SCHEDULE 14A INFORMATION
                    Proxy Statement Pursuant to Section 14(a)
             of the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_]   Preliminary Proxy Statement

[_]   Confidential, for Use of the Commission Only (as permitted by Rule 14a
      6(e) (2))

[X]   Definitive Proxy Statement

[_]   Definitive Additional Materials

[_]   Soliciting Material Pursuant to Section 14a-12

                               BALCHEM CORPORATION
--------------------------------------------------------------------------------
                (Name of Registrant as Specified In Its Charter)

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

     (Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X]   No fee required.
[_]   Fee computed on table below per Exchange Act Rules 14a-6(i)(1)and 0-11.

      1)    Title of each class of securities to which transaction applies: N/A

      2)    Aggregate number of securities to which transaction applies: N/A

      3)    Per unit price or other underlying value of transaction computed
            pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
            the filing fee is calculated and state how it was determined): N/A

      4)    Proposed maximum aggregate value of transaction: N/A

      5)    Total fee paid: N/A

[_]   Fee paid previously with preliminary materials.

[_]   Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

      1)    Amount Previously Paid: N/A
      2)    Form, Schedule or Registration Statement No.: N/A
      3)    Filing Party: N/A
      4)    Date Filed: N/A

<page>

                           [LOGO BALCHEM CORPORATION]

                    ----------------------------------------
                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                           TO BE HELD ON JUNE 15, 2007
                    ----------------------------------------


         TO OUR STOCKHOLDERS:

         NOTICE IS HEREBY  GIVEN that the  Annual  Meeting  of  Stockholders  of
BALCHEM  CORPORATION will be held in the NASDAQ  MarketSite,  Times Square,  New
York,  New York,  on  Friday,  June 15,  2007 at 11:00  a.m.  for the  following
purposes:

         1.       To elect two Class 1 Directors  to the Board of  Directors  to
                  serve  until the Annual  Meeting of  Stockholders  in 2010 and
                  thereafter until their  respective  successors are elected and
                  qualified;

         2.       To ratify the  appointment  of McGladrey & Pullen,  LLP as our
                  independent  registered  public accounting firm for the fiscal
                  year ending December 31, 2007; and

         3.       To transact  such other  business as may properly  come before
                  the Meeting or any adjournment thereof.

         Information with respect to the above matters is set forth in the Proxy
Statement, which accompanies this Notice.

         The Board of  Directors  has set April 24,  2007 as the record date for
the Annual Meeting.  This means that only stockholders of record at the close of
business  on that date are  entitled  to notice of and to vote at the Meeting or
any adjournment thereof.

         We hope that all  stockholders  who can  conveniently do so will attend
the Meeting. Stockholders who do not expect to be able to attend the Meeting are
requested to fill in, date and sign the enclosed  proxy and promptly  return the
same in the stamped,  self-addressed  envelope  enclosed  for your  convenience.
Stockholders  who are present at the Meeting may withdraw their proxies and vote
in person, if they so desire.

                                            BY ORDER OF THE BOARD OF DIRECTORS

                                            Dino A. Rossi, President & CEO
Dated: April 27, 2007

           P.O. Box 600, New Hampton, New York 10958 Tel: 845-326-5600
                       Fax: 845-326-5702 www.balchem.com

<page>

                                 PROXY STATEMENT

                               BALCHEM CORPORATION


                                     GENERAL

This Proxy Statement is furnished in connection with the solicitation of proxies
on behalf of the Board of Directors of Balchem Corporation (the "Company") to be
voted at the 2007 Annual Meeting of  Stockholders  (the "Annual  Meeting" or the
"Meeting") to be held at the NASDAQ MarketSite, 4 Times Square, New York, NY, on
Friday,  June 15,  2007 at 11:00 AM,  local  time,  and at any  adjournments  or
postponements  thereof. This Proxy Statement and a proxy card are expected to be
sent to stockholders beginning on or about April 27, 2007.

         The Board of  Directors  has fixed the close of  business  on April 24,
2007 as the record date for the determination of stockholders entitled to notice
of, and to vote at, the Annual Meeting. At the Annual Meeting, stockholders will
be asked to consider  and vote upon the election of two Class 1 Directors to the
Board of Directors to serve until the annual meeting of Stockholders in 2010 and
thereafter  until  their  respective   successors  are  elected  and  qualified.
Stockholders  will also be asked to ratify the Board of Directors'  selection of
McGladrey  &  Pullen,  LLP  as  the  Company's  independent   registered  public
accounting firm for the 2007 fiscal year. Stockholders may also consider and act
upon such other  matters as may properly  come before the Annual  Meeting or any
adjournment or adjournments thereof.

         You can ensure  that your  shares  are voted at the  Annual  Meeting by
completing,  signing,  dating  and  returning  the  enclosed  proxy  card in the
envelope  provided.  Sending in a signed  proxy  will not  affect  your right to
attend the Meeting and vote.  A  stockholder  who gives a proxy may revoke it at
any time before it is  exercised by voting in person at the Annual  Meeting,  by
submitting  another proxy bearing a later date or by notifying the Inspectors of
Election or the Secretary of the Company of such  revocation in writing prior to
the Annual Meeting. Please note, however, that if your shares are held of record
by a broker,  bank or other nominee and you wish to attend and vote in person at
the Annual  Meeting,  you must obtain from the record  holder a proxy  issued in
your name.

         Proxies  may  be  solicited,   without  additional   compensation,   by
directors,  officers and other  regular  employees of the Company by  telephone,
email,  telefax or in person.  All  expenses  incurred in  connection  with this
solicitation will be borne by the Company.  Brokers,  nominees,  fiduciaries and
other  custodians  have been  requested  to forward  soliciting  material to the
beneficial  owners of Common Stock held of record by them,  and such  custodians
will be reimbursed for their reasonable expenses.


                                  PROPOSAL NO.1
                              ELECTION OF DIRECTORS

         The Company's  By-laws  provide for a staggered term Board of Directors
consisting of six (6) members, with the classification of the Board of Directors
into three  classes  (Class 1, Class 2 and Class 3). The term of the two current
Class 1 Directors who are nominated for election as directors will expire at the
Annual  Meeting.  The Class 3 and Class 2 Directors  will

                                       3
<page>

remain  in  office  until  their  terms  expire,   at  the  annual  meetings  of
stockholders to be held in the years 2008 and 2009, respectively.

         Accordingly,  at the 2007 Annual Meeting,  two Class 1 Directors are to
be elected to hold office until the annual meeting of stockholders to be held in
2010 and thereafter until their successors have been elected and qualified.  The
nominees listed below with brief  biographies  are currently  directors and have
been nominated for election after due consideration by the Corporate  Governance
and  Nominating  Committee.  The Board is not aware of any  reason  why any such
nominee may be unable to serve as a director. If either or both of such nominees
are unable to serve,  the shares  represented by all valid proxies will be voted
for the  election of such other  person or  persons,  as the case may be, as the
Board may recommend.


Vote Required to Elect Directors

         Under the rules of the Securities and Exchange Commission,  boxes and a
designated  blank space are  provided on the form of proxy for  stockholders  to
mark if they  wish to vote in favor  of or  withhold  authority  to vote for the
Company's nominees for director.

         Assuming a quorum has been reached,  a determination must be made as to
the results of the vote on each matter submitted for stockholder approval.

         A director  nominee  must  receive a plurality of the votes cast at the
Meeting, which means that a broker non-vote or a vote withheld from a particular
nominee or nominees will not affect the outcome of the election of directors.

         All shares  represented by duly executed  proxies will be voted For the
election of the  nominees  named in this Proxy  Statement  as  directors  unless
authority to vote For any such nominee has been withheld.  If for any reason any
                  ===
such named  nominee  should not be available as a candidate  for  director,  the
proxies will be voted in accordance  with the  authority  conferred in the proxy
for  such  other  candidate  as  may be  nominated  by the  Company's  Board  of
Directors.


Nominees for Election as Director

         Dino A. Rossi,  age 52, has been a Director  of the Company  since 1997
and Chairman of the Company's  Board of Directors  since  February 22, 2007. Mr.
Rossi has been  President  and Chief  Executive  Officer  of the  Company  since
October 1997, Chief Financial  Officer of the Company from April 1996 to January
2004 and  Treasurer  of the  Company  from June 1996 to June  2003.  He was Vice
President,  Finance and  Administration  of Norit  Americas Inc., a wholly-owned
subsidiary  of Norit N.V.,  a chemicals  company,  from January 1994 to February
1996, and Vice President,  Finance and Administration of Oakite Products Inc., a
specialty chemicals company, from 1987 to 1993.

         Dr. Elaine R. Wedral,  age 63, has been a Director  since October 2003.
Dr. Wedral is retired. She was President Nestle R&D Center, Inc. New Milford, CT
and Head of Nestle Food Service  Systems  worldwide  1999-2005.  Dr.  Wedral was
President,  Nestle RD Centers in the U.S.  1988-1999.  Prior to that, she held a
variety of technical positions at Nestle. Dr. Wedral holds 34 patents in the R&D
food  processing,  food nutrition and ingredient  areas, and is on the editorial
board  of  Food  Processing  Magazine.  She  received  her  Ph.D.  from

                                       4
<page>

Cornell University in Food Biochemistry, an M.S. in Food Microbiology and a B.S.
(Honors)  from  Purdue  University  in  Biochemistry.  She is  currently  also a
director  of  Sensient  Technologies  Corporation,  and  continues  to work with
several key industry/university related groups.


         Upon recommendation by the Corporate Governance & Nominating Committee,
the Board of Directors of the Company recommends a vote For the election of Dino
                                                        ===
A. Rossi and Elaine R.  Wedral as Class 1  Directors  to hold  office  until the
Annual Meeting of Stockholders  for the Year 2010 and until their successors are
elected.  Proxies  received by the Company  will be so voted unless such proxies
withhold authority to vote for such nominees.


Directors Not Standing For Election

         In  addition  to Mr.  Rossi  and Dr.  Wedral,  the  Company's  Board of
Directors includes the following members:

         Hoyt  Ammidon,  Jr.,  age 69, has been a Director of the Company  since
October 2001. Mr. Ammidon is retired.  Mr. Ammidon served as a managing director
of Berkshire  Capital  Corporation,  a private  company that provides merger and
acquisition  related  services  to  the  investment  management  and  securities
industries, from November 1994 to January 2004 and has been an advisory director
thereof since January 2004. Prior thereto,  he held various executive  positions
at Cazenove Incorporated,  a brokerage firm, The Chase Manhattan Investment Bank
and E.F.  Hutton & Co.,  Inc.  Mr.  Ammidon is  currently  a  director  of Tetra
Technologies, Inc., a publicly traded company.

         Edward L.  McMillan,  age 61, has been a Director of the Company  since
February   2003.   Mr.   McMillan   owns   and   manages   McMillan,    LLC,   a
transaction-consulting  firm that  provides  strategic  consulting  services and
facilitates   mergers  and/or   acquisitions   predominantly  to  the  food  and
agribusiness  industry  sectors.  From 1988 to 1996, he was President and CEO of
Purina Mills,  Inc., where he was involved for approximately 25 years in various
senior level positions in marketing,  strategic  planning,  and business segment
management. Since September 2005, he has been a director of Nutracea, a publicly
traded company. In addition, he is also a director of Marical, Inc., a privately
held corporation.

         Kenneth P. Mitchell, age 67, has been the Company's Lead Director since
October 1, 2005 and has been a Director of the Company since 1993. Mr.  Mitchell
is retired.  He was Chief Executive Officer of Oakite Products Inc. from 1986 to
1993. Since February 1997, he has been a director of Tetra Technologies, Inc., a
publicly  traded  company.  Mr.  Mitchell  is  currently  a  director  of  Tetra
Technologies, Inc., a publicly traded company.

         Dr.  John Y.  Televantos,  age 54, has been a Director  since  February
2005.  Currently,  Dr. Televantos is also an Executive Vice President of Arsenal
Capital  Partners,  Inc., a private equity  investment firm. Dr.  Televantos was
formerly  with  Hercules  as  President  of the  Aqualon  Division  and as  Vice
President of Hercules,  from April 2002 through 2005. He had been  President and
Chief Executive Officer,  and prior to that Chief Operating  Officer,  of Foamex
International  during the period from June 1999 through  December 2001. Prior to
that, he was Vice  President,  Development  Businesses  and Research at Lyondell
Chemical  Company since 1998.  Dr.  Televantos  holds B.S. and Ph.D.  degrees in
Chemical Engineering from the University of London,

                                       5
<page>

United  Kingdom.  He also has been on several public and private  company Boards
and is affiliated with other key industry-related groups.


Director Independence

         The Board of Directors has made an affirmative  determination that each
of the Company's directors,  other than Mr. Rossi, is independent,  as such term
is defined under Nasdaq Marketplace Rules.


Meeting Attendance

         During fiscal 2006,  the Board of Directors met 5 times during  regular
meetings and 1 time for a telephonic special meeting.  Each director attended at
least 75% of the meetings of the Board held when he or she was a director and of
all meetings of those Committees of the Board on which he or she served.

         The Company has adopted a policy to  strongly  encourage  directors  to
attend each annual meeting of  stockholders.  Historically,  attendance has been
excellent. All directors were in attendance at the Company's 2006 annual meeting
of stockholders.


Committees of the Board of Directors

         The  Company's  Board of  Directors  has a  standing  Audit  Committee,
Executive  Committee,  Compensation  Committee,  and  Corporate  Governance  and
Nominating  Committee.  The Board of  Directors  appoints  the  members  of each
Committee.  In 2006,  the Audit  Committee  held five meetings and the Corporate
Governance and Nominating and Compensation  Committees each held three meetings.
The Executive Committee did not meet in 2006.

         Audit Committee. The Audit Committee, in its capacity as a committee of
the Board of Directors, is directly responsible for appointing, compensating and
overseeing  the  work  of the  accounting  firm  retained  for the  purposes  of
preparing or issuing  audit reports or related work.  The Audit  Committee  also
assists the Board of Directors in fulfilling its oversight responsibilities with
respect to the Company's financial reporting,  internal controls and procedures,
and audit functions. Responsibilities,  activities and independence of the Audit
Committee  are  discussed  in  greater  detail  under the  section of this Proxy
Statement entitled "Audit Committee Report."

         The Board of Directors of the Company has adopted a written charter for
the Audit Committee,  which is available on the Corporate Governance page in the
Investor  Relations  section of the  Company's  Web site,  www.balchem.com.  The
                                                           ---------------
current members of the Audit Committee are Messrs.  Ammidon  (Chair),  McMillan,
and  Mitchell.  The Board of  Directors of the Company has  determined  that the
Audit  Committee  Chairman,  Mr.  Ammidon,  qualifies  as  an  "audit  committee
financial expert",  as defined in Section 407 of the Sarbanes-Oxley Act of 2002,
and that all members of the Audit Committee are  "independent"  under the Nasdaq
Marketplace Rules applicable to audit committee members.

         Compensation Committee. The duties of the Compensation Committee are to
(i)  recommend  to the Board of  Directors  a  compensation  program,  including
incentives,  for the Chief  Executive  Officer and other senior  officers of the
Company,  for  approval by the full Board of  Directors,  (ii) prepare an Annual

                                       6
<page>

Report of the  Compensation  Committee  for  inclusion  in the  Company's  Proxy
Statement as contemplated by the  requirements of Schedule 14A of the Securities
Exchange Act of 1934,  as amended,  (iii) propose to the full Board of Directors
the compensation of directors, a significant part of which compensation is to be
in the form of stock or stock options, and (iv) to administer the Company's 1999
Stock Plan for  officers,  directors,  directors  emeritus and  employees of and
consultants  to the  Company  and its  subsidiaries  (referred  to in this Proxy
Statement as the "1999 Stock Plan").

         The Board of Directors of the Company has adopted a written charter for
the Compensation Committee,  which is available on the Corporate Governance page
in the Investor  Relations  section of the Company's Web site,  www.balchem.com.
                                                                ---------------
The  current  members  of  the  Compensation  Committee  are  Messrs.  McMillan,
Mitchell,  Dr. Televantos  (Chair) and Dr. Wedral,  each of whom are independent
directors.

         See "Compensation Discussion and Analysis - Compensation Committee" and
"Report of the Compensation Committee of the Board of Directors" below.

         Executive Committee.  The Executive Committee is authorized to exercise
all the powers of the Board of Directors in the interim between  meetings of the
Board,  subject  to the  limitations  imposed by  Maryland  law.  The  Executive
Committee is also responsible for the  recruitment,  evaluation and selection of
suitable  candidates for the position of Chief Executive  Officer  ("CEO"),  for
approval by the full Board, for the preparation,  together with the Compensation
Committee,  of objective  criteria for the evaluation of the  performance of the
CEO, and for reviewing the CEO's plan of succession for officers of the Company.

         The current  members of the Executive  Committee are Messrs.  McMillan,
Mitchell (Chair), and Dr.
Televantos.

         Corporate  Governance  &  Nominating  Committee.   The  duties  of  the
Corporate Governance & Nominating Committee are, among other things, to consider
and make  recommendations to the Board concerning the appropriate size, function
and needs of the Board,  to  determine  the criteria  for Board  membership,  to
evaluate  and  recommend  to  the  Board  the   responsibilities  of  the  Board
committees,  to  annually  review  and  assess  the  adequacy  of the  Company's
corporate  governance  guidelines  and  recommend  any  changes to the Board for
adoption,  to  oversee  the  annual  self-evaluation  of  the  Board  and  Board
Committees,  to consider matters of corporate social  responsibility and matters
of significance  in areas related to corporate  public affairs and the Company's
employees  and  stockholders,   to  recruit  and  evaluate  new  candidates  for
nomination by the full Board for election as director,  to prepare and update an
orientation  program for new Directors,  to evaluate the  performance of current
directors in connection  with the expiration of their term in office with a view
to  providing  advice to the full  Board as to  whether  the full  Board  should
nominate any such director for reelection,  and to annually review and recommend
policies on director retirement age.

         The Board of Directors of the Company has adopted a written charter for
the  Corporate  Governance  &  Nominating  Committee,  which is available on the
Corporate Governance page in the Investor Relations section of the Company's Web
site,  www.balchem.com and was attached as Exhibit A to the Company's 2006 Proxy
       ---------------
Statement.  The  current  members  of  the  Corporate  Governance  &  Nominating
Committee  are  Messrs.  Ammidon and  Mitchell  and Drs.  Televantos  and Wedral
(Chair).

                                       7
<page>

Nominations of Directors

         Consistent  with  previous   practice,   the  Corporate   Governance  &
Nominating  Committee continues to re-nominate  incumbent directors who continue
to satisfy the Company's  criteria for  membership on the Board;  whom the Board
believes will continue to make  contributions  to the Board;  and who consent to
continue  their  service  on the  Board.  If the  incumbent  directors  are  not
nominated for  re-election or if there is otherwise a vacancy on the Board,  the
Committee  will  solicit  recommendations  for  nominees  from  persons that the
Committee  believes  are  likely  to  be  familiar  with  qualified  candidates,
including  from  members of the Board and  management.  The  Committee  may also
determine  to  engage  a  professional  search  firm to  assist  in  identifying
qualified candidates.  The Committee also considers external director candidates
or candidates  recommended by one or more substantial,  long-term  stockholders.
Generally,  stockholders  who  individually or as a group hold 5% or more of the
Company's  common  stock and have  continued  to do so for over one year will be
considered substantial,  long-term stockholders. Each stockholder recommendation
should  include  at  a  minimum  the  director  candidate's  name,  biographical
information and  qualifications,  and the director  candidate's  acknowledgement
that such  person is  willing  to be  nominated  for  directorship  and serve as
director if elected.  The Committee  will consider  stockholder  recommendations
regarding  potential  nominees  for next  year's  annual  stockholders  meeting,
consistent  with the policy  described  above,  if the  Committee  receives such
recommendations prior to the deadline for stockholder proposal submissions,  set
forth below in  "Stockholder  Proposals  for 2008 Annual  Meeting."  Stockholder
nominations  that  comply  with  these  procedures  and that  meet the  criteria
outlined  above  will  receive  the same  consideration  that  other  candidates
receive.

         The Committee and the Board has adopted  guidelines for  identifying or
evaluating  nominees for director,  including  incumbent  directors and nominees
recommended by stockholders.  The Company's  current policy is to require that a
majority  of the  Board of  Directors  be  independent;  at  least  three of the
directors  have the  financial  literacy  necessary  for  service  on the  audit
committee and at least one of these  directors  qualifies as an audit  committee
financial  expert.  In addition,  directors  may not serve on the boards of more
than  three  other  public  companies,  without  the  approval  of the  Board of
Directors;  and  directors  must  satisfy  the  Company's  age limit  policy for
directors  which requires that a director retire at the conclusion of his or her
term in the  calendar  year  during  which he or she  reaches the age of 70. The
guidelines do not otherwise establish specific minimum  qualifications that must
be met for nomination for a position on the Board of Directors,  but provide for
the  selection  of nominees  based on the  nominees'  skills,  achievements  and
experience,  and contemplate that the following will be considered,  among other
things,  in  selecting  nominees:  knowledge,  experience  and  skills  in areas
critical   to   understanding   the   Company   and   its   business,   personal
characteristics,  such as integrity and judgment, and the candidate's commitment
to the boards of other companies.


Lead Director

         Mr.  Mitchell has been the Lead Director  since 2005. The Lead Director
functions,  in general,  to reinforce the independence of the Board of Directors
of  the  Company.  This  person  is  appointed  on a  rotating  basis  from  the
independent  Directors.  The  initial  term is a two year  assignment.  The Lead
Director will serve at the election of the Board and, in any event, only so long
as that person shall be an  independent  Director of the Company.  The

                                       8
<page>

Corporate   Governance  and  Nominating   Committee  will  review  annually  the
description of the Lead Director position and recommend to the Board any changes
that it  considers  appropriate.  The Lead  Director  provides a source of Board
leadership  complementary  to that of the CEO.  Amongst other  things,  the Lead
Director is responsible for working with the Chairman and other directors to set
agendas for Board  meetings;  providing  leadership in times of crisis  together
with the Executive  Committee;  chairing regular  meetings of independent  Board
members  without  management  present  (executive  sessions);  acting as liaison
between the independent  Directors and the CEO; and chairing Board meetings when
the Chairman is not in attendance.


Communicating With the Board of Directors

         Members of the Board and executive  officers are  accessible by mail in
care of the Company.  Any matter  intended for the Board,  or for any individual
member or members of the Board, should be directed to the General Counsel with a
request  to  forward  the  communication  to  the  intended  recipient.  In  the
alternative,  stockholders  can  direct  correspondence  to the  Board  via  the
Chairman,  or to the attention of the Lead  Director,  in care of the Company at
the Company's principal executive office address,  P.O. Box 600, New Hampton, NY
10958.  The Company  will forward  such  communications,  unless of an obviously
inappropriate nature, to the intended recipient.


Executive Sessions of the Board of Directors

         The  Company's   independent  Directors  meet  regularly  in  executive
sessions  following each regularly  scheduled meeting of the Board of Directors.
These executive sessions are presided over by the Lead Director. The independent
Directors presently consist of all current Directors, except Mr. Rossi.


Executive Officers

         Set  forth  below  is  certain  information  concerning  the  executive
officers of the Company  (other than Mr.  Rossi,  whose  background is described
above under the caption "Directors"),  which officers serve at the discretion of
the Board of Directors:

         Francis  J.  Fitzpatrick,  CPA,  age 46,  has been the Chief  Financial
Officer of the Company  since  January 2004 and  Treasurer of the Company  since
June 2003, and was Controller of the Company from April 1997 to January 2004. He
has been an executive officer and Assistant  Secretary of the Company since June
1998.   He  was   Director  of  Financial   Operations/Controller   of  Alliance
Pharmaceutical  Corp., a  pharmaceuticals  company,  from September 1989 through
March 1997.

         Matthew D. Houston,  age 43, has been General  Counsel since January of
2005 and Secretary,  since June of 2005. He was General Counsel and Secretary of
Eximias  Pharmaceutical  Corporation,  a privately held corporation from 2001 to
2004.  Mr.  Houston  also  held  several  internal  counsel  positions  at  BASF
Corporation  from 1994 to 2001.  Mr. Houston  received his Juris  Doctorate from
Saint Louis University.

         David F. Ludwig,  age 49, has been Vice President and General  Manager,
Specialty Products since July 1999 and an executive officer of the Company since
June 2000. He was Vice President and General Manager of Scott

                                       9
<page>

Specialty  Gases, a  manufacturer  of high purity gas products and specialty gas
blends,  from  September  1997 to June 1999.  From 1986 to 1997 he held  various
international  and  domestic  sales  and  marketing   positions  with  Engelhard
Corporation's Pigments and Additives Division.

         Robert T. Miniger,  age 53, has been Vice  President,  Human  Resources
since April 2001 and an executive officer of the Company since June 2003. He was
the Global  Director of Human  Resources for the Industrial  Coatings  Strategic
Business Unit of PPG  Industries  Inc. from 1995 to 2000.  From 1980 to 1995, he
held several human resource  positions within PPG including glass  manufacturing
and corporate office assignments.

         Paul H.  Richardson,  PhD,  CChem,  age 37, has been Vice  President of
Research  and  Development  and an Executive  Officer of the Company  since July
2005,  and was Director of Research and  Development,  January 2004 to July 2005
and  Director of Materials  Science,  January  2001 to January  2004.  Since his
Bachelors  degree in chemistry and PhD in polymer science from the University of
Durham,  England,  Dr.  Richardson  has  held  Research  Scientist  and  Project
Management  positions at Unilever Plc. (January 1995 to April 1997) and National
Starch and Chemical Company, September 1997 to December 2000.


Code of Business Conduct and Ethics

         The Company has adopted a Code of Ethics for Senior Financial  Officers
that applies to the Company's Chief Executive Officer,  Chief Financial Officer,
Treasurer  and  Corporate  Controller.  The Company has also  adopted a Business
Ethics Policy  applicable to its employees and a further Policy  Statement which
confirms that, as and when appropriate,  the Business Ethics Policy and the Code
of  Ethics  for  Senior  Financial  Officers  are  applicable  to the  Company's
directors  and  officers.  Any waiver of any  provision in the Code of Ethics or
Business Ethics Policy in favor of members of the Board or in favor of executive
officers may be made only by the Board.  Any such waiver,  and any  amendment to
such Code, will be publicly  disclosed in a Current Report on Form 8-K. The Code
of Ethics and Business Ethics Policy and further Policy  Statement are available
on the  Corporate  Governance  page in the  Investor  Relations  section  of the
Company's Web site, www.balchem.com.
                    ---------------

Section 16(a) Beneficial Ownership Reporting Compliance

         Section  16(a) of the  Securities  Exchange  Act of 1934,  as  amended,
requires the Company's directors and executive officers and holders of more than
10% of the  Company's  Common  Stock to file with the  Securities  and  Exchange
Commission initial reports of ownership and reports of any subsequent changes in
ownership of Common Stock and other equity  securities of the Company.  Specific
due dates for these reports have been established and the Company is required to
disclose any failure to file by these dates.

         The Company  believes  that during the fiscal year ended  December  31,
2006,  its officers and  directors and holders of more than 10% of the Company's
Common Stock complied with Section 16(a) filing date  requirements  with respect
to transactions during such year.

                                       10
<page>


Compensation Committee Interlocks and Insider Participation

         Messrs. McMillan, Mitchell, Dr. Televantos, and Dr. Wedral each of whom
is a  director  of the  Company,  served  as  the  members  of the  Compensation
Committee  during  2006.  None of Messrs.  McMillan  or Mr.  Mitchell  or,  Drs.
Televantos or Wedral (i) were, during the last completed fiscal year, an officer
or employee of the Company, (ii) was formerly an officer of the Company or (iii)
had any  relationship  requiring  disclosure  by the  Company  under Item 404 of
Regulation S-K under the Securities Act of 1933, as amended,  which has not been
disclosed.


                                       11
<page>

                                 PROPOSAL NO. 2

          RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
                                 ACCOUNTING FIRM

         The Board has  selected  McGladrey & Pullen LLP (M&P) as the  Company's
independent  registered  public accounting firm for the year ending December 31,
2007.  The Company is submitting  its selection of M&P for  ratification  by the
stockholders  at the Annual  Meeting.  M&P has audited the  Company's  financial
statements  since  2005.  Representatives  of M&P will be  present at the Annual
Meeting and will have an  opportunity  to make a statement if they wish and will
be available to respond to appropriate questions.

         The Company's  Bylaws do not require that the  stockholders  ratify the
selection of M&P as the Company's independent registered public accounting firm.
However,  the Company is  submitting  the selection of M&P to  stockholders  for
ratification  as a matter of good corporate  practice.  If  stockholders  do not
ratify the selection, the Audit Committee will reconsider whether to retain M&P.
Even if the  selection is ratified,  the Board and the Audit  Committee in their
discretion  may  change  the  appointment  at any time  during  the year if they
determine  that such a change would be in the best  interests of the Company and
its stockholders.


Principal Accountant Fees and Services

         During  2006,  the  Company  retained  M&P to  audit  the  consolidated
financial  statements  for 2006.  In addition,  the Company also retained M&P to
provide  services  relating to Management's  Assessment of Internal  Controls as
required  by  Section  404 of the  Sarbanes-Oxley  Act,  as  well  as  with  the
preparation of the Company's tax returns and other audit-related and tax-related
services.  The following table shows the fees paid or accrued by the Company for
the audit and other professional services provided by M&P for 2005 and 2006:

                                    2006      2005
                                    ----      ----

         Audit fees (1)           305,175   265,700

         Audit-related fees (2)    82,700    39,900

         Tax fees (3)              29,852    34,800

                                  -----------------
         Total fees               420,727   340,400
                                  =================

(1)   Fees relating to audit of the annual consolidated financial statements and
      quarterly reviews.
(2)   Fees  relating  to  employee   benefit  plan  audit  and  acquisition  due
      diligence.
(3)   Fees for tax compliance and advisory services.

                                       12
<page>

Policy on Pre-Approval of Audit and Non-Audit Services

         All  auditing  and  non-audit  services  provided to the Company by the
independent  accountants  are  pre-approved by the Audit Committee or in certain
instances by one or more of its members pursuant to delegated authority.  At the
beginning of each year, the Audit Committee reviews and approves all known audit
and  non-audit  services and fees to be provided by and paid to the  independent
accountants.  During the year, specific audit and non-audit services or fees not
previously  approved by the Audit Committee are approved in advance by the Audit
Committee  or in certain  instances  by one or more of its  members  pursuant to
delegated  authority.  In addition,  during the year the Chief Financial Officer
and the Audit Committee  monitor actual fees to the independent  accountants for
audit and non-audit services.

Audit Committee Review

         The Audit  Committee  has reviewed the services  rendered by M&P during
2006  and  has  determined  that  the  services  rendered  are  compatible  with
maintaining  the  independence  of M&P as the Company's  independent  registered
public accounting firm.

Vote Required; Recommendation of the Board

         The affirmative  vote of the majority of the votes cast is required for
ratification.

         THE BOARD  UNANIMOUSLY  RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF M&P AS THE COMPANY'S  INDEPENDENT  REGISTERED
PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2007.

                                       13
<page>

                      COMPENSATION DISCUSSION AND ANALYSIS

Compensation Committee

         During the fiscal  year  ended  December  31,  2006,  our  Compensation
Committee held primary  responsibility  for determining  executive  compensation
levels. The Committee is composed of four independent  directors.  The Committee
solicits,  receives  and  analyzes  compensation  recommendations  from  Company
management  and  determines  each facet of the  compensation  for our  executive
officers.  The Committee  also  administers  our 1999 Stock Plan.  The Committee
solicits input from our Chief Executive  Officer with respect to the performance
of our executive  officers and their  compensation  levels no less than once per
calendar year, usually in the first quarter.

         The members of our  Compensation  Committee  have  extensive and varied
experience  with various  public and private  corporations  - as  investors  and
stockholders,  as senior executives, and as directors charged with the oversight
of management and the setting of executive  compensation  levels. In particular,
Mr. Mitchell is a member of the  Compensation  Committee of Tetra  Technologies,
Inc., a publicly  traded  company.  In addition to the extensive  experience and
expertise of the Committee's  members and their  familiarity  with the Company's
performance and the performance of our executive officers, the Committee is able
to draw on the experience of other Directors and on various legal and accounting
executives  employed by the  Company,  and the  Committee  has access to readily
available public information regarding executive  compensation structure and the
establishment of appropriate compensation levels.

         The   Compensation   Committee  has  authority  to  engage   attorneys,
accountants and consultants,  including executive compensation  consultants,  to
solicit input from management  concerning  compensation matters, and to delegate
any of its  responsibilities  to one or more  directors or members of management
where it deems such delegation appropriate and permitted under applicable law.

         In 2003,  the  Compensation  Committee  retained  Mercer Human Resource
Consulting, Inc. to provide an executive compensation study. The results of said
effort provided the  Compensation  Committee broad data with which the Committee
was able to benchmark and compare our current executive  compensation  structure
against other similarly situated companies.

         In 2006, the  Compensation  Committee  retained  Deloitte  Compensation
Consulting  Group to assist in the development of a revised equity based segment
of our  executive  compensation.  It is through this effort that we have altered
the  structure of our program for granting  executives  equity in the Company as
compensation, as discussed below.


General Compensation Objectives and Guidelines

         The  Company's  overall  compensation  philosophy  has  been  to  offer
competitive  salaries,   cash  incentives,   stock  options  and  benefit  plans
consistent with the Company's financial performance. Rewarding key employees who
contribute to the continued success of the Company through cash compensation and
equity participation are key elements of the Company's  compensation policy. The
Company's executive  compensation policy is to attract and retain key executives
necessary for the Company's short and long-

                                       14
<page>

term success by establishing a direct link between  executive  compensation  and
the  performance  of the Company,  by rewarding  individual  initiative  and the
achievement of annual corporate goals through salary and cash bonus awards,  and
by  providing  equity  awards to allow  executives  to  participate  in enhanced
stockholder value.

         In awarding salary increases and bonuses,  the  Compensation  Committee
relates various  elements of corporate  performance to the elements of executive
compensation.  The  Compensation  Committee  considers  whether the compensation
package as a whole  adequately  compensates  the  applicable  executive  for the
Company's  performance during the past year and the executive's  contribution to
such performance.

         Pursuant to the  Company's  compensation  philosophy,  the total annual
compensation  of its  executive  officers is  primarily  made up of base salary,
cash-based incentives and stock-based incentive  compensation.  In addition, the
Company  provides  retirement  compensation  plans,  group welfare  benefits and
certain perquisites.  In executing our executive compensation policy, we seek to
reward each  executive's  achievement of designated  objectives  relating to our
company's  annual  and  long-term  performance  and  individual  fulfillment  of
responsibilities.  While  compensation  survey data and  benchmarking are useful
guides for  comparative  purposes,  we believe  that a  successful  compensation
program also requires the application of judgment and subjective  determinations
of individual performance.  Accordingly,  our Compensation Committee applies its
judgment to adjust and align each individual element of our compensation program
with the broader objectives of the program.

         The Company does not have any formal stock ownership  requirements  for
its executive  officers but notes that its directors and executive  officers are
stockholders of the Company,  as is disclosed elsewhere in this Proxy Statement.
The Company is mindful of the stock  ownership of our  directors  and  executive
officers but does not believe that it is  appropriate  to provide a mechanism or
formula to take stock  ownership  (or gains from prior  option or stock  awards)
into account  when  setting  compensation  levels.  The Company  provides in its
insider  trading  policies that  directors  and executive  officers may not sell
Company  securities  short  and  may not  sell  puts,  calls  or  other  similar
derivative securities tied to our Common Stock.

Base Salary

         Base  salary   represents   the  fixed   component  of  the   executive
compensation  program.  The  Company's  philosophy  regarding  base  salaries is
conservative,  maintaining  salaries at reasonably  competitive industry levels.
Determinations of base salary levels are established based upon the magnitude of
responsibilities and the scope of the position,  as well as based upon an annual
review of marketplace competitiveness and on the Company's existing compensation
structure.  Periodic increases in base salary relate to individual contributions
to the Company's overall performance and industry competitive pay practices.  In
determining appropriate levels of base salary, the Compensation Committee relied
in part on  industry  compensation  surveys,  including  WorldatWork,  a leading
not-for-profit association dedicated to knowledge leadership in compensation and
benefits.

         The  Committee  solicits  input  from Mr.  Rossi  with  respect  to the
performance  of our executive  officers and their  compensation  levels.  During
2006,  the base  salaries of our executive  officers,  with the exception of Mr.
Rossi,  were  increased to the amounts  identified  in the Summary  Compensation

                                       15
<page>

Table.  These increases were subjectively based on increased growth in net sales
and recent profit performance of the Company, as well as individual performance.

Cash Based Incentives

         Bonuses represent the variable component of the executive  compensation
program that is tied to individual  achievement  and the Company's  performance.
The Company's policy is to base a meaningful portion of its executive  officers'
cash  compensation  on bonus.  In  determining  bonuses,  the Company  considers
factors such as the individual's  contribution to the Company's  performance and
the relative performance of the Company during the year.

         At the end of each calendar  year,  the  Compensation  Committee of the
Board of Directors approves an Incentive Compensation Program for the succeeding
calendar  year  (the  "ICP").  The  ICP  provides  for  the  awarding  of  bonus
compensation to executive  officers and certain other employees,  based upon the
level of achievement of specific goals established for the particular officer or
employee,  and for the  weighting of those goals to determine  the amount of the
bonus.

         The process of  establishing  applicable  goals requires a well-defined
annual business plan from which most ICP goals are measured. Our annual business
plan evolves from our corporate  strategic  plan and is approved by the Board of
Directors each December for the following  fiscal year.  Individual  goals under
the ICP are a composite of our corporate goals and key individual objectives. In
addition,  no bonuses  are  required to be paid under the ICP unless a specified
minimum level of consolidated  net income before interest and taxes ("NIBIT") is
achieved. The Compensation Committee established such minimum level of NIBIT for
2007 based upon the Company's  results of operations  for the 2006 calendar year
as part of the approval of the annual plan.

         In addition  to NIBIT,  individual  ICP goals  involve,  amongst  other
things, the development of new revenue  generating  products or services meeting
our  profit  criteria;  the  implementation  of  procedures  that  will  improve
efficiency, effectiveness or safety of our products or services; the development
of a change or changes in  procedures  or  processes  that reduce  cost  without
sacrificing   quality;   the  improvement  of  methods  resulting  in  increased
productivity  without loss of quality;  and the  development  of ideas that will
improve quality without increasing cost.

         Under the ICP, each goal is determined  objectively  and  consistently.
The  goals  require  an   individual  to  stretch   beyond  his  or  her  stated
responsibilities.  The value placed on each  individual ICP goal depends heavily
upon the  degree  of which  the goal  will  help us meet our  annual  plan;  the
relative degree of difficulty, creativity or involvement required to achieve the
goal; and the intrinsic value of the goal, i.e., magnitude of income enhancement
or cost savings. Each employee will typically have 4-6 ICP goals.

         The  Compensation  Committee  sets target  bonuses  for each  executive
officer  participating in the ICP. Target bonuses are based upon a percentage of
each  executive  officer's  base  yearly  salary.  The  Compensation   Committee
determines  actual bonus  amounts paid to the executive  officers,  which may be
higher or lower  than the target  bonus,  based  upon each  executive  officer's
performance  relative to the specific  established  performance goals upon which
the target bonus amounts were based. There is no maximum bonus amount under

                                       16
<page>

the ICP.  Actual bonuses for a particular  fiscal year are generally  determined
during the first quarter of the following fiscal year and paid at the discretion
of the  Compensation  Committee.  Discretionary  cash bonuses under the ICP were
paid in early 2007 to our executive  officers for performance during fiscal year
ended  2006  in the  amounts  identified  in  the  Summary  Compensation  Table.
Performance based incentive paid to Mr. Rossi is discussed below.

         Pursuant to the terms of the employment  agreement  between the Company
and Mr.  Rossi,  Mr. Rossi is entitled to annual bonus of up to 100% of his base
salary,  based upon our achieving operating and/or financial targets established
by the Board or an authorized committee thereof. Half of such bonus compensation
is determined pursuant to the ICP. The Compensation  Committee has established a
minimum level of consolidated net income for the 2007 fiscal year to be achieved
by the  Company in order for Mr.  Rossi to be  entitled  to the  portion of such
bonus compensation not covered by the ICP.


Equity Based Compensation

         The  Compensation  Committee  believes that one  important  goal of the
executive compensation program should be to provide executives, key employees --
who have  significant  responsibility  for the  management,  growth  and  future
success of the Company,  and Directors -- with an  opportunity to increase their
ownership and potentially  gain  financially from Company stock price increases.
The goal of this approach is that the interests of the stockholders, executives,
employees and Directors will be closely aligned.

         Prior to 2006, we accomplished this goal generally through the granting
of stock  options to executive  officers and other key  employees of the Company
from time to time,  giving  them a right to  purchase  shares  of the  Company's
Common  Stock at a specified  price in the future.  Grants of options  have been
based primarily on an employee's potential  contribution to the Company's growth
and financial results.  Options have been granted at the prevailing market value
of the  Company's  Common  Stock and  accordingly  will  only have  value if the
Company's stock price increases.  With limited exceptions,  grants of options to
employees have provided for vesting over three years and the individual  must be
employed by the Company for such options to vest.

         Partially in response to changes in which stock  options are  accounted
for  under  generally  accepted  accounting  principles,  we have  modified  the
structure  and  composition  of the  long-term  equity  based  component  of our
executive  compensation.  Beginning in 2006, we no longer grant  incentive stock
options,  but instead grant a combination of restricted shares and non-qualified
options  to  our  executives.   (We  also  granted   restricted  shares  to  our
non-management directors in 2005. Restricted stock, which vests over an extended
period, encourages stability and commitment at the director level.)

         Awards under the  Company's  1999 Stock Plan are purely  discretionary,
are not based  upon any  specific  formula  and may or may not be granted in any
given  fiscal  year.  It is now the  practice of the  Compensation  Committee to
review and approve awards for officers and certain employees during its December
meeting.  To avoid  timing of  equity-based  awards  ahead of the release of our
quarterly earnings and other material non-public information,  the annual awards
to our senior management,  including executive officers,  are granted coinciding
with the date of our December  Board of  Directors  Meeting.  In  addition,  the
Compensation  Committee may refrain from or delay any regularly scheduled awards
if it or senior  management  is aware of any

                                       17
<page>

material  non-public  information.  Awards of restricted  stock for officers and
certain employees will normally occur in December of each calendar year.

         Consistent with this direction,  we granted  restricted stock awards to
our named executive  officers in December 2006. The number of shares awarded was
as follows: Mr. Rossi: 13,500 shares; Mr. Fitzpatrick: 4,500 shares; Mr. Ludwig:
3,000 shares;  Mr.  Miniger:  1,500 shares;  and Dr.  Richardson:  4,500 shares.
Additionally,  in  2006,  we  granted  Non-Qualified  Options  to our  executive
officers as follows: Mr. Rossi, Mr. Fitzpatrick,  Mr. Ludwig, Mr. Richardson and
Mr. Miniger were granted options to purchase 45,000, 34,500, 27,000, 22,500, and
10,500  shares,  respectively,  at an  exercise  price of $17.81 per share.  The
number of shares and options  granted on December 8, 2006 and the exercise price
of the option  awards have been  adjusted to reflect the 3-for-2 split which was
effected on December 29, 2006.

         When  considering the grant of stock based awards,  the Committee gives
consideration  to our overall  performance  and the  performance  of  individual
employees.  It is our expectation to continue yearly grants of restricted  stock
awards and non-qualified options to executive officers.

Employment Agreement

         The Company  entered  into an  employment  agreement  with Mr. Rossi in
2001. Except for Mr. Rossi,  there are no agreements or  understandings  between
the Company and any executive  officer which guarantee  continued  employment or
guarantee any level of compensation,  including incentive or bonus payments,  to
the executive officer.

Retirement Plans

401(k)/Profit Sharing Plan

         The  Company's  executive  officers,  as well as  most  employees,  are
eligible to participate in the 401(k) Retirement  Plan/Profit  Sharing Plan (the
"401(k) Plan"). The 401(k) Plan provides that  participating  employees may make
elective  contributions  of up to  15%  of  pre-tax  salary,  subject  to  ERISA
limitations,  and for the Company to make  matching  contributions  on a monthly
basis equal in value to 35% of each participant's elective  contributions.  Such
matching contributions are made in shares of the Company's Common Stock.

         The  profit-sharing  portion of the 401(k)  Plan is  discretionary  and
non-contributory.  Profit  sharing  contributions  are  restricted  to employees
(including executive officers) who have completed 1,000 hours of service and are
employed on the last day of a plan year.  The Company  contributes,  in cash,  a
minimum of 3.55% of an eligible  participant's  taxable compensation (subject to
certain exclusions).

Perquisites

         Perquisites are granted to the executive officers  occasionally and are
generally de minimis and not a material component of compensation.

         Mr. Rossi is entitled to the use of an automobile leased by the Company
and to be reimbursed  for a specified  level of premiums for life and disability
insurance.  He is also  entitled to the use of a financial  planner,  as well as
participation in a country club membership for corporate business. Mr. Ludwig is
also  entitled to the use of an  automobile  leased by the

                                       18
<page>

Company.  The  Company  pays to insure and  maintain  both Mr.  Rossi's  and Mr.
Ludwig's automobiles.  The Company also pays fuel expenses to the extent related
to Company business.  Messrs. Fitzpatrick and Miniger and Dr. Richardson receive
cash allowances associated with the use of their personal automobiles.


         The following  Compensation  Committee Report shall not be incorporated
by  reference by any general  statement  incorporating  by reference  this Proxy
Statement  into any filing  under the  Securities  Act of 1933,  as amended (the
"Securities  Act"),   except  to  the  extent  that  the  Company   specifically
incorporates  this  information by reference,  and shall not otherwise be deemed
filed under the Securities Act or the Exchange Act.


                          COMPENSATION COMMITTEE REPORT

         We have reviewed and discussed the above  "Compensation  Discussion and
Analysis" with management.

         Based upon this review and discussion, we have recommended to the Board
of Directors that the "Compensation Discussion and Analysis" be included in this
Proxy Statement.

         Submitted by the Compensation Committee of the Board of Directors.

                                             John Y. Televantos (Chairman)
                                             Edward L. McMillan
                                             Kenneth P. Mitchell
                                             Elaine R. Wedral


                                       19
<page>

                             EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE


The  following  table  sets  forth  the  compensation  earned  by (i) our  Chief
Executive  Officer  ("Principal  Executive  Officer"),  (ii) our Chief Financial
Officer ("Principal Financial Officer"), and (iii) each of our three most highly
compensated executive officers (each a "Named Executive Officer") for the fiscal
year ended December 31, 2006.

<table>
<caption>
                                           Summary Compensation Table
-------------------------------------------------------------------------------------------------------------------
                                                                           Non-Equity
                                                                            Incentive
                                                     Stock      Option        Plan          All Other
                                                     Awards     Awards     Compensation   Compensation
    Name and Principal                    Salary      (1)         (1)          (2)             (3)         Total
       Position                Year         ($)       ($)         ($)          ($)             ($)          ($)
-------------------------------------------------------------------------------------------------------------------

                            <c>       <c>         <c>       <c>          <c>              <c>          <c>
  Dino A. Rossi                2006      $338,600    $3,778    $198,528     $212,445         $17,364      $770,715
  President & CEO

  Francis J. Fitzpatrick       2006      $169,000    $1,259    $152,270      $62,406         $21,582      $406,517
  CFO

  David F. Ludwig              2006      $193,481      $839    $123,072      $41,894         $18,026      $377,312
  VP/GM Specialty Products

  Robert T. Miniger            2006      $156,039      $420     $48,382      $51,770         $20,694      $277,305
  VP  Human Resources

  Paul H. Richardson           2006      $155,385    $1,259     $80,852      $43,575         $20,357     $301,3428
  VP  R&D
-------------------------------------------------------------------------------------------------------------------
</table>

(1)   The amounts  included in the "Stock  Awards" and "Option  Awards"  columns
      reflect the dollar amount  recognized  for financial  statement  reporting
      purposes for the fiscal year ended  December 31, 2006, in accordance  with
      FAS 123(R) adjusted to eliminate service-based forfeiture assumptions used
      for financial reporting purposes. These amounts include amounts related to
      awards granted in 2006 and in prior years. A discussion of the assumptions
      used in  valuation  of stock and  option  awards may be found in "Note 2 -
      Stockholders' Equity" in the Notes to Consolidated Financial Statements of
      our Annual  Report on Form 10-K for the year ended  December 31, 2006,  as
      filed with the SEC on March 15, 2007.
(2)   Reflects the value of cash incentive bonuses earned under our ICP.
(3)   The amounts reflected represent employer matching contributions and profit
      sharing  contributions  made under the  Company's  combined  401(k)/profit
      sharing plan,  automobile  allowance and the Company paid portion of life,
      health, and disability  insurance  benefits,  in the following amounts for
      each Named Executive Officer:

         (a)      Mr.  Rossi's  other  compensation   consists  of  $13,060  for
                  contributions under the Company's  401(k)/profit sharing plan,
                  $3,506 for automobile allowance, and $798 for life, health and
                  disability insurance benefits.
         (b)      Mr.  Fitzpatrick's other compensation  consists of $13,060 for
                  contributions under the Company's  401(k)/profit sharing plan,
                  $8,308_ for automobile  allowance,  and $214 for life,  health
                  and disability insurance benefits.

                                       20
<page>

         (c)      Mr.  Ludwig's  other  compensation  consists  of  $13,060  for
                  contributions under the Company's  401(k)/profit sharing plan,
                  $4,707 for automobile allowance, and $259 for life, health and
                  disability insurance benefits.
         (d)      Mr.  Miniger's  other  compensation  consists  of $12,757  for
                  contributions under the Company's  401(k)/profit sharing plan,
                  $7,639 for automobile allowance, and $298 for life, health and
                  disability insurance benefits.
         (e)      Mr.  Richardson's other  compensation  consists of $12,738 for
                  contributions under the Company's  401(k)/profit sharing plan,
                  $7,500 for automobile allowance, and $119 for life, health and
                  disability insurance benefits.


Grants of Plan Based Awards

         The  following  table  discloses the actual number of stock options and
restricted  stock awards  granted during the fiscal year ended December 31, 2006
to each Named  Executive  Officer,  including the grant date fair value of these
awards.

<table>
<caption>
                                               Estimated Future Payouts
                                              under Non-Equity Incentive      All Other      All Other
                                                   Plan Awards (1)              Stock         Option
                                       -------------------------------------   Awards:        Awards:
                                                                              Number of     Number of    Exercise
                                                                              Shares of     Securities   Price of
                                                                              Restricted    Underlying    Option     Grant Date
                            Grant                                               Stock        Options      Awards     Fair Value
       Name                 Date        Threshold     Target      Maximum       (#)(2)        (#)(2)      ($/Sh)        (3)
-------------------------------------------------------------------------------------------------------------------------------

                       <c>              <c>        <c>           <c>         <c>           <c>          <c>        <c>
Dino A. Rossi             12/8/2006         --        $169,300       --         13,500        45,000       $17.81     $460,710

Francis J. Fitzpatrick    12/8/2006         --         $59,150       --          4,500        34,500       $17.81     $249,315

David F. Ludwig           12/8/2006         --         $67,718       --          3,000        27,000       $17.81     $185,850

Robert T. Miniger         12/8/2006         --         $54,613       --          1,500        10,500       $17.81      $78,195

Paul H. Richardson        12/8/2006         --         $54,384       --          4,500        22,500       $17.81     $190,395

-------------------------------------------------------------------------------------------------------------------------------
</table>

(1)   Represents  target payout levels under the ICP for 2006  performance.  The
      actual amount of incentive bonus earned by each Named Executive Officer in
      2006 is reported under the Non-Equity  Incentive Plan Compensation  column
      in the Summary Compensation Table.  Additional  information  regarding the
      design of the ICP is included in the Compensation Discussion and Analysis.
(2)   The number of shares of restricted  stock and options  granted on December
      8, 2006 and the exercise  price of the option awards have been adjusted to
      reflect the 3-for-2 split of the Company's common stock which was effected
      on December 29, 2006.
(3)   The FAS 123(R) value of awards  granted on 12/8/2006  was $17.76 per share
      of restricted  stock, and $4.91 per stock option with an exercise price of
      $17.81.

Employment Agreement

         As of January 1, 2001, the Company entered into an Employment Agreement
with Mr. Rossi, which provides for Mr. Rossi to serve as the Company's President
and Chief Executive Officer. Mr. Rossi's Employment Agreement initially provided
for a base salary of  $194,700,  subject to annual  increases if approved by the
Board of Directors.  Mr. Rossi's  current salary for fiscal 2007 pursuant to the
Employment  Agreement  is  $362,302.  Mr.  Rossi is also  eligible  to receive a
discretionary  performance bonus (as determined by the

                                       21
<page>

Board of  Directors)  of up to 100% of annual  salary,  based on a target figure
consistent  with operating  and/or other  financial  targets  established by the
Board of Directors, for each fiscal year during the term of his employment.

         Mr.  Rossi's  Employment  Agreement  also  provides that if the Company
terminates  his  employment  other  than for  cause or in the  event  Mr.  Rossi
terminates  his  employment  under  certain  limited  circumstances  effectively
amounting  to a  constructive  termination,  he will be  entitled  to  severance
payments of 150% of his then current annual salary,  and if such  termination by
the Company  occurs within two years after a change of control  event  involving
the Company he would be entitled to severance  payments equal to 200% of the sum
of his then  current  annual  salary plus the annual bonus earned by him for the
fiscal year immediately  preceding the year in which the change of control event
occurred.  If Mr. Rossi were to  terminate  his  employment  prior to the second
anniversary of such a change of control event, he would be entitled to severance
payments equal to 100% of his then current  annual  salary.  In the event of any
termination  by the Company  entitling  Mr.  Rossi to  severance  payments,  his
theretofore granted but unvested options to purchase Common Stock of the Company
would  immediately  vest and be exercisable in accordance with their terms.  Mr.
Rossi's  entitlement to severance  payments would be subject to reduction to the
extent  necessary to avoid such payments being  considered an "excess  parachute
payment" for purposes of Section 280G of the Internal  Revenue Code.  During the
period of Mr. Rossi's employment (or, in the case of a voluntary  termination by
Mr.  Rossi or a  termination  of his  employment  by the Company for cause,  the
balance of the term of the  Employment  Agreement  before  giving effect to such
termination) and for a period of one year thereafter,  the Employment  Agreement
imposes on Mr. Rossi certain  non-competition and  non-solicitation  obligations
regarding the Company and its customers and its employees.

         The Employment  Agreement was amended as of December 9, 2005 to conform
certain  provisions  thereof to Section 409A of the Internal Revenue Code, which
was enacted as part of the American Jobs Creation Act of 2004,  and the proposed
regulations issued by the Treasury  Department under Section 409A. The amendment
provides that certain  payments to Mr. Rossi in connection  with the termination
of his  employment  would not be due and  payable  before six  months  after the
applicable  termination.  The six-month delay relates to Mr. Rossi's status as a
"key  employee"  (as defined under  Section 409A and the  accompanying  proposed
regulations).

Terms and Conditions of Awards

         The 1999 Stock Plan was adopted and  approved  by our  stockholders  in
1999 and was amended in 2003.  Under the 1999 Stock Plan, the officers and other
employees of the Company may be granted  options to purchase Common Stock of the
Company  which  qualify as  "incentive  stock  options"  ("ISO" or "ISOs") under
Section  422(b) of the Internal  Revenue Code of 1986,  as amended (the "Code");
directors,  officers and  employees  may be granted  options to purchase  Common
Stock which do not  qualify as ISOs  ("non-Qualified  Option" or  "Non-Qualified
Options");  and  directors,  officers and  employees may be granted the right to
make direct purchases of Common Stock from the Company ("Purchases").  Both ISOs
and Non-Qualified  Options are referred to in this Proxy Statement  individually
as an "Option" and  collectively  as  "Options."  The  exercise  price per share
specified to each Option  granted under the 1999 Stock Plan may not be less than
the fair market value per share of Common Stock on the date of such grant.

                                       22
<page>

         All of our restricted stock awards for executive officers have the same
features.  Each  executive  officer may purchase  the stock at a purchase  price
equal  to the par  value of the  shares  ($.06-2/3  per  share).  The  purchased
restricted  stock is subject to a repurchase  option in favor of the Company and
to  restrictions  on transfer until it vests.  The purchased  stock will vest in
full in four  years,  or upon an  earlier  change  of  control  of the  Company,
provided the  executive  officer is employed by the Company on that date. In the
event the  purchaser's  employment  with the Company is terminated  for cause or
upon the purchaser's  voluntary  resignation from the Company's employ, prior to
vesting in full,  the Company may  repurchase  all of the purchased  shares at a
purchase  price of $.06-2/3  per share.  The Company may  repurchase a pro-rated
amount of the purchased shares,  based on the amount of time remaining until the
vesting  date,  at a  purchase  price of  $.06-2/3  per  share in the  event the
purchaser ceases to be an employee of the Company prior to vesting by reason of:
(1) the purchaser's  voluntary  retirement from the Company's employ at or after
age 62; (2) the purchaser's death, major disability or significant  illness;  or
(3)  termination  of the  purchaser's  employment by the Company  without cause.
Repurchases  are subject to the  approval of the  Compensation  Committee of the
Board.

         Our  Non-Qualified  Options  granted vest as follows:  20% on the first
anniversary of the grant date; 40% on the second  anniversary of the grant date;
and 40% on the third  anniversary of the grant date. Our  Non-Qualified  Options
expire ten years after grant.

Outstanding Equity Awards at Fiscal Year End

         The following table shows outstanding stock option awards classified as
exercisable and  unexercisable  as of December 31, 2006 for each Named Executive
Officer.  The table also  discloses the number and value of unvested  restricted
stock awards as of December 31, 2006.

<table>
<caption>
                                                         Option Awards                               Stock Awards
                           ---------------------------------------------------------------     -----------------------
                                Number of Securities                                                           Market
                               Underlying Unexercised                                                          Value
                                     Options (#)                                                                 Of
                           --------------------------------                                                    Shares
                                                                                                                 Of
                                                                                                Number of       Stock
                                                                                                Shares of       That
                                                                      Option                      Stock         Have
                                                    Un-              Exercise     Option        that Have       Not
                            Exercisable         Exercisable           Price     Expiration         Not         Vested
         Name                   (1)                 (1)                ($)         Date         Vested(2)      (3) ($)
-----------------------     -----------         -----------          -------     --------      ----------     --------

                              <c>                  <c>             <c>           <c>           <c>            <c>
Dino A. Rossi                    83,025                  -           $  3.19     10/17/07
                                 13,500                  -           $  1.85     10/23/08
                                 16,875                  -           $  1.88     10/21/09
                                 23,625                  -           $  3.30     09/15/10
                                 67,500                  -           $  6.27     10/25/11
                                 67,500                  -           $  6.83     09/12/12
                                 67,500                  -           $  6.77     12/12/13
                                 44,550  (4)        29,700  (4)      $  8.77     09/16/14
                                 18,000  (5)        72,000  (5)      $ 13.81     09/16/15
                                      -             45,000  (6)      $ 17.81     12/08/16
                                                                                               13,500  (7)     231,120
Frank J. Fitzpatrick             40,500                  -           $  6.83     09/12/12
                                 50,625                  -           $  6.77     12/12/13
                                 36,450  (8)        24,300  (8)      $  8.77     09/16/14
                                 13,500  (9)        54,000  (9)      $ 13.81     09/16/15
                                      -             34,500  (10)     $ 17.81     12/08/16
                                                                                                4,500  (11)    $77,040

                                       23
<page>

David F. Ludwig                  12,150                  -           $  6.83     09/12/12
                                 32,400                  -           $  6.77     12/12/13
                                 30,375  (12)       20,250  (12)     $  8.77     09/16/14
                                 10,800  (13)       43,200  (13)     $ 13.81     09/16/15
                                      -             27,000  (14)     $ 17.81     12/08/16
                                                                                                3,000  (15)    $51,360

Robert T. Miniger                 9,666                  -           $  6.83     09/12/12
                                 16,875                  -           $  6.77     12/12/13
                                 12,150  (16)        8,100  (16)     $  8.77     09/16/14
                                  4,050  (17)       16,200  (17)     $ 13.81     09/16/15
                                      -             10,500  (18)     $ 17.81     12/08/16
                                                                                                1,500  (19)    $25,680

Paul H. Richardson                5,400                  -           $  6.83     12/12/13
                                      -             13,500           $  6.77     09/16/14
                                  4,500  (20)       18,000  (20)     $  8.77     06/24/15
                                  4,500  (21)       18,000  (21)     $ 13.81     09/16/15
                                      -             22,500  (22)     $ 17.81     12/08/16
                                                                                                4,500  (23)    $77,040
</table>

(1)   Stock option awards are  exercisable  20% after 1 year,  60% after 2 years
      and 100% after 3 years from the date of grant.

(2)   Restricted stock vests 20% on the first anniversary of the grant date; 40%
      on the  second  anniversary  of  the  grant  date;  and  40% on the  third
      anniversary of the grant date.

(3)   Value is computed  based on the closing  price of our Common  Stock on the
      NASDAQ on December 29, 2006, which was $17.12 per share.

(4)   Mr.  Rossi's  74,250  options  granted on September  16, 2004 at $8.77 per
      share became  exercisable  starting September 16, 2005 with twenty percent
      being  exercisable  on this date and an  additional  forty  percent  being
      exercisable on September 16, 2006 and 2007, respectively.

(5)   Mr.  Rossi's  90,000  options  granted on September 16, 2005 at $13.81 per
      share became  exercisable  starting September 16, 2006 with twenty percent
      being  exercisable  on this date and an  additional  forty  percent  being
      exercisable on September 16, 2007 and 2008, respectively.

(6)   Mr. Rossi's 45,000 options granted on December 8, 2006 at $17.81 per share
      becomes  exercisable  starting  December 8, 2007 with twenty percent being
      exercisable on this date and an additional forty percent being exercisable
      on December 8, 2008 and 2009, respectively.

(7)   Mr.  Rossi's  13,500 share  restricted  stock award granted on December 8,
      2006 for $.06 2/3 per share will vest in full on December 8, 2010.

(8)   Mr.  Fitzpatrick's  60,750 options  granted on September 16, 2004 at $8.77
      per share  became  exercisable  starting  September  16,  2005 with twenty
      percent being  exercisable  on this date and an  additional  forty percent
      being exercisable on September 16, 2006 and 2007, respectively.

(9)   Mr.  Fitzpatrick's  67,500 options granted on September 16, 2005 at $13.81
      per share  became  exercisable  starting  September  16,  2006 with twenty
      percent being  exercisable  on this date and an  additional  forty percent
      being exercisable on September 16, 2007 and 2008, respectively.

(10)  Mr. Fitzpatrick's 34,500 options granted on December 8, 2006 at $17.81 per
      share becomes  exercisable  starting  December 8, 2007 with twenty percent
      being

                                       24
<page>

      exercisable on this date and an additional forty percent being exercisable
      on December 8, 2008 and 2009, respectively.

(11)  Mr.  Fitzpatrick's  4,500 share restricted stock award granted on December
      8, 2006 for $.06 2/3 per share will vest in full on December 8, 2010.

(12)  Mr.  Ludwig's  50,625  options  granted on September 16, 2004 at $8.77 per
      share became  exercisable  starting September 16, 2005 with twenty percent
      being  exercisable  on this date and an  additional  forty  percent  being
      exercisable on September 16, 2006 and 2007, respectively.

(13)  Mr.  Ludwig's  54,000 options  granted on September 16, 2005 at $13.81 per
      share became  exercisable  starting September 16, 2006 with twenty percent
      being  exercisable  on this date and an  additional  forty  percent  being
      exercisable on September 16, 2007 and 2008, respectively.

(14)  Mr.  Ludwig's  27,000  options  granted on  December 8, 2006 at $17.81 per
      share becomes  exercisable  starting  December 8, 2007 with twenty percent
      being  exercisable  on this date and an  additional  forty  percent  being
      exercisable on December 8, 2008 and 2009, respectively.

(15)  Mr.  Ludwig's  3,000 share  restricted  stock award granted on December 8,
      2006 for $.06 2/3 per share will vest in full on December 8, 2010.

(16)  Mr.  Miniger's  20,250 options  granted on September 16, 2004 at $8.77 per
      share became  exercisable  starting September 16, 2005 with twenty percent
      being  exercisable  on this date and an  additional  forty  percent  being
      exercisable on September 16, 2006 and 2007, respectively.

(17)  Mr.  Miniger's  20,250 options granted on September 16, 2005 at $13.81 per
      share became  exercisable  starting September 16, 2006 with twenty percent
      being  exercisable  on this date and an  additional  forty  percent  being
      exercisable on September 16, 2007 and 2008, respectively.

(18)  Mr.  Miniger's  10,500  options  granted on December 8, 2006 at $17.81 per
      share becomes  exercisable  starting  December 8, 2007 with twenty percent
      being  exercisable  on this date and an  additional  forty  percent  being
      exercisable on December 8, 2008 and 2009, respectively.

(19)  Mr.  Miniger's 1,500 share  restricted  stock award granted on December 8,
      2006 for $.06 2/3 per share will vest in full on December 8, 2010.

(20)  Mr. Richardson's 33,750 options granted on September 16, 2004 at $8.77 per
      share became  exercisable  starting September 16, 2005 with twenty percent
      being  exercisable  on this date and an  additional  forty  percent  being
      exercisable on September 16, 2006 and 2007, respectively.

(21)  Mr.  Richardson's  22,500  options  granted on June 24, 2005 at $13.81 per
      share became exercisable  starting June 24, 2006 with twenty percent being
      exercisable on this date and an additional forty percent being exercisable
      on June 24, 2007 and 2008, respectively.

(21)  Mr.  Richardson's  22,500 options  granted on September 16, 2005 at $13.81
      per share  became  exercisable  starting  September  16,  2006 with twenty
      percent being  exercisable  on this date and an  additional  forty percent
      being exercisable on September 16, 2007 and 2008, respectively.

(22)  Mr.  Richardson's 22,500 options granted on December 8, 2006 at $17.81 per
      share becomes  exercisable  starting  December 8, 2007 with twenty percent
      being  exercisable  on this date and an  additional  forty  percent  being
      exercisable on December 8, 2008 and 2009, respectively.

(23)  Mr. Richardson's 4,500 share restricted stock award granted on December 8,
      2006 for $.06 2/3 per share will vest in full on December 8, 2010.

                                       25
<page>

Option Exercises and Stock Vested

         The following table sets forth certain  information  regarding  options
and  stock  awards  exercised  and  vested,  respectively,  by each of our Named
Executive Officers during the fiscal year ended December 31, 2006.

<table>
<caption>
                             Option Exercises and Stock Vested Table
                                      Option Awards                       Stock Awards
                            ----------------------------------    -----------------------------
                             Number of                             Number of
                              Shares        Value Realized on       Shares             Value
                            Acquired on         Exercise          Acquired on       Realized on
        Name                Exercise (#)         ($)(1)           Vesting (#)       Vesting ($)
--------------------------------------------------------------    -----------------------------

                               <c>              <c>                 <c>               <c>
  Dino A. Rossi                   95,850           $1,178,936             -               -
  Francis J. Fitzpatrick          55,688             $632,119             -               -
  David F. Ludwig                      -                    -             -               -
  Robert T. Miniger                    -                    -             -               -
  Paul H. Richardson              36,113             $335,055             -               -

</table>

         (1) Value  realized  represents  the excess of the fair market value of
the shares at the time of exercise over the exercise price of the options.


Termination of Employment and Change of Control Arrangements

         Agreement with Dino A. Rossi.  We entered into an employment  agreement
with Dino A. Rossi on January 1, 2001,  which  provides for  automatic  one-year
extensions of the employment term unless either party provides written notice of
its  intention  not to  extend  the  agreement  within 60 days of the end of the
then-current term. Mr. Rossi receives an annual base salary of $362,302 in 2007,
an annual  incentive bonus and medical and other benefits.  Mr. Rossi's bonus is
targeted to be 50% of his base salary for the appropriate year,  although he may
be entitled to up to 100% of his base salary as bonus.

         If we terminate  Mr.  Rossi's  Employment  Agreement for other than for
cause or in the event Mr. Rossi  terminates his employment under certain limited
circumstances  effectively amounting to a constructive  termination,  he will be
entitled to severance  payments of 150% of his then current annual salary,  plus
the pro rata  portion of the annual  bonus he would  have  received  had he been
employed by us through the end of the full fiscal year in which the  termination
occurred.  If such  termination  by the Company  occurs within two years after a
change of control  event,  he would be entitled to severance  payments  equal to
200% of the sum of his then current  annual  salary plus the annual bonus earned
by him for the fiscal year immediately preceding the year in which the change of
control event occurred.  If Mr. Rossi were to terminate his employment  prior to
the second  anniversary of such a change of control event,  he would be entitled
to severance  payments equal to 100% of his then current  annual salary.  In the
event of any  termination  by the  Company  entitling  Mr.  Rossi  to  severance
payments,   his  granted  but  unvested   options  and  restricted  stock  would
immediately vest and be exercisable in accordance with their terms.

         Under  the  Employment  Agreement,  if Mr.  Rossi  had been  terminated
effective  December 31, 2006, he would have been paid $905,755  representing his
2007 base salary and his expected 2007 bonus and all of Mr. Rossi's

                                       26
<page>

granted but unvested options and restricted stock would  immediately vest and be
exercisable  in  accordance  with their  terms.  The  approximate  value of such
acceleration would be equal to the number of shares vested (562,275), multiplied
by average of the excess of the then  current  stock price on the last  business
day of 2006 ($17.12) over the average exercise price of the options ($5.12). The
total approximate gain relating to the accelerated  options and restricted stock
would be $6,297,848.

         All  of   our   executive   officers   other   than   Mr.   Rossi   are
employees-at-will  and,  as such,  do not have  employment  agreements  with us.
Therefore,  we are not obligated to provide any post-employment  compensation or
benefits.  However, upon a change of control, as defined in the 1999 Stock Plan,
and at the sole  discretion of the  Compensation  Committee,  all unvested stock
option grants may become exercisable and all outstanding restricted share grants
may fully vest.


Director Compensation

         For 2006, the Company paid each of its directors, other than Mr. Rossi,
an annual fee of $18,000 and $4,000 for each Board meeting attended.  For fiscal
2006,  the Company also paid to each of its directors  serving on Committees the
following fees, plus expenses, for each Committee meeting attended:  Chairman of
the Audit Committee,  $2,500;  Chairman of the Compensation  Committee,  $2,000;
chairman of all other Committees,  $1,500; all other Committee members,  $1,000.
The Lead Director is paid an additional  $5,000 per year. In 2006,  the Board of
Director  approved  the  aforementioned  compensation  to be  effective  through
December 2008.

         The  following  table  discloses  the cash,  equity  awards,  and other
compensation  earned,  paid,  or  awarded,  as the case  may be,  to each of the
Company's  directors (other than Mr. Rossi,  whose  compensation is set forth in
the Summary  Compensation Table above) during the fiscal year ended December 31,
2006.

                            Fees        Stock
                          Earned or     Awards       All Other
                           Paid in      (1)(2)     Compensation      Total
      Name                 Cash ($)       ($)           ($)           ($)
-----------------------------------    --------    ------------    ----------
Hoyt Ammidon, Jr.          $44,000     $115,560          -          $159,560
Edward McMillan            $44,000     $115,560          -          $159,560
Kenneth Mitchell           $49,000     $115,560          -          $164,560
John Televantos            $45,000     $115,560          -          $160,560
Elaine Wedral              $42,500     $115,560          -          $158,060

(1)   On December 8, 2006,  each  director,  other than Mr.  Rossi,  was awarded
      6,750 shares of restricted  stock.  The shares are subject to a repurchase
      option in favor of the Company and to  restrictions on transfer until they
      vest in accordance  with the provisions of the  Restricted  Stock Purchase
      Agreement  dated  December  8,  2006  between  the  Company  and each such
      director.  The amounts  included in the "Stock  Awards" column reflect the
      dollar amount recognized for financial  statement  reporting  purposes for
      the fiscal year ended  December 31, 2006,  in  accordance  with FAS 123(R)
      adjusted  to  eliminate  service-based  forfeiture  assumptions  used  for
      financial  reporting  purposes.  These amounts  include amounts related to
      awards granted in 2006 and in prior years. The weighted average grant date
      fair  value  per share of each  award  was  $17.76.  A  discussion  of the
      assumptions  used in valuation of stock and option  awards may be found in
      "Note 2 -  Stockholders'  Equity" in the

                                       27
<page>

      Notes to  Consolidated  Financial  Statements of our Annual Report on Form
      10-K for the year ended  December 31, 2006, as filed with the SEC on March
      15, 2007.
(2)   The following table shows the aggregate number of options and stock awards
      outstanding for each Outside Director as of December 31, 2006:

                                    Aggregate       Aggregate
                                      Stock           Stock
                                     Option           Awards
                                   Outstanding     Outstanding
                                      as of           as of
        Name                       12/31/2006       12/31/2006
--------------------------------------------------------------
  Hoyt Ammidon, Jr.                     38,011          13,500
  Edward McMillan                       41,386          13,500
  Kenneth Mitchell                      38,011          13,500
  John Televantos                        4,500          13,500
  Elaine Wedral                         29,623          13,500

         In December, 2006, each director entered into Restricted Stock Purchase
Agreements  with the Company to purchase the Company's  Common Stock pursuant to
the Company's 1999 Stock Plan.  These  Agreements  replace the stock option plan
that non-employee directors participated in prior years.

         Under the Agreements,  each of Mr. Ammidon,  Jr., Dr.  Televantos,  Mr.
McMillan,  Mr.  Mitchell and Dr. Wedral  purchased 4,500 shares of the Company's
Common Stock at the purchase price of $.06-2/3 per share. The purchased stock is
subject to a repurchase  option in favor of the Company and to  restrictions  on
transfer until it vests in accordance with the provisions of the Agreements. The
purchased  stock will vest in full seven years from the date of the  Agreements,
provided  the  purchaser  is still a director of the  Company on that date.  The
purchased  stock  will  also vest in full  prior to seven  years  upon:  (1) the
purchaser's retirement from the Company's Board of Directors at or after age 70;
(2) the purchaser's death or major disability,  (3) the purchaser's  resignation
from the  Company's  Board of Directors due to a conflict of interest or serious
illness,  and  (4) a  change  of  control  of the  Company  (as  defined  in the
Agreements).  The purchased  shares will not vest and the Company may repurchase
all of the  purchased  shares at a purchase  price of $.06-2/3  per share in the
event of gross misconduct on the part of the purchaser in the performance of his
or her duties as a director of the Company  prior to vesting,  as  determined by
majority  vote of the Board of  Directors.  A pro rated amount of the  purchased
shares may be  repurchased  by the Company at a purchase  price of $.06-2/3  per
share in the event the purchaser ceases to be a director of the Company prior to
vesting of the purchased shares for any reason other than gross misconduct.

         The Company does not pay any other direct or indirect  compensation  to
directors in their capacity as such.

Related Party Transactions

     Other than the compensation and employment arrangements described above, we
have not entered into any  transactions  with any of our  directors or executive
officers or their immediate family members in 2006.

                                       28
<page>

     In accordance  with our Audit  Committee  charter,  our Audit  Committee is
responsible  for reviewing and approving the terms and conditions of all related
party  transactions,  including any  transaction  in which any of our directors,
director nominees,  executive officers or holders of more than 5% of our capital
stock have or will have a direct or indirect material interest. If we were to do
so, any such transaction  would need to be approved by our Audit Committee prior
to us entering into such  transaction.  A report is made to our Audit  Committee
annually  disclosing  all related  parties  that are  employed by us and related
parties that are employed by other companies that we had a material relationship
with during that year, if any. The Audit Committee, as well as the full Board of
Directors,  reviews any potential transactions which may involve related parties
at least once per calendar year.

                      EQUITY COMPENSATION PLAN INFORMATION

         The following table provides information, as of December 31, 2006, with
respect to shares of the Company's  Common Stock that may be issued  pursuant to
awards  under  the 1999  Stock  Plan,  described  above,  as well as  under  the
Company's prior stock option plans,  which plans were replaced by the 1999 Stock
Plan. These plans are the Company's only equity  compensation  plans approved by
security holders,  and there are no equity compensation plans that have not been
approved by security  holders.  It should be noted that shares of the  Company's
Common Stock may be allocated to, or purchased on behalf of, participants in the
Company's   401(k)/Profit  Sharing  Plan  (described  above).   Consistent  with
Securities and Exchange  Commission  regulations  governing equity  compensation
plans,  information relating to shares issuable or purchased under the Company's
401(k)/Profit Sharing Plan is not included from the table below.

<table>
<caption>
----------------------------------------------------------------------------------------
                                (a)                     (b)                   (c)
                                                                       Number of shares
                                                                           remaining
                                                                         available for
                         Number of shares        Weighted-average       future issuance
                         to be issued upon      exercise price per       under equity
                            exercise of              share of         compensation plans
                            outstanding             outstanding        (excluding shares
                         options, warrants       options, warrants       reflected in
Plan Category               and rights              and rights            column (a))
----------------------------------------------------------------------------------------

                          <c>                       <c>                  <c>
Equity
compensation plans           2,282,418                 $9.64                721,953
approved by
security holders
----------------------------------------------------------------------------------------
Equity
compensation plans
not approved by
security holders                 -                       -                     -
----------------------------------------------------------------------------------------
Total                        2,282,418                 $9.64                721,953
----------------------------------------------------------------------------------------
</table>

        Security Ownership of Certain Beneficial Owners and of Management

         The table below sets forth as of April 7, 2007, the number of shares of
Common Stock  beneficially  owned by (i) each  director,  (ii) each of the Named
Executive  Officers  who is  currently  an  officer of the  Company,  (iii) each

                                       29
<page>

beneficial owner of, or institutional  investment manager exercising  investment
discretion with respect to, 5% or more of the outstanding shares of Common Stock
known to the  Company  based  upon  filings  with the  Securities  and  Exchange
Commission,  and (iv) all directors  and executive  officers of the Company as a
group, and the percentage  ownership of the outstanding  Common Stock as of such
date held by each such holder and group:

<table>
<caption>

                                                       Amount and Nature of      Percent of
Name and Address of  Beneficial Owner                Beneficial Ownership (1)    Class (2)
-------------------------------------------------------------------------------------------

                                                                <c>               <c>
Ashford Capital Management, Inc.(3)                                 1,732,245         9.7%
Kayne Anderson Rudnick Investment Management, LLC (4)               1,412,253         7.9%
Royce & Associates (5)                                                894,413         5.0%
Segall, Bryand & Hamill (6)                                           876,905         4.9%
Dino A. Rossi (7)*                                                    362,455         2.0%
Frank Fitzpatrick (8)*                                                160,377           **
David F. Ludwig (9)*                                                  106,509           **
Kenneth P. Mitchell (10)*                                              59,779           **
Edward L. McMillan (11)*                                               55,831           **
Hoyt Ammidon, Jr. (12)*                                                51,511           **
Robert T. Miniger (13)*                                                47,247           **
Elaine R. Wedral (14)*                                                 43,123           **
Paul Richardson (15)*                                                  20,647           **
John Televantos(16)*                                                   18,000           **
All directors and executive officers
as a group (11 persons) (17)                                          934,444         5.2%

                                                     --------------------------------------
</table>

Shares Outstanding  April 7, 2007                     17,832,980

*     Such person's address is c/o the Company,  P.O. Box 600, New Hampton,  New
      York 10958.
**    Indicates less than 1%.

(1)   Beneficial  ownership is determined  in  accordance  with the rules of the
      Securities and Exchange  Commission  ("SEC") and generally includes voting
      or investment  power with respect to  securities.  In accordance  with SEC
      rules,  shares which may be acquired  upon exercise of stock options which
      are currently exercisable or which become exercisable within 60 days after
      the date of the  information  in the table are  deemed to be  beneficially
      owned by the  optionee.  Except as indicated  by footnote,  and subject to
      community property laws where applicable,  to the Company's knowledge, the
      persons or  entities  named in the table  above are  believed to have sole
      voting and  investment  power with  respect to all shares of Common  Stock
      shown as beneficially owned by them.
(2)   For purposes of calculating  the percentage of outstanding  shares held by
      each person  named  above,  any shares  which such person has the right to
      acquire within 60 days after the date of the  information in the table are
      deemed to be  outstanding,  but not for the  purpose  of  calculating  the
      percentage ownership of any other person.
(3)   Based upon  information  provided in a Schedule  13G for such entity filed
      with the SEC.  Such  entity's  address as reported in its  Schedule 13G is
      P.O. Box 4172, Wilmington, DE 19807.
(4)   Based upon information provided in Schedule 13G for such entity filed with
      the SEC.  Such  entity's  address as reported in its  Schedule 13G is 1800
      Avenue of the Stars, 2nd Floor, Los Angeles, CA 90067.
(5)   Based upon  information  provided in a Schedule  13G for such entity filed
      with the SEC.  Such  entity's  address as reported in its  Schedule 13G is
      1414 Avenue of the Americas New York, NY 10019

                                       30
<page>

(6)   Based upon  information  provided in a Schedule  13G for such entity filed
      with the SEC. Such entity's  address as reported in its Schedule 13G is 10
      S.Wacker Dr., Chicago, IL 60606.
(7)   Consists of 316,350  shares such person has the right to acquire  pursuant
      to stock options, 13,500 shares of restricted stock, 12,355 shares held in
      such  person's  Company  401(k)/profit  sharing plan  account,  and 20,250
      shares held directly.
(8)   Consists of 141,075  shares such person has the right to acquire  pursuant
      to stock options,  4,500 shares of restricted stock,  9,739 shares held in
      such person's Company 401(k)/profit sharing plan account, and 5,063 shares
      held directly.
(9)   Consists of 85,725 shares such person has the right to acquire pursuant to
      stock options, 3,000 shares of restricted stock, 6,534 shares held in such
      person's  Company  401(k)/profit  sharing plan account,  and 11,250 shares
      held directly.
(10)  Consists of 38,011 shares such person has the right to acquire pursuant to
      stock options,  13,500 shares of restricted  stock,  and 8,268 shared held
      directly.
(11)  Consists of 41,386 shares such person has the right to acquire pursuant to
      stock  options,  13,500  shares of restricted  stock,  and 945 shared held
      directly.
(12)  Consists of 38,011 shares such person has the right to acquire pursuant to
      stock options and 13,500 shares of restricted stock.
(13)  Consists of 47,247 shares such person has the right to acquire pursuant to
      stock options,  1,500 shares of restricted  stock and 3,006 shares held in
      such person's Company 401(k)/profit sharing plan account.
(14)  Consists of 29,623 shares such person has the right to acquire pursuant to
      stock options and 13,500 shares of restricted stock.
(15)  Consists of 14,400 shares such person has the right to acquire pursuant to
      stock options,  4,500 shares of restricted  stock and 1,747 shares held in
      such person's Company 401(k)/profit sharing plan account.
(16)  Consists of 4,500 shares such person has the right to acquire  pursuant to
      stock options, and 13,500 shares of restricted stock.
(17)  Consists  of  options  to  purchase  751,822  shares,   94,500  shares  of
      restricted stock, 33,381 shares in the accounts of five executive officers
      under the Company's  401(k)/profit sharing plan, and 45,776 shares held by
      individuals directly.


Audit Committee Report

         The following  report of the Audit  Committee shall not be deemed to be
soliciting  material or to be filed with the Securities and Exchange  Commission
or incorporated by reference by any general statement incorporating by reference
this  Proxy  Statement  into any filing  under the  Securities  Act of 1933,  as
amended, or under the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically requests that the information be treated as
soliciting  material  or  that  the  Company   specifically   incorporates  this
information  by  reference,  and shall not  otherwise be deemed filed under such
Acts.

         The Board of Directors has appointed an Audit  Committee  consisting of
three  directors.  Each member of the Audit  Committee is independent as defined
under the Nasdaq  Marketplace Rules applicable to audit committee  members.  The
Board of  Directors  has  adopted a written  charter  with  respect to the Audit
Committee's  responsibilities.   The  Audit  Committee  oversees  the  Company's
internal  and  independent  auditors  and  assists  the  Board of  Directors  in
overseeing matters relating to the Company's financial reporting process.

         In fulfilling its  responsibilities,  the Audit Committee  reviewed and
discussed the audited  financial  statements  for the fiscal year ended December
31, 2006 with  management and discussed the audit with  McGladrey & Pullen,  LLP

                                       31
<page>

("M&P"), the Company's independent auditors.  The Audit Committee also discussed
with the Company's  independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61  (Communications  with Audit Committees),
as amended.  This included a discussion of the independent auditors' judgment as
to  the  quality,  not  just  the  acceptability,  of the  Company's  accounting
principles  as  applied to the  Company's  financial  reporting,  and such other
matters that generally  accepted auditing standards require to be discussed with
the Audit  Committee.  The Audit  Committee  also  received from M&P the written
disclosures and letter  required by Independence  Standards Board Standard No. 1
(Independence   Discussion  with  Audit  Committees)  and  the  Audit  Committee
discussed with M&P and management M&P's independence.

         Management  is  responsible  for  maintaining  internal  controls  over
financial  reporting and assessing the  effectiveness  of internal  control over
financial  reporting.   The  independent  registered  public  accounting  firm's
responsibility  is to  express  an opinion  on  management's  assessment  and an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting  based on their audit.  In fulfilling its oversight  responsibilities,
the Audit  Committee  reviewed  the  Company's  assessment  process of  internal
controls  over  financial  reporting.  The  Audit  Committee  reviewed  with the
independent  registered  public  accounting firm any deficiencies  that had been
identified during their engagement.

         The Audit Committee also considered  whether the provision of non-audit
services  by M&P to the  Company  is  compatible  with M&P's  independence.  M&P
advised  the  Audit  Committee  that  M&P was and  continues  to be  independent
accountants with respect to the Company.

         Based upon the reviews and considerations  referred to above, the Audit
Committee  recommended  to the Board of Directors  (and the Board has  approved)
that the audited  financial  statements be included in the Annual Report on Form
10-K for the year ended  December  31, 2006 for filing with the  Securities  and
Exchange Commission.

         The Audit Committee has also recommended the Board of Directors approve
the selection of M&P as the Company's independent auditors for 2007.

                                             Hoyt Ammidon, Jr.
                                             Edward L. McMillan
                                             Kenneth P. Mitchell

                                             being the members of the Audit
                                             Committee of the Board of Directors


Quorum Required

         Maryland law and the Company's By-laws require the presence of a quorum
for the Meeting,  defined as the presence in person or by proxy of  stockholders
entitled to cast a majority of all the votes entitled to be cast at the Meeting.
Abstentions  and broker  non-votes  will be treated as "present" for purposes of
determining whether a quorum has been reached.

         Broker  non-votes  are  shares  held by brokers  or  nominees  that are
present in person or  represented  by proxy,  but are not voted on a  particular
matter because instructions have not been received from the beneficial owner

                                       32
<page>

and the  broker  or  nominee  does  not have  discretion  to vote  without  such
instructions.  Brokers and nominees  generally do not have such  discretion when
the matter is deemed by Nasdaq to be  "non-routine."  However,  Nasdaq generally
considers  the election of  directors  to be a "routine"  matter with respect to
which  brokers and  nominees  could vote shares held by them in  street-name  in
their discretion absent any instructions  received from the beneficial owners of
such shares.

Voting Securities

         Stockholders  of record on April 24, 2007 (the  "Record  Date") will be
eligible to vote at the Meeting. The voting securities of the Company consist of
its  Common  Stock,   $.06-2/3  par  value,  of  which  17,833,430  shares  were
outstanding  on the Record Date.  Each share of Common Stock  outstanding on the
Record Date will be entitled to one vote.

Stockholder Proposals for 2008 Annual Meeting

         From time to time, the  stockholders  of the Company may wish to submit
proposals  which  they  believe  should be voted upon by the  stockholders.  The
Securities  and Exchange  Commission  has adopted  regulations  which govern the
inclusion of such proposals in the Company's annual meeting proxy materials. All
such  proposals  must  be  submitted  to the  Secretary  of the  Company  at the
Company's  principal  executive offices no later than December 27, 2007 in order
to be considered for inclusion in the Company's year 2008 proxy materials.  With
respect to any stockholder proposal not submitted for inclusion in the Company's
year 2008 proxy materials,  the proxy for such meeting will confer discretionary
authority  to vote on such  proposal  unless  the  Company is  notified  of such
proposal not later than March 19, 2008 (45 days prior to the  anniversary of the
date this Proxy Statement is first being sent to stockholders).

Matters Not Determined at the Time of Solicitation

         The Board of  Directors  is not aware of any matters to come before the
Meeting  other than as  described  above.  If any matter other than as described
above  should come before the  Meeting,  then the persons  named in the enclosed
form of proxy will have discretionary authority to vote all proxies with respect
thereto in accordance with their judgment.

         Approval of any other  matter  that may come before the Annual  Meeting
will be  determined  by the vote of a  majority  of the  shares of Common  Stock
present in person or by proxy at the Annual  Meeting and voting on such matters.
With  respect  to an  abstention,  the shares  will be  considered  present  and
entitled  to vote at the Annual  Meeting  and they will have the same  effect as
votes against the matter. With respect to broker non-votes,  the shares will not
be  considered  entitled  to vote at the Annual  Meeting for such matter and the
broker  non-votes  will have the  practical  effect of  reducing  the  number of
affirmative  votes  required  to  achieve  a  majority  vote for such  matter by
reducing the total number of shares from which the majority is calculated.


New Hampton, New York
----------

                                       33
<page>

         The Annual  Report to  Stockholders  of the Company for the fiscal year
ended  December  31,  2006 is being  mailed to  stockholders  with  these  proxy
materials. The Annual Report does not form part of these proxy materials for the
solicitation of proxies.


                                       34
<page>

                                 REVOCABLE PROXY
                               BALCHEM CORPORATION

[X]  PLEASE MARK VOTES AS IN THIS EXAMPLE

                          PROXY SOLICITED ON BEHALF OF
                             THE BOARD OF DIRECTORS
                 FOR THE ANNUAL MEETING TO BE HELD JUNE 15, 2007

The undersigned  hereby appoints  Francis J.  Fitzpatrick and David Ludwig,  and
each of them  individually,  as attorneys and proxies of the  undersigned,  with
full power of  substitution,  at the Annual Meeting of  Stockholders  of Balchem
Corporation  scheduled  to be held on June  15,  2007,  and at any  adjournments
thereof,  and to vote all  shares  of  Common  Stock of the  Company  which  the
undersigned is entitled to vote on all matters coming before said meeting.

The undersigned  hereby revokes all proxies  heretofore given by the undersigned
to vote at said meeting or any adjournment thereof.


                         Please be sure to sign and date
                          this Proxy in the box below.


                        ---------------------------------
                                      Date


                        ---------------------------------
                             Stockholder sign above


                        ---------------------------------
                          Co-holder (if any) sign above



<page>

--------------------------------------------------------------------------------
Election of Directors:                  For All   Withhold All  For All Except*

Election of two (2)                                                   [_]
Class 1 Directors                         [_]         [_]

Nominees for Election as Class
1 Directors:  Dino A. Rossi
and Elaine R. Wedral


--------------------------------------------------------------------------------
Ratification and approval                 For       Withhold        Abstain
of the appointment of
McGladrey and Pullen, LLP,                [_]         [_]             [_]
as the Company's
independent registered
accounting firm for the
year 2007

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

*INSTRUCTION:  To  withhold  authority  to vote  for any one or more  individual
nominee(s)  for  election to the Board of  Directors,  mark "For All Except" and
write the name of such nominee in the space provided below:

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

The proxies are directed to vote as  specified  and in their  discretion  on all
other matters  coming before the Annual  Meeting.  If no direction is made,  the
proxies will vote FOR the nominees for election as Directors named above.

The Board of Directors  recommends a vote FOR each named nominee for election as
a Director.

PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE MEETING. [_]

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE.

Please sign  exactly as your name  appears on this proxy card.  When  signing as
attorney,  executor,  administrator,  trustee or guardian, please give your full
title.  If shares are held jointly,  each holder should sign. If the signer is a
corporation,  please sign full corporate name by duly authorized  officer.  If a
partnership  or a limited  liability  company,  please  sign in  partnership  or
limited liability company name by authorized persons.

                               PLEASE ACT PROMPTLY
                     SIGN, DATE & MAIL YOUR PROXY CARD TODAY