, or cause to be observed and
performed, at all times any and all covenants, undertakings, stipulations and
provisions on its part to be observed or performed contained in the Security
Agreement.

SECTION 2.05. PRIORITY OF LIEN OF SECURITY AGREEMENT; DISCHARGE OF LIENS AND
ENCUMBRANCES. (A) The Corporate Guarantor hereby covenants that the Corporate
Guarantor has the right to grant a security interest in and Lien on the
Collateral, and Corporate Guarantor will warrant and defend title to the
Collateral against all claims and demands.

         (B) The Corporate Guarantor shall not permit or create or suffer to be
permitted or created any Lien, except for Permitted Encumbrances, upon the
Collateral or any part thereof.

                                       6
<PAGE>


         (C) To the extent the Corporate Guarantor is permitted under the
provisions of any of the Financing Documents to dispose of items of Collateral,
the same shall be deemed upon such disposition to be free and clear of all Liens
granted to the Holder, and the Holder agrees at the cost and expense of the
Corporate Guarantor to execute UCC release statements so as to reflect of record
the release of said items from the Lien of this Security Agreement or other
appropriate evidence of the release of such Liens as the Company may reasonably
request.



                                       7
<PAGE>



                                   ARTICLE III

                  REPRESENTATIONS AND WARRANTIES AND COVENANTS.


SECTION 3.01. REPRESENTATIONS AND WARRANTIES AND COVENANTS OF THE CORPORATE
GUARANTOR. The Corporate Guarantor represents and warrants as follows:

         (A) (1) The Corporate Guarantor has good title to the Collateral,
subject only to Permitted Encumbrances and (2) this Security Agreement is and
will remain a valid and enforceable Lien on the Collateral, except as items of
Collateral are disposed of as permitted by the Financing Documents.

         (B) The Corporate Guarantor is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and
possesses full corporate power and corporate capacity to enter into the Security
Agreement and the other Financing Documents and to mortgage and pledge the
Collateral in the manner and to the extent herein set forth, and the Security
Agreement and the other Financing Documents constitute valid and enforceable
obligations according to their terms except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other laws relating to or affecting
the enforcement of creditors' rights generally and except as enforceability may
limited by general equitable principles.

         (C) Neither the execution and delivery of the Security Agreement and
the other Financing Documents, the consummation of the transactions contemplated
hereby and thereby nor the fulfillment of or compliance with the provisions
hereof or thereof will conflict with or result in a breach of any of the terms,
conditions or provisions of the articles of incorporation or by-laws of the
Corporate Guarantor or of any order, judgment, law, restriction, agreement or
instrument to which the Corporate Guarantor is a party of by which it is bound
except to the extent the foregoing would not have a material adverse effect upon
the business, operations or financial condition of the Corporate Guarantor or
materially and adversely effect the Lien on the Collateral granted hereunder, or
result in the creation or imposition of any Lien (except Permitted Encumbrances)
of any nature upon any of the Property of the Corporate Guarantor under the
terms of any such instrument or agreement.

         (D) The chief executive office and other places of business of the
Corporate Guarantor, the Collateral and the books and records relating to the
Collateral are, and have been during the four month period prior to the date
hereof (or in the case of a new business, from the date of commencement of said
business), located at the address(es) set forth in Schedule 3.01 hereto and the
Corporate Guarantor will not change the same, or merge or consolidate with any
person or change its name, without prior written notice to the Holder.

         (E) In its discretion, the Holder may at any time and from time to
time, after an Event of Default has occurred and is continuing, in its name or
the Corporate Guarantor's or otherwise, notify any account debtor or obligor of
any account contact, document, instrument, chattel paper or general intangible
included in the Collateral to make payment to the Holder.

         (F) In its discretion, the Holder may, at any time and from time to
time, after an Event of Default has occurred and is continuing, demand, sue for,
collect or receive any money or property at any time payable or receivable on
account of or in exchange for, or make any compromise or settlement deemed
desirable to the Holder with respect to, any Collateral, and/or extend the time
of payment, arrange for payment in installments, or otherwise modify the terms
of, or release, any Collateral or obligations, all without notice to or consent
by the Corporate Guarantor and without otherwise discharging or affecting the
obligations, the Collateral or the security interest granted herein.



                                       8
<PAGE>



                                   ARTICLE IV

                 MAINTENANCE, MODIFICATION, TAXES AND INSURANCE

SECTION 4.01. MAINTENANCE AND MODIFICATIONS OF COLLATERAL. The Corporate
Guarantor agrees that during the period that the Notes are outstanding it will
(1) keep the tangible Collateral in good condition and repair and preserve the
same against waste, loss and damage, ordinary wear and tear excepted, and (2)
make all necessary repairs and replacements to the tangible Collateral or any
part thereof (whether ordinary or extraordinary, structural or nonstructural,
foreseen or unforeseen), in each instance where the failure to do so would have
a material adverse effect upon the Corporate Guarantor and Company taken as a
whole or materially diminish the value of the Collateral (as defined in the Loan
Agreement) taken as a whole.

SECTION 4.02. TAXES, ASSESSMENTS AND UTILITY CHARGES. (A) Except as otherwise
permitted by the Financing Documents, the Corporate Guarantor shall pay or cause
to be paid, as the same respectively become due, (1) all material taxes and
governmental charges of any kind whatsoever which may at any time be lawfully
assessed or levied against or with respect to the Collateral, (2) all utility
and other charges, including "service charges", incurred or imposed for the
operation, maintenance, use, occupancy, upkeep and improvement of the
Collateral, and (3) all assessments and charges of any kind whatsoever lawfully
made by any Governmental Authority for public improvements, provided that, with
respect to special assessments or other governmental charges that may lawfully
be paid in installments over a period of years, the Corporate Guarantor shall be
obligated hereunder to pay only such installments as are required to be paid
during all periods that sums payable by the Corporate Guarantor hereunder are
due and owing.

         (B) Notwithstanding the provisions of subsection (A) of this Section
4.02, the Corporate Guarantor may in good faith actively contest any such taxes,
assessments and other charges, provided that the Corporate Guarantor shall have
paid such taxes, assessments and other charges if required by law to do so or
provided that (1) the Corporate Guarantor first shall have notified the Holder
in writing of such contest, (2) no Event of Default exists hereunder or under
the other Financing Documents and (3) the Corporate Guarantor shall have set
aside reserves for any such taxes, assessments and other charges in accordance
with GAAP. Otherwise, such taxes, assessments or other charges shall be paid
promptly by the Corporate Guarantor or, at the Corporate Guarantor's option,
secured by the Corporate Guarantor's posting a bond in form and substance
satisfactory to the Holder.

SECTION 4.03. INSURANCE REQUIRED. At all times that the Notes are outstanding,
the Corporate Guarantor shall maintain or cause to be maintained insurance with
respect to the Collateral against such risks and for such amounts as are
customarily insured against by businesses of like size and type, paying, as the
same become due and payable, all premiums with respect thereto, including, but
not necessarily limited to:

         (A) Insurance protecting the interests of the Corporate Guarantor as
insured and the Holder as mortgagee and loss payee, as their interests may
appear, against loss or damage to the Collateral by fire, lightning, vandalism,
malicious mischief and other perils and casualties normally insured against with
a uniform extended coverage endorsement, such insurance at all times when
combined with that maintained by the Company to be in an amount not less than
the unpaid principal amount of the Notes outstanding; provided, however, that
the Corporate Guarantor may insure all or a portion of the Collateral under a
blanket insurance policy or policies covering not only the Collateral or
portions thereof but other Property.

                                       9
<PAGE>


         (B) To the extent applicable, workers' compensation insurance,
disability benefits insurance and such other forms of insurance which the
Corporate Guarantor is required by law to provide, covering loss resulting from
injury, sickness, disability or death of employees of the Corporate Guarantor.

         (C) Insurance protecting the Corporate Guarantor and the Holder against
loss or losses from liabilities imposed by law or assumed in any written
contract and arising from personal injury or death or damage to the property of
others caused by any accident or occurrence, with limits of not less than
$2,000,000 per person per accident or occurrence on account of personal injury,
including death resulting therefrom, and $2,000,000 per accident or occurrence
on account of damage to the property of others, excluding liability imposed upon
the Corporate Guarantor by any applicable workers' compensation law, and a
separate commercial umbrella liability policy in excess of the basic coverage
stated above protecting the Corporate Guarantor and the Holder with a limit of
not less than $3,000,000.

         (D) If requested by the Holder, customary policies of insurance against
loss or damage to any air conditioning, heating or ventilation system, steam
boilers or other high pressure machinery, if any in an amount satisfactory to
the Holder.

         (E) Other insurance coverage required by any Governmental Authority in
connection with any Requirement.

SECTION 4.04. ADDITIONAL PROVISIONS RESPECTING INSURANCE. All insurance required
by Section 4.03 hereof shall be procured and maintained in financially sound and
generally recognized responsible insurance companies selected by the Corporate
Guarantor and authorized to write such insurance in the State and satisfactory
to the Holder. The Corporate Guarantor or companies issuing the policies
required by Sections 4.03(A) shall be rated "A" or better by A.M. Best Co., Inc.
in the most recent edition of Best's Key Rating Guide. Such insurance may be
written with deductible amounts comparable to those on similar policies carried
by other companies engaged in businesses similar in size, character and other
respects to those in which the Corporate Guarantor is engaged. All policies
evidencing the insurance required by Section 4.03 (A) hereof shall name the
Corporate Guarantor as insured and the Holder as mortgagee and loss payee under
a lender's loss payable endorsement, as their interests may appear, and all
policies evidencing the insurance required by Section 4.03 hereof shall provide
for at least thirty (30) days' written notice to the Corporate Guarantor and the
Holder prior to cancellation, lapse, reduction in policy limits or material
change in coverage thereof. The insurance required by Sections 4.03(A) and
4.03(D) hereof shall be fully paid for and shall contain a standard
non-contributory mortgagee endorsement in favor of the Holder as mortgagee and
loss payee. All insurance required hereunder shall be in form and content
reasonably satisfactory to the Holder. Certificates satisfactory in form and
substance to the Holder to evidence all insurance required hereby shall be
delivered to the Holder on or before the Closing Date. The Corporate Guarantor
shall deliver to the Holder on or before the first Business Day of each calendar
year thereafter a certificate dated not earlier than the immediately preceding
December l reciting that there is in full force and effect, with a term covering
at least the next succeeding calendar year, insurance in the amounts and of the
types required by Sections 4.03 and 4.04 hereof. Prior to the expiration of any
such policy, the Corporate Guarantor shall furnish to the Holder evidence that
the policy has been renewed or replaced or is no longer required hereby.

               (B) All premiums with respect to the insurance required by
Section 4.03 hereof shall be paid by the Corporate Guarantor; provided, however,
that if the premiums are not timely paid, the Holder may pay such premiums and
the Corporate Guarantor shall pay immediately upon demand all sums so expended
by the Holder, together with interest, to the extent permitted by law, at the
Default Rate from the date on which such payment was due until the date on which
the payment is made.

                                       10
<PAGE>


         (C) The Corporate Guarantor shall give the Holder prompt notice of any
material loss covered by the insurance required in this Article, and any Net
Proceeds of insurance claims received by the Corporate Guarantor shall promptly
be paid over to the Holder to be held by the Holder to the extent required and
in accordance with the provisions of Section 4.05 hereof.

         (D) (1) The Corporate Guarantor shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required to be
maintained under Section 4.03 unless the Holder is included therein as a named
insured with loss payable to Holder under a standard non-contributory mortgage
endorsement of the above described character. The Corporate Guarantor shall
immediately notify the Holder whenever any such separate insurance is taken out
and shall promptly deliver to the Holder the policy or policies of such
insurance.

             (2) Each of the policies required pursuant to Section 4.03 hereof
shall waive any right of subrogation against any Person insured under such
policy, and shall waive any right of the insurers to any set-off or counterclaim
or any other deduction, whether by attachment or otherwise, in respect of any
liability of any Person insured under such policy.

SECTION 4.05. APPLICATION OF NET PROCEEDS OF INSURANCE. The Net Proceeds of the
insurance carried pursuant to the provisions of Section 4.03 hereof shall be
applied as follows: (A) the Net Proceeds of the insurance required by Section
4.03(A) and 4.03(D) hereof shall, provided no Event of Default has occurred and
is continuing, be paid to the Corporate Guarantor and applied toward the
replacement or restoration of the particular items for which a claim was made
provided however that in the event the Net Proceeds exceed $5,000,000 or exceed
the Principal Balance, the Net Proceeds shall, at the option of the Holder, be
applied toward payment of Debt Service Payments payable pursuant to the Notes
and the payment of the Company's obligations hereunder and (B) the Net Proceeds
of the insurance required by Section 4.03(B), 4.03(C) and 4.03(E) hereof shall
be applied toward extinguishment or satisfaction of the liability with respect
to which such insurance proceeds may be paid.

SECTION 4.06. COVENANTS. Until the Loans have been paid in full and all other
monetary obligations then due of the Corporate Guarantor under the Financing
Documents have been satisfied, the Corporate Guarantor covenants with the Holder
as follows:

         (A) It will deliver to the Holder on demand if the Holder reasonably
requests such, certified copies of any contracts, bills of sale, statements,
receipted vouchers or agreements, under which the Corporate Guarantor claims
title to any materials, fixtures or articles subject to the Lien of the Security
Agreement;

         (B) It will transmit to the Holder, immediately upon receipt thereof,
any material communication adversely affecting the Collateral and will promptly
and reasonably respond to any reasonable inquiry of the Holder made with respect
thereto;

         (C) It will notify the Holder of any material adverse change in the
financial condition or business of the Corporate Guarantor and furnish such
other information concerning its financial condition and business as may be
reasonably requested by the Holder from time to time;

         (D) The Holder shall have the right to inspect the Collateral including
the right to conduct field examinations thereof at such times as the Holder may
determine in its reasonable discretion, the reasonable cost of which inspections
and examinations should be borne by the Corporate Guarantor; provided that if no
Event of Default has occurred and is continuing, such inspections shall be
limited to one during each fiscal year;

                                       11
<PAGE>


         (E) It will give written notice to the Holder within ten (10) days of
becoming aware of any condition or event which constitutes an event of default
beyond any applicable grace or cure period with respect to other outstanding
Indebtedness of the Corporate Guarantor in excess of $100,000;

         (F) It will promptly inform the Holder of any pending or to the
Corporate Guarantor's knowledge threatened litigation against the Corporate
Guarantor or affecting any of the Corporate Guarantor's property, if such
litigation or potential litigation could reasonably be expected to have a
material adverse effect on the Corporate Guarantor's consolidated financial
condition or to cause an Event of Default;

         (G) It will preserve and maintain its corporate existence, all rights,
licenses, privileges, franchises, certificates and the like necessary for the
operation of its business and the maintenance of its existence where the failure
to maintain the same is reasonably expected to have a material adverse effect
upon the Corporate Guarantor, and promptly and properly comply with all laws,
statutes, ordinances and governmental regulations applicable to it or to any of
its property, business operations and transactions where the failure to comply
with the same is reasonably expected to have a material adverse effect upon the
Corporate Guarantor;



                                       12
<PAGE>



                                    ARTICLE V

                         EVENTS OF DEFAULT AND REMEDIES


SECTION 5.01. EVENTS OF DEFAULT DEFINED. The following shall be "Events of
Default" under the Security Agreement and the terms "Event of Default" or
"default" shall mean, whenever they are used in the Security Agreement, any one
or more of the following events:

         (A) If the Corporate Guarantor fails to comply with any of the
covenants or agreements made, or to be observed, by it in the Security
Agreement, other than a covenant or agreement specified in subsection (B) below,
and such failure shall have continued for a period of fifteen (15) days
following written notice of non-compliance from the Holder to the Corporate
Guarantor, provided that if such default cannot reasonably be cured within said
fifteen (15)-day period and the Corporate Guarantor shall have commenced action
to cure the breach of covenant or agreement within said fifteen (15)-day period
and, thereafter, diligently and expeditiously proceeds to cure the same, such
fifteen (15) day period shall be extended for so long as the Corporate Guarantor
shall require, in the exercise of due diligence, to cure such default, it being
agreed that no such extension shall be for a period in excess of forty five (45)
days in the aggregate from the date of such written notice;

         (B) Notwithstanding the foregoing subsection (A) above, the following
shall be immediate Events of Default for which there shall be no cure period
under this Section:

                    (1) if a default by the Corporate Guarantor occurs in the
         due and punctual payment of any amounts specified to be paid herein or
         under any of the other Financing Documents (other than any amounts
         payable on the Maturity Date or any earlier date on which the entire
         Principal Balance together with all accrued but unpaid interest and all
         other sums evidenced or secured by the Financing Documents shall be due
         and payable in full) and such default continues for ten (10) days;

                    (3) an Event of Default beyond any applicable grace or cure
         period shall occur under the Loan Agreement.

SECTION 5.02. ACCELERATION; ANNULMENT OF ACCELERATION. (A) Upon the occurrence
of an Event of Default hereunder, the Holder may, by notice in writing delivered
to the Corporate Guarantor declare the whole of the Indebtedness immediately due
and payable, whereupon the same shall become and be immediately due and payable,
anything in the Security Agreement or any other Financing Documents to the
contrary notwithstanding. In such event, there shall be due and payable the
total amount of Indebtedness plus all accrued but unpaid interest thereon and
all interest which will accrue thereon to the date of payment.

         (B) At any time after the principal of the Notes shall have been so
declared to be due and payable and before the entry of final judgment or decree
in any suit, action or proceeding instituted on account of such default, or
before the completion of the enforcement of any other remedy under the Security
Agreement, the Holder may at its option annul such declaration and its
consequences. No such annulment shall extend to or affect any subsequent Event
of Default or impair any right consequent thereon.

SECTION 5.03. ENFORCEMENT OF REMEDIES. (A) Upon the occurrence and continuance
of any Event of Default, the Holder may proceed forthwith to protect and enforce
its rights under the Security Agreement, and the other Financing Documents by
such suits, actions or proceedings as it shall deem appropriate, including,
without limitation, an action to foreclose the Lien of the Security Agreement,
in which case the Collateral or any interest therein may be sold for cash or
credit in one or more interests and in any order or manner.

                                       13
<PAGE>


         (B) The Holder may sue for, enforce payment of and receive any amounts
due or becoming due from the Corporate Guarantor for principal, premium, if any,
interest or otherwise under any of the provisions of the Security Agreement or
the other Financing Documents, without prejudice to any other right or remedy of
the Holder.

         (C) Regardless of the happening of an Event of Default, the Holder may
institute and maintain such suits and proceedings as it may be advised shall be
necessary to prevent any impairment of the security under the Security Agreement
by any acts which may be unlawful or in violation of the Security Agreement, or
to preserve or protect the interests of the Holder.

         (D) The Holder shall have the right to appear in and defend any action
or proceeding brought with respect to the Collateral and to bring any action or
proceeding, in the name and on behalf of the Corporate Guarantor, which the
Holder, in its discretion, determines should be brought to protect their
interests in the Collateral.

         (E) Upon the occurrence and continuance of any Event of Default
hereunder, the Corporate Guarantor, upon demand of the Holder, shall forthwith
surrender the possession of, and it shall be lawful for the Holder, to take
possession of, all or any part of the Collateral, together with the books,
papers and accounts of the Corporate Guarantor pertaining thereto, and to hold,
operate and manage the same, and from time to time to make all needed repairs
and improvements as the Holder shall deem wise; and the Holder may sell the
Collateral or any part thereof, or lease the Collateral or any part thereof in
the name and for the account of the Corporate Guarantor, collect, receive and
sequester the rents, revenues, earnings, income, products and profits therefrom,
and pay out of the same all proper costs and expenses of taking, holding,
leasing, selling and managing the Collateral, including reimbursement for
expenses reasonably and actually incurred by the Holder and its agents and
counsel, and any charges of the Holder hereunder, and any taxes and other
charges prior to the Lien of the Security Agreement which the Holder may deem it
wise to pay, and all expenses of such repairs and improvements, and apply the
remainder of the moneys so received in accordance with the provisions of Section
5.05 hereof.

         Whenever all monetary payments then due under the Notes and the other
Financing Documents shall have been paid and no Event of Default shall be
continuing, the Holder shall surrender possession to the Corporate Guarantor;
the same right of entry, however, to exist upon any subsequent Event of Default.

         (F) The Holder may exercise any and/or all of the rights and remedies
available to a secured party under the New York Uniform Commercial Code in such
order and in such manner as the Holder, in its sole discretion, may determine;
provided, however, that the expenses of retaking, holding, preparing for sale or
the like as provided thereunder shall include reasonable attorneys' fees and
other actual expenses of the Holder and shall be additionally secured by this
Security Agreement.

         (G) Notwithstanding anything herein contained to the contrary, the
Corporate Guarantor or anyone claiming through or under either of them (1) will
not (a) at any time insist upon, or plead, or in any manner whatever claim or
take any benefit or advantage of any stay or extension or moratorium law, any
exemption from execution or sale of the Collateral or any part thereof, wherever
enacted, now or at any time hereafter in force, which may affect the covenants
and terms of performance of the Security Agreement, (b) claim, take or insist
upon any benefit or advantage of any law now or hereafter in force providing for
the valuation or appraisal of the Collateral, or any part thereof, prior to any
sale or sales thereof which may be made pursuant to any provision hereof, or
pursuant to the decree, judgment or order of any court of competent
jurisdiction, or (c) after any such sale or sales, claim or exercise any right
under any statute heretofore or hereafter enacted to redeem the Property so sold
or any part thereof, (2) hereby expressly waive all benefit or advantage of any
such law or laws, and (3) covenant not to hinder, delay or impede the




                                       14
<PAGE>

execution of any power herein granted or delegated to the Holder, but to suffer
and permit the execution of every power as though no such law or laws had been
made or enacted. The Corporate Guarantor for itself and all who may claim under
it, waives, to the extent that it lawfully may, all right to have the Collateral
marshaled upon any foreclosure hereof.

SECTION 5.04. APPOINTMENT OF RECEIVERS. Upon the occurrence and continuance of
an Event of Default hereunder and upon the filing of a suit or commencement of
other judicial proceedings to enforce the rights of the Holder under the
Security Agreement, the Holder shall be entitled, as a matter of right, without
notice and without regard to the adequacy of any security for the debt secured
hereby, to the appointment of a receiver or receivers of the Collateral and of
the revenues and receipts thereof, pending the conclusion of such proceedings
and any appeal therefrom, with such powers as the court making such appointment
shall confer. The receiver shall be entitled to occupational rent from an
owner/occupant and may upon non-payment of said rent evict the owner/occupant.

SECTION 5.05. APPLICATION OF MONEYS. The Net Proceeds received by the Holder or
pursuant to any right given or action taken under the provisions of this Article
V shall, during the continuance of an Event of Default hereunder, be applied (A)
first, to the payment of the fees, costs and expenses reasonably incurred by the
Holder to operate the Collateral and protect and enforce its rights hereunder
and under the other Financing Documents, including reasonable attorney's fees;
(B) second, to the payment of all installments of interest then due and payable
on the Notes; (C) third, to the payment of unpaid principal of and premium, if
any, on the Notes, whether or not then due and payable; (D) fourth, to the
payment of any sum or charge (other than principal or interest) evidenced or
secured by the Security Agreement and all interest payable thereon; (E) fifth,
to the payment of interest on principal amounts then due and payable under any
other Financing Document; and (F) sixth, the balance thereof to be applied in
reduction of principal amounts then due and payable under or any other Financing
Document, with any excess remaining to be paid to the Corporate Guarantor.

SECTION 5.06. REMEDIES CUMULATIVE. No remedy herein conferred upon or reserved
to the Holder is intended to be exclusive of any other available remedy, but
each and every such remedy shall be cumulative and in addition to every other
remedy given under the Security Agreement or under any other Financing Document
now or hereafter existing at law or in equity. No delay or omission to exercise
any right or power accruing upon any default shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right and power
may be exercised from time to time and as often as may be deemed expedient. In
order to entitle the Holder to exercise any remedy reserved to it of them in
this Article V, it shall not be necessary to give any notice, other than such
notice as may be expressly required in the Security Agreement.

SECTION 5.07. TERMINATION OF PROCEEDINGS. In case any proceeding taken by the
Holder on account of any Event of Default shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Holder,
then the Holder and the Corporate Guarantor shall be restored to their former
positions and rights hereunder, and all rights, remedies and powers of the
Holder shall continue as if no such proceeding had been taken.

SECTION 5.08. WAIVER AND NON-WAIVER OF EVENT OF DEFAULT. (A) The Holder may, in
its discretion, agree to waive, in writing, any Event of Default hereunder and
its consequences and annul any acceleration in accordance with Section 5.02
hereof. No such waiver shall extend to or affect any other existing or any
subsequent Event of Default.

         (B) The failure of the Holder to insist upon strict performance of any
term hereof shall not be deemed to be a waiver of any term of the Security
Agreement. The Corporate Guarantor shall not be relieved of the Corporate
Guarantor's obligations hereunder by reason of (1) failure of the Holder to
comply


                                       15
<PAGE>

with any request of the Corporate Guarantor to take any action to foreclose the
Security Agreement or otherwise enforce any of the provisions hereof, (2) the
release, regardless of consideration, of the whole or any part of the
Collateral, or (3) any agreement or stipulation by the Holder extending the time
of payment or otherwise modifying or supplementing the terms of the Security
Agreement or any of the other Financing Documents. The Holder may resort for the
payment of the Indebtedness to any other security held by the Holder pursuant to
the Financing Documents in such order and manner as the Holder, in its
discretion, may elect. The Holder may take action to recover the Indebtedness,
or any portion thereof, or to enforce any covenant hereof without prejudice to
the right of the Holder thereafter to foreclose the Security Agreement. The
rights of the Holder under the Security Agreement shall be separate, distinct
and cumulative and none shall be given effect to the exclusion of the others. No
act of the Holder shall be construed as an election to proceed under any one
provision herein to the exclusion of any other provision. No waiver of any right
of the Holder shall be effective unless it is in a writing signed by an officer
of the Holder.

SECTION 5.09. REPAYMENT AND SECURING OF EXPENSES PAID BY THE HOLDER. In the
event the Holder shall pay any premiums on any policies of insurance required to
be maintained or procured by Section 4.03 hereof, or in the event the Holder
shall expend any funds for the payment of any unpaid taxes or assessments upon
the Collateral, or expend any funds in payment of any unpaid installments under
any applicable agreement for payments in lieu of taxes with any taxing entity or
pay or perform any other obligation of the Corporate Guarantor under any of the
Financing Documents, then in any such event such payment shall be deemed to be
secured by the Security Agreement and shall be payable to the Holder in the
manner provided and with interest as provided herein, or if not so provided
therein, shall be payable on demand as an additional payment under the other
Financing Documents with interest at the rate of the Default Rate or the maximum
amount permitted by law, whichever is less.

SECTION 5.10. OTHER ACTIONS BY THE HOLDER. Regardless of the happening of an
Event of Default, the Holder may institute and maintain such suits and
proceedings as it shall deem necessary or expedient to prevent any impairment of
the security under the Security Agreement by any acts which may be unlawful or
in violation of the Security Agreement, or to preserve or protect the interests
of the Holder.





                                       16
<PAGE>


                                   ARTICLE VI

                                  MISCELLANEOUS


SECTION 6.01. LIMITATION OF RIGHTS. With the exception of rights herein
expressly conferred, nothing expressed or mentioned in or to be implied from the
Security Agreement or the other Financing Documents is intended or shall be
construed to give to any Person, other than the parties hereto or thereto, and
their successors and assigns, any right, remedy or claim under or with respect
to the Security Agreement or any covenants, conditions and provisions herein
contained. The Security Agreement and all of the covenants, conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
parties hereto and their successors and assigns as herein provided.

SECTION 6.02. LAWS. If any law or ordinance is enacted or adopted which imposes
a tax, either directly or indirectly, on the Security Agreement, the Corporate
Guarantor will pay, or cause to be paid, such tax, with interest and penalties
thereon, if any.

SECTION 6.03. REVENUE STAMPS. If at any time any Governmental Authority shall
require revenue or other stamps to be affixed to the Security Agreement, the
Corporate Guarantor will pay, or cause to be paid, the same, with interest and
penalties thereon, if any.

SECTION 6.04. FURTHER ASSURANCE. The Corporate Guarantor will execute and
procure for the Holder and cause to be done any further conveyances, instruments
or acts of further assurance as the Holder shall reasonably require to perfect
the security of the Holder in the Collateral intended now or hereafter to be
covered by the Security Agreement or otherwise for carrying out the intention of
facilitating the performance of the terms of the Security Agreement.

SECTION 6.05. SATISFACTION OF SECURITY AGREEMENT. Upon the payment in full of
all of the amounts due under the Notes and any monetary obligation then due and
payable under the other Financing Documents, and adequate provision has been
made for any indemnification or defense for any then-pending claims against the
Holder of the Holder which the Holder is then entitled to under the terms of any
of the Financing Documents, the Holder by acceptance of the Security Agreement,
agrees to execute and deliver, any and all instruments necessary and/or
appropriate to discharge the Lien of the Security Agreement of record and to
terminate UCC Financing Statements.

SECTION 6.06. SEVERABILITY. (A) If any provision of the Security Agreement
shall, for any reason, be held or shall, in fact, be inoperative or
unenforceable in any particular case, such circumstance shall not render the
provision in question inoperative or unenforceable in any other case or
circumstance or render any other provision herein contained inoperative or
unenforceable.

               (B) The invalidity of any one or more phrases, sentences,
clauses, paragraphs or sections in the Security Agreement shall not affect the
remaining portions of the Security Agreement or any part thereof.

SECTION 6.07. NOTICES. All notices, certificates and other communications
hereunder shall be in writing and shall be sufficiently given and shall be
deemed given when (A) sent to the applicable address stated below by registered
or certified mail, return receipt requested, postage prepaid, or by such other
means (including, without limitation, overnight delivery) as shall provide the
sender with documentary evidence of such delivery, or (B) delivery is refused by
the addressee, as evidenced by the affidavit of the Person who attempted to
effect such delivery or such other evidence of such attempted delivery. The
addresses to which notices, certificates and other communications hereunder
shall be delivered are as follows:

                                       17
<PAGE>


               TO THE CORPORATE GUARANTOR:

               BCP Ingredients, Inc.
               c/o Balchem Corporation
               P.O. Box 175
               Slate Hill, New York  10973
               Attention:  Dino A. Rossi, President

               WITH A COPY TO:

               Golenbock, Eiseman, Assor & Bell
               437 Madison Avenue
               New York, New York  10022
               Attention:  Nathan E. Assor, Esq.


               TO THE HOLDER:

               Fleet National Bank
               NY KP 0250
               Peter D. Kiernan Plaza
               Albany, New York 12207
               Attention:  Corporate Banking Division

               WITH A COPY TO:

               Lemery MacKrell Greisler LLC
               10 Railroad Place
               Saratoga Springs, New York 12866
               Attention:  James A. Carminucci, Esq.


The Corporate Guarantor and the Holder may, by notice given hereunder, designate
any further or different addresses to which subsequent notices, certificates and
other communications shall be sent.

SECTION 6.08. COUNTERPARTS. The Security Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.

SECTION 6.09. TABLE OF CONTENTS AND SECTION HEADINGS NOT CONTROLLING. The table
of contents and the headings of the several articles and sections of the
Security Agreement have been prepared for convenience of reference only and
shall not control, affect the meaning of or be taken as an interpretation of any
provision of the Security Agreement.

SECTION 6.10. AMENDMENT, ETC. Neither the Security Agreement nor any provisions
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.

SECTION 6.11. WAIVER OF NOTICE. Whenever in the Security Agreement the giving of
notice by mail or otherwise is required, the giving of such notice may be waived
in writing by the Person or Persons entitled to receive such notice.


                                       18
<PAGE>


SECTION 6.12.  INDEMNIFICATION; SUBROGATION; WAIVER OF OFFSET.

         (a) The Corporate Guarantor shall indemnify, defend and hold the Holder
harmless against: (i) any and all claims for brokerage, leasing, finders or
similar fees which may be made relating to the Loans claiming to have dealt with
the Corporate Guarantor, and (ii) against any and all liability, obligations,
losses, damages, penalties, claims, actions, suits, costs, and expenses
(including its reasonable attorneys' fees, together with reasonable appellate
counsel fees, if any) of whatever kind or nature which may be imposed on or
incurred by the Holder at any time pursuant either to a judgment or decree or
other order entered into by a court or administrative agency or to a settlement
reasonably approved by the Corporate Guarantor, which judgment, decree, order or
settlement relates in any way to or arises out of the offer, sale or lease of
the Collateral and/or the ownership, use, or operation of any portion of the
Collateral.

         (b) If the Holder is made a party defendant to any litigation
concerning the loan which is the subject of the Notes, this Security Agreement,
the Collateral, or any part thereof, or any interest therein, or the occupancy
thereof, then the Corporate Guarantor shall indemnify, defend and hold the
Holder harmless from all liability by reason of said litigation, including
reasonable attorneys' fees (together with reasonable appellate counsel fees, if
any) and expenses incurred by the Holder in any such litigation, whether or not
any such litigation is prosecuted to judgment. If the Holder commences an action
against the Corporate Guarantor to enforce any of the terms hereof or to
prosecute any breach by the Corporate Guarantor of any of the terms hereof or to
recover any sum secured hereby and the Holder prevails thereunder, the Corporate
Guarantor shall pay to the Holder such reasonable attorneys' fees (together with
reasonable appellate counsel fees, if any) and expenses. The right to such
attorneys fees (together with reasonable appellate counsel fees, if any) and
expenses shall be deemed to have accrued on the commencement of such action, and
shall be enforceable whether or not such action is prosecuted to judgment. If an
Event of Default occurs hereunder, the Holder may employ an attorney or
attorneys to protect its rights hereunder, and in the event of such employment
following any such Event of Default, the Corporate Guarantor shall pay the
Holder reasonable attorneys' fees (together with reasonable appellate counsel
fees, if any) and expenses incurred by the Holder, whether or not an action is
actually commenced against the Corporate Guarantor by reason of such breach.

         (c) A waiver of subrogation shall be obtained by the Corporate
Guarantor from its insurance carrier and, consequently, the Corporate Guarantor
waives any and all right to claim or recover against the Holder, its officers,
employees, agents and representatives, for loss of or damage to the Corporate
Guarantor, the Collateral, the Corporate Guarantor's property or the property of
others under the Corporate Guarantor's control from any cause insured against or
required to be insured against by the provisions of this Security Agreement.

         (d) All sums payable by the Corporate Guarantor hereunder shall be paid
without notice (except as may otherwise be provided herein), demand,
counterclaim, set-off, deduction or defense and without abatement, suspension,
deferment, diminution or reduction, and the obligations and liabilities of the
Corporate Guarantor hereunder shall in no way be released, discharged or
otherwise affected by reason of: (i) any damage to or destruction of or any
condemnation or similar taking of the Collateral or any part thereof; (ii) any
restriction or prevention of or interference with any use of the Collateral or
any part thereof; (iii) any title defect or encumbrance affecting the Collateral
or any part thereof by title superior or otherwise; (iv) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation,
or other like proceeding relating to the Holder, or any action taken with
respect to this Security Agreement by any trustee or receiver of the Holder, or
by any court, in such proceeding; or (v) any other occurrence whatsoever,
whether similar or dissimilar to the foregoing, whether or not the Corporate
Guarantor shall have notice or knowledge of any of the foregoing. The Corporate
Guarantor waives all rights now or


                                       19
<PAGE>

hereafter conferred by statute or otherwise to any abatement, suspension,
deferment, diminution, or reduction of any sum secured hereby and payable by the
Corporate Guarantor.

SECTION 6.13. COVENANT AGAINST USURY. All agreements between the Corporate
Guarantor and the Holder are hereby expressly limited so that in no contingency
or event whatsoever, whether by reason of acceleration of maturity of the
indebtedness evidenced hereby or otherwise, shall the amount paid or agreed to
be paid to the Holder for the use or the forbearance of the indebtedness
evidenced hereby exceed the maximum permissible under applicable law. As used
herein, the term "applicable law" shall mean the law in effect as of the date
hereof provided, however that in the event there is a change in the law which
results in a higher permissible rate of interest, then this Agreement shall be
governed by such law as of its effective date. In this regard, it is expressly
agreed that it is the intent of the Corporate Guarantor and the Holder in the
execution, delivery and acceptance of this Agreement to contract in strict
compliance with the laws of the State of New York from time to time in effect.
If, under or from any circumstances whatsoever, fulfillment of any provision
hereof or of any law of the Financing Documents at the time of performance of
such provision shall be due, shall involve transcending the limit of such
validity prescribed by applicable law, then the obligation to be fulfilled shall
automatically be reduced to the limits of such validity, and if under or from
circumstances whatsoever the Holder should ever receive as interest an amount
which would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal balance evidenced
hereby and not to the payment of interest. This provision shall control every
other provision of all agreements between the Corporate Guarantor and the
Holder.

SECTION 6.14. JURY TRIAL WAIVER. THE CORPORATE GUARANTOR AND THE HOLDER (BY
ACCEPTANCE OF THIS SECURITY AGREEMENT) MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM
BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS SECURITY
AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE HOLDER
RELATING TO THE ADMINISTRATION OF THE LOAN OR ENFORCEMENT OF THIS SECURITY
AGREEMENT, AND AGREE THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION
WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
EXCEPT AS PROHIBITED BY LAW, THE CORPORATE GUARANTOR HEREBY WAIVES ANY RIGHT IT
MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE
OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES. THE CORPORATE GUARANTOR CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF THE HOLDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE HOLDER
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER.
THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE HOLDER TO ACCEPT THE NOTES
AND MAKE THE LOANS.

SECTION 6.15. RIGHT OF SET OFF. The Corporate Guarantor hereby grants to the
Holder, a continuing lien, security interest and right of setoff as security for
all liabilities and obligations to the Holder, whether now existing or hereafter
arising, upon and against all deposits, credits, collateral and property, now or
hereafter in the possession, custody, safekeeping or control of the Holder or
any entity under the control of FleetBoston Financial Corporation and its
successors and assigns, or in transit to any of them. At any time following the
occurrence and during the continuance of an Event of Default, without demand or
notice (any such notice being expressly waived by the Corporate Guarantor), the
Holder may set off the same or any part thereof and apply the same to any
liability or obligation of the Corporate Guarantor even though unmatured and
regardless of the adequacy of any other collateral securing the Notes. ANY AND
ALL RIGHTS TO REQUIRE THE HOLDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT


                                       20
<PAGE>

TO ANY OTHER COLLATERAL WHICH SECURES THE NOTE, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE CORPORATE
GUARANTOR OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.

SECTION 6.16. EXPENSES INCURRED IN CONNECTION WITH ENFORCEMENT. The Corporate
Guarantor shall pay on demand all reasonable expenses of the Holder in
connection with the preparation, administration, default, collection, waiver or
amendment of loan terms, or in connection with the Holder's exercise,
preservation or enforcement of any of its rights, remedies or options hereunder,
including, without limitation, reasonable fees of outside legal counsel or the
allocated costs of in-house legal counsel, accounting, consulting, brokerage or
other similar professional fees or expenses, and any reasonable fees or expenses
associated with travel or other costs relating to any appraisals or examinations
conducted in connection with the Loans or the Collateral therefor, and the
amount of all such expenses shall, until paid, bear interest at the rate
applicable to principal hereunder (including any default rate) and be an
obligation secured by any collateral.

SECTION 6.17. CHOICE OF LAW. This Security Agreement and the rights and
obligations of the parties hereunder shall be construed and interpreted in
accordance with the laws of the State of New York (the "Governing State")
(excluding the laws applicable to conflicts or choice of law).

               THE CORPORATE GUARANTOR AGREES THAT ANY SUIT FOR THE ENFORCEMENT
OF THIS SECURITY AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE GOVERNING STATE
OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE
UPON THE CORPORATE GUARANTOR BY MAIL AT THE ADDRESS SET FORTH HEREIN. THE
CORPORATE GUARANTOR HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS
BROUGHT IN AN INCONVENIENT FORUM.

SECTION 6.18. MERGER. This Security Agreement is intended by the parties as the
final, complete and exclusive statement of the transactions evidenced by this
Security Agreement. All prior contemporaneous promises, agreements and
understandings, whether oral or written, are deemed to be superceded by this
Security Agreement, and no party is relying on any promise, agreement or
understanding not set forth in this Security Agreement. This Security Agreement
may not be amended or modified except by a written instrument describing such
amendment or modification executed by the Corporate Guarantor and the Holder.




                                       21
<PAGE>




         IN WITNESS WHEREOF, the parties hereto have duly executed this Security
Agreement as of the day and year first above written.


                                        BCP INGREDIENTS, INC.


                                        By:    /s/ Frank J. Fitzpatrick
                                               ---------------------------------
                                        Name:  Frank J. Fitzpatrick
                                               ---------------------------------
                                        Title: Secretary and Treasurer
                                               ---------------------------------



                                        FLEET NATIONAL BANK


                                        By:    /s/ Karen D. Finnerty
                                               ---------------------------------
                                               Karen D. Finnerty, Vice President

STATE OF NEW YORK        )
                         )ss.:
COUNTY OF NEW YORK       )

               On the 30 day of May, in the year 2001 before me personally came
Frank J. Fitzpatrick,  to me known, who, being by me duly sworn, did depose and
say that he/she/they reside(s) in _____________________; that he/she/they
is(are) the Secretary & Treasurer of BCP INGREDIENTS, INC., the corporation
described in and which executed the above instrument; and that he/she/they
signed his/her/their name(s) thereto by authority of the board of directors of
said corporation.

                                                               /s/ Jane A. Dwyer
                                                               -----------------
                                                               Notary Public


STATE OF NEW YORK        )
                         )ss.:
COUNTY OF NEW YORK       )

               On the 30 day of May, in the year 2001 before me personally came
KAREN D. FINNERTY to me known, who, being by me duly sworn, did depose and say
that he/she/they reside(s) in _____________________; that he/she/they is(are)
the VICE PRESIDENT of FLEET NATIONAL BANK, the national banking association
described in and which executed the above instrument; and that he/she/they
signed his/her/their name(s) thereto by authority of the board of directors of
said corporation.

                                                               /s/ Jane A. Dwyer
                                                               -----------------
                                                               Notary Public



<PAGE>

                                  SCHEDULE 3.01



2007 Route 284
Slate Hill, New York  10973


299 Extension Street
Verona, Missouri  65769


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
