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                      CONSTRUCTION/PERMANENT LOAN AGREEMENT


THIS AGREEMENT dated June 7, 2001, by and between New Millennium Bank, its
successors and assigns located at 57 Livingston Avenue, New Brunswick, New
Jersey 08903 (hereinafter referred to as the "Bank"),

and

HYDROMER, INC., A NJ Corporation, having an address at 35 Industrial Parkway,
Branchburg, New Jersey 08876 hereinafter referred to as the "Borrower").

This Agreement specifies the terms of the construction loan from the Bank to the
Borrower in an amount not to exceed the sum of ONE MILLION AND 00/100 DOLLARS
($1,000,000.00) which sum is to be used for the sole purpose of constructing an
addition to the existing building on property located at 35 Industrial Parkway,
Branchburg, Somerset County, New Jersey, (the "Project") , as defined herein, to
be erected by the Borrower on said real property located in the Township of
Branchburg, County of Somerset, and State of New Jersey, as more fully described
in Schedule "All attached hereto (hereinafter referred to as the "Premises") .
After the construction phase as defined herein, the loan shall be converted to a
permanent loan in the amount of $1,000,000.00 to be repaid over a period of
fifteen (15) years as more particularly set forth in a commitment letter issued
by the Bank dated July 11, 2000 (the "Commitment"), as amended March 21, 2001,
the terms and conditions of which are made a part hereof.

NOW, THEREFORE, in consideration of these premises and the mutual agreements
hereinafter set forth, the parties hereto agree as follows:

DEFINITIONS
1. "Advance" or "Advances" shall include all payments of money to the Borrower
at any time and in any amount and regardless of whether in accordance with the
terms of this Agreement.
2. "Bank" shall mean New Millennium Bank, its successors or assigns.
3. "Borrower", in addition to the named Borrower, shall also include any and all
persons, firms, associations or corporations which may be directly or
indirectly, primarily or secondarily, liable for any debt contemplated hereunder
of Borrower to the Bank.
4. "Completion Date" shall mean that date, up to eighteen (18) months from the
date hereof on which if all conditions set forth herein are met, the final
advance shall be made.

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5. "Construction/Permanent Loan Mortgage" or "Mortgage" shall mean the mortgage
given by the Borrower to the Bank to secure the Loan, and may be singular or
plural as the text requires.
6. "Construction/ Permanent Loan Note" or "Note" shall mean the Note executed by
the Borrower and delivered to the Bank as evidence of the Loan.
7. "Financing Statements" shall mean the Uniform Commercial Code financing
statements required to be filed with (i) the Of f ice of the Secretary of State
of New Jersey, and (ii) the Office of the Clerk of Somerset County in order to
perfect the security interest granted to the Bank by the Construction/Permanent
Loan Mortgage.
8. "Guarantor" shall mean Biosearch Medical Products Inc.
9. "Loan" shall mean the construction loan described herein which shall be in
the aggregate principal amount not to exceed ONE MILLION AND 00/100 DOLLARS
($1,000,000.00) or such lesser amount as may be advanced to the Borrower by the
Bank in accordance with the terms hereof, made by the Bank for the purpose of
providing sufficient monies to enable the Borrower to complete the Project,
which loan shall be converted to a permanent mortgage loan upon completion of
construction as provided herein in the amount of $1,000,000.00.
10. "Loan Documents" shall mean this Agreement, the Construction/ Permanent Loan
Note, the Construction/ Permanent Loan Mortgage, the Financing Statements, the
Assignment of Leases covering 35 Industrial Parkway, Branchburg, New Jersey; the
commitment of the Bank dated July 11, 2000 as amended March 21, 2001, as
amended, and any other instrument or document executed in connection with the
Loan, . together with all amendments or supplements to any or all of them.
11. "Permanent Loan" shall mean the loan made hereunder in the amount of
$1,000,000.00 for long-term financing of the costs of completion of the Project,
to be repaid over a period of 15 years.
12. "Project" shall mean the construction of an addition to the existing
building located on the Premises and constructed in accordance with certain
plans prepared for construction of the addition.
LOANS AND AIWANCES
1. The Bank agrees to lend to the Borrower (subject to this Agreement) funds to
aid in the construction of the Project in an amount not to exceed the sum of the
Loan, with interest from the date of each advance at the rate set forth in the
Construction/ Permanent Loan Note, payable monthly in accordance with the terms
and provisions of the Construction/ Permanent Loan Note.
2. To secure payment of the Loan, the Borrower shall simultaneously herewith
execute a Construction/Permanent Loan Mortgage and deliver same to the Bank with
respect to the Premises, in such form and with such terms and conditions as are
required by the Bank. The Construction/ Permanent Loan Mortgage shall be
considered a part of this Agreement as though fully set forth herein, and the
terms of this Agreement shall be considered part of the Construction/ Permanent
Loan Mortgage as though fully set

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forth therein. in addition t Q the aforementioned Construction/ Permanent Loan
Mortgage, the Borrower hereby give and grants to the Bank an exclusive security
interest in and to all buildings, structures and improvements of every kind and
description erected and placed on the Premises as defined in the Mortgage and
Security Agreement; all rents, issues and profits and all proceeds of
conversion, which are more particularly described as follows:
(a) All the buildings, structures and improvements of every kind and description
now or hereafter erected or placed on the Premises (as defined in the Mortgage
and Security Agreement), and all facilities, fixtures, machinery, apparatus,
appliances, installations, machinery and equipment, including, without
limitation, all building materials to be incorporated into such buildings, all
electrical equipment necessary for the operation of such buildings and heating,
air conditioning and plumbing equipment now or hereafter attached to, located in
or used in connection with those buildings, structures or other improvements
(the "Improvements") ;
(b) All rents, issues and profits arising or issuing from
the Premises and the Improvements (the "Rents") including, but not limited to,
the Rents arising or issuing from all leases and subleases now or hereafter
entered into covering all or any part of the Premises and Improvements (the
"Leases") including, without limitation, all fees, charges, accounts or other
payments for the use or occupancy of rooms and other public facilities in
hotels, motels, or other lodging properties, and all cash or securities
deposited under Leases to secure performance of lessees of their obligations
thereunder, whether; such cash or securities are to be held until the expiration
of the terms of such leases or applied to one or more installments of rent
coming due prior to the expiration of such terms;
(c) All proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or liquidated claims;
(d) And without limiting any of the other provisions of the Mortgage, all those
portions of the Property (as defined in the Mortgage and Security Agreement),
which may be subject to the Uniform Commercial Code provisions applicable to
secured transactions under the laws of any state. The Borrower agrees to execute
any and all documents including Financing Statements which may be required by
the Bank to perfect or protect the security interest granted hereby.
3. Applications for Advances under this Agreement are to be made by the Borrower
to the Bank on or about the first day of each month after the commencement of
construction of the Project for work done during the preceding month or part
thereof, at least five (5) days prior to actual Settlement, except that the
Bank, at its option, upon request therefor by the Borrower, may make Advances at
more frequent intervals. Advances shall be made by crediting the Borrower's
account with the Bank. The funds in such account shall not be connected with
funds from other property of the Borrower. Application for Advances shall be
requisitioned on AIA Forms G702 and G703, a certain form attached as Exhibit B
to that certain Design and Construction

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Contract between Redco Engineering & Construction Corp. and Borrower dated April
19, 2001, or any other requisition forms designated by the Bank to be signed by
the general contractor, the Bank inspector, and the Borrower.
4. Advances during construction period shall be limited to an initial advance of
$30,000, as reimbursement for the deposit advanced by the Borrower for plans,
plus the percentage of completion of "hard costs" of construction acceptably
completed as determined by the Bank's construction inspector retained by the
Bank, multiplied by ninety percent (90%) of the amount for which a requisition
of monies has been received by the Bank, but at no time shall the undisbursed
portion of the Loan herein be, in the judgment of the Bank, less than an amount
sufficient to complete the Project. The Borrower shall furnish, as requested, a
projection of work progress in such form and at such times as may be required by
the Bank. Parts or the whole of any Advance provided for herein may in the
discretion of the Bank be advanced before due, but all such Advances, if made,
shall be deemed to have been made pursuant to this Agreement and not in
modification thereof.
5. Advances for construction up to $1,000,000.00 shall be made in accordance
with a schedule to be agreed upon by the Borrower and the Bank.
6. The Borrower agrees as a condition precedent to any Advance, to furnish the
Bank with:
(a) A mortgage title insurance policy in form and substance, and
issued by companies and in amounts, satisfactory to the Bank. Said policy shall
be extended by endorsement to cover each and every Advance of the Loan at the
time of payment thereof insuring that the Bank's Construction/ Permanent Loan
Mortgage is, without exception, a valid second lien on the Project. Within
forty-five (45) days after the initial Advance, the Borrower shall furnish the
Bank or its nominee with the mortgage title insurance policy as aforesaid;
(b) The Borrower's certificate of in-place value of the completed construction
portion of the Project certified by the general contractor and the Borrower
drawn in accordance with cost estimate furnished, indicating the amount of work
completed by trade and the percentage thereof, and also indicating (i) that the
Project is being completed substantially in accordance with the Drawings and
Specifications as approved by the Bank, (ii) that the aggregate of all
disbursements for "hard costs" of construction does not exceed ninety percent
(90%) of the amounts which the Bank has agreed to fund, as more fully set forth
in the Project development budget previously delivered by the Borrower to the
Bank, and (iii) that the amount of moneys remaining to be disbursed in
accordance with this Agreement is sufficient to complete the construction of the
Project substantially in accordance with the Drawings and Specifications. The
Bank will disburse only that amount as is acceptable to the Bank;
(c) Such affidavits and surveys, including initial plot plan, survey showing
foundation-in-place and final survey, and such stipulations, subordinations,
releases and discharges of mechanics' and materialmen's notices, claims, liens,

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lien rights and stop notices as the Bank or the title insurance company may
require. The Bank will made Advances to the Borrower of up to $300,000 prior to
a foundation survey being provided by Borrower to the Bank;
(d) Affidavits from the Borrower and the general contractor that all money
previously disbursed on the Loan has been paid to subcontractors and that there
are presently no amounts owing to subcontractors, materialmen or laborers other
than the holdbacks or retainages provided for under existing contractual
arrangements between or among the various parties; and
(e) Satisfactory proof that all of the prerequisites required by this Agreement
have been satisfactorily fulfilled.
7. No Advance shall be due or payable while there is any lien or encumbrance
upon the Project other than the lien of the Construction/Permanent Loan Mortgage
and security interest to the Bank above mentioned and the existing first
mortgage to PNC Bank in the original amount of $850,000.00, or while there is
any change, question or claim of any kind whatsoever, whether of record or not,
which, in the opinion of the counsel for the Bank, may constitute a cloud on the
title to the Premises, render the title of the Premises unmarketable, or
otherwise invalidate or have priority over the Bank's Construction Loan Mortgage
and security interest, or any portion thereof, or in any way render the Bank's
position insecure.
8. Nothing contained herein or in any other document or agreement contemplated
hereby or executed approximately simultaneously therewith shall impose upon the
Bank any obligation to see to the proper application of Advances by the
Borrower, general contractor of subcontractors, and nothing shall prevent the
Bank, in its opinion, from deducting from any Advance any sums due to the Bank
from the Borrower for unpaid interest or for sums paid and expended by the Bank
for taxes or assessments, for insurance, and like payment, pursuant to the
Bank's rights under the terms of this Agreement, the Construction/ Permanent
Loan Note or the Construction/Permanent Loan Mortgage.
III
REPRESENTATIONS,WARRANTIES AND COVENANTS
To induce the Bank to enter into this Agreement and to
make the Loan hereunder, the Borrower represents, warrants and covenants to the
Bank that:
1. The Borrower agrees to complete the Project within eighteen (18)
months of the date hereof in accordance with Plans and Specifications.
2. The Borrower is a Corporation duly organized, validly existing and in good
standing under the laws of New Jersey and has the power to execute, deliver and
carry out the terms of this Agreement, the Construction/Permanent Loan Note, the
Construction/Permanent Loan Mortgage and the Financing Statements, and its Board
of Directors have duly authorized and approved the terms of the Loan and the
taking of any and all action contemplated hereunder by the Borrower. At all
times throughout the term of the Loan, the Borrower (i) shall maintain its
existence and all rights, privileges, franchises, licenses and other authority
necessary to conduct its business,

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(ii) shall not liquidate or dissolve without the prior express written consent
of the Bank, which consent shall not be unreasonably withheld.
3. The execution of this Agreement, the Cons t ruction /Permanent Loan Note, the
Construction /Permanent Loan Mortgage, the Financing Statements, and every other
instrument or document required to be executed in accordance herewith or which
the Bank may deem advisable in connection herewith, does not violate any
provision of the Certificate of Incorporation or By-Laws of the Borrower is a
party or in which the Borrower is bound in any fashion.
4 . The Borrower has taken all action required by law to validate and make this
Agreement, the Construction/ Permanent Loan Note, the Construction/Permanent
Loan Mortgage, the Financing Statements, and any other document required in
connection herewith, enforceable, and will deliver approximately simultaneously
herewith certification of such action.
5. The Borrower has, and at all times will have, good and marketable title in
fee simple to the Premises, and the Construction/Permanent Loan Mortgage, when
executed, delivered and recorded, will be a valid second lien on the Premises.
6. There are no actions, Suits or proceedings pending, or to the knowledge of
the Borrower threatened, against the Borrower or any of its property and it is
nor- in default with respect to any order, writ, injunction, decree or demand of
any court or any governmental authority.
7. The Borrower has filed, or has caused to be filed, all tax returns required
to be filed, and has paid all taxes shown to be due and payable on said return
or on any assessment made against it.
8. The Borrower agrees that it will execute and deliver any further mortgages or
any other documents or instruments necessary to achieve and maintain at all
times the balance due to the Bank as a second and valid lien on the Premises and
the personal property described in the Financing Statements.
9. There has been no substantial and material adverse change in the condition of
the Borrower, financial or otherwise, since the last financial statements and
reports furnished by the Borrower to the Bank, and the information contained in
said statements and reports is true and correctly reflects the financial
condition of the Borrower as of the respective dates of the statements and
reports.
10. The Borrower agrees that it shall maintain business records in a
commonly-accepted manner, which said records shall be available at all times and
at all reasonable hours for inspection by the Bank.
11. The Borrower agrees not to create, assume, or suffer to exist any mortgage,
pledge, encumbrance, lien or security interest upon the Premises, real or
personal, except those mortgages, pledges, encumbrances, liens or security
interests permitted or provided for hereunder, including the existing first
mortgage to PNC Bank in the original amount of $850,000.00.

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12. The Borrower agrees to pay all charges incident to the procuring and making
of the Loan and the charges for the examination of the titie of the Premises,
surveys and drawing of papers, mortgage tax and recording fees, and for all
searches which may be required by the Bank to assure the Bank that the
Construction/ Permanent Loan Mortgage is a valid second lien as herein provided.
If not so paid, the Bank may deduct such charges from the amount due under this
Agreement.
13. In the event of a default by Borrower or in the event the first mortgage
holder on the premises is no longer paying taxes, the Bank shall have the right
to require the Borrower to maintain a tax escrow so that tax payments shall be
made through the Bank for real estate taxes from proceeds paid to the Bank by
Borrower. This provision shall only be applicable during the permanent loan
phase. During the construction phase, Borrower shall pay taxes directly to the
municipality.
14. The Borrower agrees that it will receive all Advances hereunder as a trust
fund to be applied first for the purpose of paying for the cost of the
improvements before using any part of the total of the same for any other
purpose, but nothing herein shall impose upon the Bank any obligation to see to
the proper application of such Advances by the Borrower.
15. The Borrower agrees (a) that the Project shall be constructed with
first-class workmanship and materials strictly in accordance with all applicable
ordinances and statutes and in accordance with the requirements of all
regulatory authorities having jurisdiction and in conformity with the
requirements of the Board of Fire Underwriters or similar body; (b) the Project
shall be constructed entirely on the Premises and will not encroach upon or
overhang any easement or right-of-way or upon the land of others; (c) that the
building(s) when erected shall be wholly within the building restriction lines
however established and will not violate applicable use or other restrictions
contained in prior conveyances, zoning ordinances or regulations; and (d) that
it will furnish from time to time satisfactory evidence with respect to (a), (b)
and (c) hereof, together with surveys identified by a licensed surveyor or
engineer showing the Project to be entirely on the Premises and free from such
violations as aforesaid. All applicable approvals for the construction and
completion of the Project have been obtained from all governmental agencies or
public utility companies having jurisdiction including, but not limited to, all
environmental approvals, all approvals for sewer, water and other utilities, all
building or construction permits, zoning, site plan or subdivision approvals.
All of such approvals and permits shall be legally valid and shall remain in
full force and effect until the completion of the Project, as set forth in
paragraph 1. of this Section III.
16. The Bank and its agents shall, at all times during construction, and on the
occasion of each Advance for construction, have the right of entry and free
access to the Project and the right to inspect all work done, labor performed
and materials furnished in and about the Project, and to inspect subcontracts
and records of the Borrower. The Borrower agrees to pay for all costs of such
inspections at the rate of $250 per inspection.

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17. The Borrower agrees that it will not assign this Agreement or any Advance to
be made hereunder or any part thereof, nor convey, nor encumber, the Premises,
fixtures and equipment, or any of them, without the Bank's prior express written
consent.
18. The Borrower hereby assigns as further security for the Loan all
construction permits, licenses and contracts relating to the Premises,
including, but not limited to, all environmental approvals, all approvals for
sewer, water and other utilities, all building or construction permits, zoning
site plan or subdivision approvals, each as may be permitted by the entity
issuing such construction permits, licenses and contracts.
19. The Borrower shall furnish the Bank with: (a) fiscal year end financial
statement prepared by a CPA acceptable to the Bank within 90 days of fiscal year
end; (b) quarterly internal financial statements within 60 days of quarter end;
(c) all updated leases on an annual basis, as applicable; (d) completed signed
copies on an annual basis of federal tax returns within 30 days of filing during
the term of the Loan.
IV
EVENTS OF DEFAULT
The occurrence of any of the following events shall constitute an Event of
Default (hereinafter referred to as an "Event of Default").
1. Any representation or warranty made by the Borrower in this Agreement, the
Construction/Permanent Loan Note, the Construction/ Permanent Loan Mortgage, or
any certificate or other writing, including the loan application, given in
connection herewith shall prove to have been false, incorrect or misleading in
any substantial and material respect on the date as of which made.
2. The Borrower shall have failed to make any payment of any installment of
interest and/or principal on the Construction/Permanent Loan Note within ten
(10) days of their due date.
3. The Borrower shall have failed to duly observe or perform any covenant,
condition or agreement with respect to the payment of moneys on the part of the
Borrower to be observed or performed pursuant to the terms of the Loan Documents
other than the payment of principal and interest which shall be governed by
Paragraph 2 above, and such default shall have remained uncured for a period of
thirty (30) days after notice thereof to the Borrower by the Bank.
4. The Borrower shall have entered into any junior financing or shall have
consented to the placing of any lien on the Premises or the Project, whether
such financing or lien is prior to or subordinate to the lien of the
Construction/Permanent Loan Mortgage.
5. The Borrower shall have failed to comply with any law, ordinance, order, rule
or regulation of any governmental authority having jurisdiction over work
similar in type as that herein contemplated to be erected, or shall have refused
to remove any work condemned by any of the said governmental authorities or
prohibited by law, and such default shall have remained uncured for a period of
thirty (30) days after notice thereof to the Borrower by the Bank.

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6. The Borrower shall have failed to present to the Bank any evidence from
materialmen or contractors who have furnished material or labor upon the
Premises, or failed to furnish evidence that all such persons, firms or
corporations who or which have performed labor or furnished material have been
paid in full, and such default shall have remained uncured for a period of
thirty (30) days after notice thereof to the Borrower by the Bank.
7. A construction lien, or notice of any unpaid balance or any other lien or
encumbrance shall have been filed against the Premises, and the Borrower shall
have failed to procure within thirty (30) days after the same is filed a
cancellation of the said lien or a discharge thereof, in the manner and form
provided by law, and such default shall have remained uncured for a period of
thirty (30) days after notice thereof to the Borrower by the Bank.
8. The Borrower shall have, at any time prior to the completion of the
construction of the Project, abandoned the same or ceased to work thereon for a
period of more than ten (10) days, or shall have failed to complete the
construction of the Project in accordance with the Drawings and Specifications,
or shall have made changes in the Drawings and Specifications without securing
the prior express written consent of the Bank, and such default shall have
remained uncured for a period of thirty (30) days after notice thereof to the
Borrower by the Bank.
9. If the Construction/Permanent Loan Mortgage made by the Borrower shall not
give to the Bank a valid second lien for the indebtedness to be secured thereby
on the Premises.
10. If the Loan is to be advanced in more than one payment, and any payment be
called for, and, because of some act an encumbrance or question of title or
priority of lien arising after making of the preceding payment which may, or
tend to, invalidate the lien of the Mortgage as a second lien on the Premises,
and such encumbrance or question is not cured within ten (10) days after the
giving of notice by the Bank of the defect.
11. If the improvements which may be erected on the Premises shall encroach upon
the street or upon adjoining property or violate restrictive covenants of record
or local zoning ordinances, and such default shall have remained uncured for a
period of thirty (30) days after notice thereof to the Borrower by the Bank.
12. If any materials, fixtures, or articles used in the construction of the
building or any improvement appurtenant thereto shall not be purchased so that
the ownership thereof will vest in the owner thereof free from all encumbrances
on delivery to the Premises.
13. If the Borrower does not permit a representative of the Bank to enter upon
the Premises to inspect the building thereon at reasonable times.
14. The Borrower or any guarantor shall have applied for or consented to the
appointment of a custodian, receiver, trustee or liquidator of all or a
substantial part of its respective assets; shall generally be unable to pay its
respective debts when due; or shall have admitted in writing its inability to
pay its respective debts as they mature; or shall have made a general assignment
for the benefit of creditors; or shall have filed

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a petition or an answer seeking reorganization or an arrangement with creditors
or shall have taken advantage of any insolvency law or shall have submitted an
answer admitting the material allegations of a petition in any bankruptcy,
reorganization or insolvency proceeding; or an order, judgment or decree shall
have been entered without the application, approval or consent of the Borrower
or any guarantor or endorser by any court of competent jurisdiction (approving a
petition seeking reorganization of the Borrower or any guarantor or endorser, or
appointing a receiver, trustee or liquidator of the Borrower or any guarantor or
endorser or a substantial part of its respective assets, and such order,
judgment or decree shall have continued un3tayed and in effect for a period of
forty-five (45) consecutive days; or an involuntary petition in bankruptcy shall
have been filed against the Borrower or any guarantor or endorser, and shall not
have been dismissed for a period of thirty (30) consecutive days; or if any
Order for Relief shall have been entered under the Federal Bankruptcy Code of
1978.
15. The Borrower shall have caused or permitted a security interest, perfected
or otherwise, other than the security interest specifically provided for or
permitted hereunder, to be created in any collateral provided for hereby, or
shall have failed to take any action reasonably requested by the Bank to perfect
or protect the security interest provided for herein, and such default shall
have remained uncured for a period of thirty (30) days after notice thereof to
the Borrower by the Bank.
16. Occurrence of any event which, in the reasonable opinion of any officer of
the Bank, impairs the financial responsibility of Borrower, and such default
shall have remained uncured for a period of thirty (30) days after notice
thereof to the Borrower by the Bank.
17. The determination of any Bank officer that a material adverse change has
occurred in the financial condition of' the Borrower, and such default shall
have remained uncured for a period of thirty (30) days after notice thereof to
the Borrower by the Bank.
18. The Borrower shall have transferred, or caused to have been transferred,
title to the Premises or any part thereof, to any person without the prior
express written consent of the Bank, whether voluntarily, involuntarily or by
operation of law.
19. A writ of execution or attachment or any similar process shall be issued or
levied against all or any part of or interest in any of the properties or assets
of the Borrower or any judgment involving monetary damage shall be entered
against the Borrower which shall become a lien on the Borrower's properties or
assets or any portion thereof or interest therein and such execution, attachment
or similar process is not released, bonded, satisfied, vacated or stayed within
thirty (30) days after its entry or levy, and said writ of execution,
attachment, levy or judgment shall involve monetary damages aggregating more
than $25,000.00.
20. Seizure or foreclosure of any of the properties or assets of the Borrower
pursuant to process of law or by respect of legal self-help, involving monetary
damages

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aggregating more than $25,000.00, unless said seizure of foreclosure is stayed
or bonded within thirty (30) days after the occurrence of same.
V
CONSEQUENCES OF DEFAULT
In case any Event of Default shall have occurred and be continuing,
then and in every such Event of Default, the Bank may take any or all of the
following actions in addition to those actions allowed in the Construction/
Permanent Loan Note and the Construction/Permanent Loan Mortgage, at the same
time or at different times:
1. Declare all loans and sums owing to the Bank from the Borrower under this
Agreement to be forthwith due and payable, whereupon all such sums shall
forthwith become due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Borrower.
2. Enter into possession of the Project and perform any and all work and labor
necessary to complete improvements substantially according to Drawings and
Specifications, and employ watchmen to protect the Premises from injury; all
sums so expended by the Bank to be deemed paid to the Borrower and secured by
the Construction/Permanent Loan Mortgage. For this purpose, the Borrower hereby
constitutes and appoints the Bank its true and lawful attorney-in-fact with full
power of substitution in the Premises to complete the Project in the name of the
Borrower, and hereby empowers said attorney or attorneys as follows:
(a) To use any funds of the Borrower, including any balance which may be held in
escrow and any funds which may remain unadvanced under this Construction Loan
Agreement, for the purpose of completing the Project in the manner called for by
the Drawings and Specifications hereinabove mentioned; to make such additions
and changes and corrections in the Drawings and Specifications which shall be
necessary or desirable to complete the Project in substantially the manner
contemplated by the Drawings and Specifications;
(b) To employ such contractors, subcontractors, and agents, architects and
inspectors as shall be required for said purposes; to pay, settle or compromise
all existing bills and claims which may be liens against the Project, or as may
be necessary or desirable for the completion of the job, or for the clearance of
title;
(c) To execute all applications and certificates in the name of the Borrower
which may be required by any of the contract documents and to do any and every
act which the borrower might do in its own behalf. It is further understood and
agreed that this power of attorney shall be deemed to be a power coupled with an
interest and cannot be revoked. The above-mentioned attorney shall also have
power to prosecute and defend all actions or proceedings in connection with the
construction of the Project or Premises and to take such action and require
scheduled performances as such attorney deems necessary under the accepted
guaranty of completion. The Borrower hereby assigns and quitclaims to the Bank
all sums unadvanced under this Agreement and all sums due in escrow conditioned
upon the use of said sums in escrow for the

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completion of the Project, such assignment to become effective only in the case
of the Borrower's default.
3. To institute and maintain foreclosure proceedings in accordance with the laws
of the State of New Jersey. In the event of the foreclosure of the
Construction/Permanent Loan Mortgage for any default in the provisions thereof
prior to the time when the building(s) shall be fully completed, it is hereby
expressly agreed between the parties hereto that all work remaining to be done
and materials still to be furnished shall be considered as work necessary for
the conservation and preservation of the subject matter secured by the
Construction/Loan Mortgage, to wit: the Project contemplated to be erected under
this Agreement.
4. To institute proceedings to collect any balance due without instituting
foreclosure proceedings.
5. Take any of the remedies otherwise available to it as a matter of law or
equity.
6. The Bank shall have the right immediately, and without notice or other action
to set-off against any of the Borrower's liability to the Bank (i) any money
owed by the Bank or any of its affiliates in any capacity to the Borrower
whether due or not, and/or (ii) any property of the Borrower in the possession
of the Bank or any of its affiliates, and the Bank shall be deemed to have
exercised such right of set-off and to have made a charge against any such money
immediately upon the occurrence of such event of default, even though the actual
book entries may be made at some time subsequent thereto; and
7. The Bank shall not be required to make any Advances during the existence of
an Event of Default; provided, however, the Bank mayr in its sole discretion,
make Advances notwithstanding the existence of such an Event of Default and any
Advance so made shall be deemed to have been made pursuant to this Construction
Loan Agreement.

VII
MISCELLANEOUS
1. The Bank shall be entitled to its reasonable expenses incurred in the
enforcement on payment of the Loan, and those expenses shall, without
limitation, including reasonable attorneys' fees plus other legal expenses
incurred.
2. The Borrower agrees that no delay on the part of the Bank in exercising any
power or right hereunder shall operate as a waiver of any such power or right,
preclude other or further exercise thereof, or the exercise of any other power
or right. No waiver whatsoever shall be valid unless in writing signed by the
Bank, and then only to the extent set forth therein.
3. The Borrower waives presentment, dishonor and notice of dishonor, protest and
notice of protest of all commercial papers at any time held by the Bank on which
the Borrower is in any way liable.
4. The provisions of this Agreement shall be in addition to those set forth in
the Construction/ Permanent Loan Mortgage, the Construction/ Permanent Loan Note
or

<PAGE>

other writings held by the Bank relating to this Loan, all of which shall be
construed as one instrument.
5. This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto, their respective successors and assigns.
6. The rights and remedies herein expressed to be vested in or conferred upon
the Bank shall be cumulative and shall be in addition to and not in substitution
for or in derogation of the rights and remedies conferred by any applicable law.
7. All notices to be given to any party hereunder shall be given to such party
by certified mail, postage prepaid, at the address shown at the head of this
Agreement.
8. Nothing herein contained shall impose upon the Bank any obligation to enforce
any terms, covenants or conditions contained herein. Failure of the Bank, in any
one or more instances, to insist upon strict performance by the Borrower of any
terms, covenants or conditions of this Agreement shall not be deemed to be a
waiver relinquishment of any such terms, covenants and conditions.
9. Ali conditions of the obligation of the Bank to make Advances hereunder are
imposed solely and exclusively for the benefit of the Bank and its assigns, and
no other person or persons shall have standing to require satisfaction of such
conditions in accordance with their terms or be entitled to assume that the Bank
will refuse to make Advances in the absence of strict compliance with any or all
thereof, and no other person or persons shall, under any circumstances, be
deemed to be a beneficiary or beneficiaries of such condition, any and all of
which may be waived in whole or in part by the Bank if it, in its sole
discretion, deems it advisable to do so.
10. This Agreement and all rights hereunder may be assigned or otherwise
transferred by the Bank to anyone of its choosing.
11. This Agreement, the Loan and the rights of the parties hereto shall be
governed by and construed under the laws of the State of New Jersey.
12. At ail times throughout the term of the Loan, the Borrower hereby agrees to
pay all fees, expenses and charges with respect to the Loan, or in any way
connected therewith, including but not limited to, title insurance and survey
costs, recording and filing fees, the fees and expenses of the Bank's attorneys,
and any other taxes, fees and expenses payable in connection with the Loan. The
Bank shall not be required to pay any premium or other charge, or any brokerage
fee or commission or similar compensation in connection with the Loan, and the
Borrower agrees to defend, indemnify and hold the Bank harmless against and from
any and all claims for any of the above mentioned matters.
13. During the term of the Loan evidenced by this Agreement, Borrower shall
provide to the Bank:
(a) Prior to conversion to Permanent status, copies of all lease agreements for
the mortgaged premises shall be provided to the Bank and shall be supplied on an
annual basis thereafter.

<PAGE>

(b) Prior to conversion to Permanent status, a
certificate of occupancy for the Project shall be provided to the Bank.
(c) The Borrower's maximum debt/worth ratio shall not exceed 1.0.
(d) Borrower shall provide the Bank within ten
(10) days of its receipt, any state or municipal inspection reports concerning
the mortgaged premises.
(e) Prior to conversion to Permanent status, Borrower shall furnish a policy for
fire and hazard insurance (including extended coverage) for the full insurable
value of the Premises in amounts sufficient to avoid coinsurance liability, with
standard form mortgagee endorsement naming the Bank as mortgagee.
14. Borrower shall maintain the Bank as its principal depository for all deposit
accounts for this Project throughout the term of the Loan. Removal of the
depository banking relationship will cause the interest rate of the Loan to
increase by 1/2% per annum until corrected, as set forth in the
Construction/Permanent Loan Note. All monthly payments shall be deducted from
the Borrower's account at the Bank. IN WITNESS WHEREOF, the Borrower has caused
these presents to be signed by the day and year first above written.


Signed :

/s/ Manfred F. Dyck
-------------------------------
Manfred F. Dyck, President

Hydromer, Inc.



Witness:

/s/ Robert J. Moravsik
-----------------------------
Robert J. Moravsik, Secretary

<PAGE>

SCHEDULEA-LEGAL DESCRIPTION
All that certain Lot, piece or parcel of land, with the buildings and
improvements thereon erected, situate, lying a~d being in the Township of
Branchburg: BEGINNING at a point in the northeasterly line of Industrial Parkway
(60'wide) distant 675.98 feet measured in a westerly direction from the
projected intersection of the northeasterly line of Industrial Parkway with the
northwesterly line of Readington Road (60' wide) and running; thence
1) along said line of Industrial Parkway, North 65 degrees 45 minutes 00 seconds
West, a distance of 650.41 feet to a point; thence
2) North 38 degrees 41 minutes 12 seconds East a distance of 475.38 feet to a
point in the southwesterly line of the Central Railroad of New Jersey; thence
3) along said line of the Central Railroad of New Jersey, South 66 degrees 06
minutes 44 seconds East, a distance of 5 3 1.87 feet to a point; t hence
4) South 24 degrees 15 minutes 00 seconds West, a distance of 463.73 feet to a
point in the northeasterly line of Industrial Parkway, the point and place of
BEGINNING.
NOTE: Being Lot(s) 3.04, Block 17, Tax Map of the Township of Branchburcr,
County of Somerset.
NOTE: Lot and Block shown for informational purposes only.
Schedule A - Legal Description



Loan Rates:


During Construction-Prime +1/2% daily floating

Permanent Phase-Prime+1.00% set 45 days before each three year period.

Loan payable in 15 years after conversion to Permanent staus.