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
  
  
 ________________________________________
 
 NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
 TO
BE HELD ON JUNE 12, 2008
 ________________________________________
 
 
 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 12, 2008 at 11:00 a.m. for the following purposes:
 
 1.
              To
      elect two Class 3 Directors to the Board of Directors to serve until the
      Annual Meeting of Stockholders in 2011 and thereafter until their
      respective successors are elected and
qualified;
 
 2.
              To
      approve an amendment to the Corporation’s Restated Articles of
      Incorporation which increases the total number of shares of common stock
      which the Corporation has authority to issue from twenty-five million
      (25,000,000) shares of common stock to sixty million (60,000,000) shares
      (a copy of which is appended to this Proxy Statement as Exhibit
      A);
 
 3.
              To
      approve the adoption of an amendment and restatement of the Corporation’s
      Amended and Restated 1999 Stock Plan, which is reflected in the Second
      Amended and Restated 1999 Stock Plan (a copy of which is appended as
      Exhibit B to this Proxy Statement);
 
 4.
              To
      ratify the appointment of McGladrey & Pullen, LLP as our independent
      registered public accounting firm for the fiscal year ending December 31,
      2008; and
 
 5.
              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, 2008 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, Chairman, President & CEO
 Dated:
April 25, 2008
 
 P.O. Box
600, New Hampton, New York 10958 Tel: 845-326-5600 Fax: 845-326-5702 www.balchem.com
  
  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 2008 Annual Meeting of Stockholders (the "Annual Meeting" or the
"Meeting") to be held at the NASDAQ MarketSite, 4 Times Square, New York, NY, on
Thursday,June 12, 2008 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 28, 2008.
 
 The Board of Directors has fixed the
close of business on April 24, 2008 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 3 Directors to the Board of Directors to serve until the
annual meeting of Stockholders in 2011 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 2008 fiscal
year.  Stockholders will also consider an amendment to the Company’s
Restated Articles of Incorporation which increases the total number of shares of
common stock which the Company has authority to issue from twenty-five million
(25,000,000) shares of common stock to sixty million (60,000,000) shares, as
well as amendments to the Company’s 1999 Stock Plan.  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.  In addition, the Company has engaged Regan &
Associates, Inc., as the proxy solicitor for the Annual Meeting for a fee to be
determined, however, such fee will not be less than $9,000.  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, effective as of the Annual Meeting, 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 three current Class 3 directors will expire at
the Annual Meeting and the number of Class 3 directors authorized by the
Company’s By-laws will be reduced to two (2), effective on the date of the
Annual Meeting.  One current Class 3 director, Hoyt Ammidon, Jr., will
retire effective on the date of the Annual Meeting and the other two Class 3
directors, Perry W. Premdas and Dr. John Y. Televantos, are nominated for
reelection to the Board. The Class 1 and Class 2 directors will remain in office
until their terms expire, at the annual meetings of stockholders to be held in
the years 2010 and 2009, respectively.
 
 Accordingly,
at the 2008 Annual Meeting, two Class 3 Directors are to be elected to hold
office until the annual meeting of stockholders to be held in 2011 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 votedForthe election of the nominees named
in this Proxy Statement as directors unless authority to voteForany 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
 
 Perry W. Premdas,age 55, was appointed as
a Director of the Company in January 2008. He is currently
retired.  From 1999 to 2004, Mr. Premdas was Chief Financial Officer
of Celanese AG, a chemical and plastics business spun-off by Hoechst AG and
listed on the Frankfurt stock exchange and the NYSE.  He was Senior
Executive Vice President and Chief Financial Officer of Centeon LLC from 1997 to
1998. Over his 30 year career, he has led the treasury, finance, audit and
investor relations functionsin US and international
companies and had general manager, executive and director roles in various
wholly-owned and joint venture operations.  Mr. Premdas holds a BA from
Brown University and an MBA from the Harvard University Graduate School of
Business. He is currently a member of the Board of Directors of Ferro
Corporation and Compass Minerals (both listed on the NYSE).  Mr. Premdas
was recommended to the Company as a director candidate through a third party
search firm.
 
 Dr. John Y. Televantos,age
55, has been a Director since February 2005. Currently, Dr. Televantos is also a
Principal of Arsenal Capital Partners, Inc., a private equity investment
firm.   Dr. Televantos was formerly with Hercules, Inc. as President
of the Aqualon Division and as Vice President of Hercules, Inc. from April 2002
through February 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, United Kingdom.  He also has been on several
public and private company Boards and is affiliated with other key
industry-related groups.
 
 
 
 Upon recommendation by the Corporate
Governance & Nominating Committee, the Board of Directors of the Company
recommends a voteForthe election of Perry W. Premdas and John Y. Televantos as Class 3 Directors to hold office
until the Annual Meeting of Stockholders for the Year 2011 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
  4
  
 In addition to Mr. Premdas and Dr.
Televantos, the Company’s Board of Directors includes the following
members:
 
 Hoyt Ammidon, Jr., age 70, has
been a Director of the Company since 2001.  He is a retired managing
director of Berkshire Capital Corporation, where he served from 1994 to
2004.  In accordance with policies established by the Board of
Directors, Mr. Ammidon will retire from the Company’s Board of Directors
effective on the date of the Annual Meeting.
 
 Edward L. McMillan,age 62,
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 OTC company.  In addition, he is also a
director of Marical, Inc., a privately held corporation.
 
 Kenneth P. Mitchell, age 68,
has been the Company’s Lead Director since October 1, 2005 and has been a
Director of the Company since 1993. Mr. Mitchell, who is currently retired, was
Chief Executive Officer of Oakite Products Inc. from 1986 to 1993. Since
February 1997, he has been a director of Tetra Technologies, Inc., an NYSE
traded  company, where he also serves as chairman of the Nominating
and Corporate Governance Committee.
 
 Dino A. Rossi, age 53, 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 Dutch 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 64,
has been a Director of the Company since October 2003. Dr. Wedral is retired.
Currently she serves as the President of the International Life Sciences
Institute in North America. She was President of Nestlé R&D Center, Inc. in
New Milford, Connecticut and Head of Nestlé Food Service Systems worldwide from
1999 to 2005. Prior to that, she held a variety of technical positions at
Nestlé. Dr. Wedral holds 34 patents in food processing, food nutrition and
ingredient areas, and is on the editorial board of Food Processing Magazine. She
received her Ph.D. from Cornell University in Food Biochemistry, an M.S. in Food
Microbiology and a B.S. from Purdue University in Biochemistry. She is currently
also a director of Sensient Technologies Corporation, a public company listed on
the NYSE, and continues to work with several key industry/university related
groups in advisory capacity.
 
 
 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 2007, the Board of Directors met 5 times during regular meetings and 2
times for telephonic special meetings.  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 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 2007 annual meeting of
stockholders.
  5
  
 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 2007, the Audit Committee held five meetings, while the
Corporate Governance and Nominating and Compensation Committees each held three
meetings.  The Executive Committee did not meet in 2007.
 
 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,  Mitchell and Premdas. 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.  Mr. Premdas will assume the Chairmanship of the Audit
Committee upon Mr. Ammidon’s retirement at the Annual
Meeting.   The Board of Directors of the Company has also
determined that Mr. Premdas qualifies as an “audit committee financial expert”,
as defined in Section 407 of the Sarbanes-Oxley Act of 2002.
 
 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 senior executives of the
Company, for approval by the full Board of Directors, (ii) prepare an Annual
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, and (iv) to administer the Company’s 1999 Amended
and Restated 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” or the “Amended
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 Dr. Televantos (Chair),
Messrs. McMillan and Mitchell, 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.
 
 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 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, to oversee an annual self-evaluation of the
Board and Board Committees, to consider matters of corporate social
responsibility and corporate public affairs related to the Company's employees
and stockholders, to recruit, evaluate and nominate new candidates for
directorships, 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 providing advice to the full Board as to
nomination for reelection, and to 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
  6
  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 Dr. Wedral
(Chair), Messrs. Ammidon and Mitchell and Dr. Televantos.
 
 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 key executives of the Company.
 
 The
current members of the Executive Committee are Messrs. McMillan, Mitchell
(Chair), and Dr. Televantos.
 
 
  7
  Nominations
of Directors
 
 The
Corporate Governance & Nominating Committee considers re-nominating
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 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.
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 2009 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 require that a
director retire at the conclusion of his or her term in which he or she reaches
the age of 70.  The guidelines for nomination for a position on the
Board of Directors, 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 ability to
commit to the Board of Directors of the Company.
 
 
 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 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 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
Chairman.  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 Chairman; 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.
 
  8
  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 47, 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,age44, 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 50, 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 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 54, 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 38, 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.
  9
  
 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, 2007, 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.
 
 
 Compensation
Committee Interlocks and Insider Participation
 
 Messrs.
McMillan and Mitchell and Drs. Televantos and Wedral, each of whom is a director
of the Company, served as the members of the Compensation Committee during 2007.
None of Messrs. McMillan or 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.
 
 
  10
  PROPOSAL
NO. 2
 
 APPROVAL
OF AMENDMENT TO
 THE
COMPANY’S RESTATED ARTICLES OF INCORPORATION
 
 On
February 27, 2008, the Board of Directors adopted a resolution recommending that
the shareholders approve an amendment to the Company’s Restated Articles of
Incorporation (the “Charter” or “Articles of Incorporation”). In particular, the
Board of Directors recommends that article FOURTH of the Charter be amended to
increase the total number of shares of Common Stock that the Company is
authorized to issue from twenty-five million (25,000,000) shares to sixty
million (60,000,000), which would increase the total number of shares of the
Company’s capital stock from twenty-seven million (27,000,000) to sixty-two
million (62,000,000) shares (the “Amendment”).  The Company also is
authorized to issue 2,000,000 shares of Preferred Stock, par value $25.00 per
share, and the proposed amendment will not affect this
authorization.
 
 If the
amendment to the Articles of Incorporation is approved by the stockholders, the
Company will promptly file Articles of Amendment with the Maryland Secretary of
State reflecting the increase in authorized shares. The
amendment will become effective on the date the Articles of Amendment is
accepted for filing by the Maryland Secretary of State.
 
 Amendment
 
 The
Amendment to the Company’s Articles of Incorporation approved by the Board of
Directors on February 27, 2008 and to be voted on at the Meeting is set forth on
Exhibit A hereto.
 
 The Company’s Articles of Incorporation
currently authorizes the issuance of twenty-seven million (27,000,000) shares of
capital stock.  Twenty-five million (25,000,000) shares of which are
designated as Common Stock, par value $.06 2/3 per share, and two million
(2,000,000) shares of which have been designated as Preferred Stock, par value
of $25.00 per share.
 
 As of March 31, 2008, there were
18,078,425 shares of Common Stock outstanding. In addition, approximately
2,738,312 shares of Common Stock have been reserved for future issuance under
the 1999 Stock Plan and the stock option plans which preceded the 1999 Stock
Plan whether by outstanding options or by reason of future grants or
awards.  Balchem has never issued any shares of Preferred
Stock.
 
 The Company has also historically made
matching contributions under its 401(k)/Profit Sharing Plan in shares of Common
Stock, corresponding in value to up to 35% of employee elective
contributions.  Plan participants may elect to invest up to 10% of
their elective contributions in shares of Common Stock.  For 2007, an
aggregate of 20,869 shares of Common Stock were issued by the Company to be held
by the trustee under the 401(k)/Profit Sharing Plan for plan participant
accounts.
 
 At our 2005 annual meeting, the
stockholders approved a measure similar to the present proposal recommended by
the then Board of Directors. Specifically, the stockholders approved the
increase in the Company’s authorized common shares from 10,000,000 shares to
25,000,000 shares.  Since the 2005 annual meeting, the Company has
twice split its common stock on a 3 for 2 basis, once in December 2005 and again
in December of 2006.  The Company believes the aforementioned stock
splits contributed to increased stockholder value over the past three
years.
 
 As in 2005, the Board of Directors
believes that increasing the number of authorized shares of capital stock will
provide the Company with greater flexibility to pursue actions that enhance
stockholder value (as the Company believes has occurred as a result of the prior
authorization).  After adjusting for shares of capital stock reserved
for issuance under the 1999 Stock Plan, its predecessor stock option plans and
shares authorized for issuance under the 401(k)/Profit Sharing Plan, the Company
currently has fewer than 3,700,000 shares of capital stock available for
issuance.  The Board of Directors considers this amount to be
insufficient for the Company to meet various needs that may arise from time to
time in the future.  If approved by stockholders, the Amendment would
provide sufficient shares, without additional expense or delay, for investments
or acquisitions by the Company, stock sales, grants, sales or awards under
future management incentive and employee benefit plans and programs, stock
splits or stock dividends and other general corporate purposes.
  11
  
 As of the
date of this Proxy Statement, the Board of Directors has not taken any action
which would use the proposed additional authorized shares for any such
purposes.
 
 Each additional share of our Common
Stock authorized by the Amendment to the Company’s Articles of Incorporation
will have the same rights and privileges as each share of Common Stock currently
authorized or outstanding. The holders of Common Stock have no preemptive
rights. Authorized but unissued shares of our Common Stock may be issued at such
times, for such purposes and for such consideration as the Board of Directors
may determine to be appropriate without further authority from our stockholders,
except as otherwise required by applicable law or stock exchange
policies.
 
 The approval of the Amendment will
result in a greater number of shares of Common Stock available for issuance.
Stockholders could therefore experience a reduction in their stockholders'
percentage interest with respect to earnings per share, voting, liquidation
value and/or book or market value per share if the additional authorized shares
are issued other than through a proportional issuance such as a stock split or
stock dividend.
 
 Required
Vote for Approval of Amendment to Articles of Incorporation
 
 Under the rules of the Securities and
Exchange Commission, boxes are provided on the form of proxy for stockholders to
mark if they wish to vote for, withhold authority to vote for, or abstain from
voting with respect to the proposal to amend the Company’s Articles of
Incorporation.
 
 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.
  The affirmative vote of the holders of
two-thirds of the issued and outstanding shares of Common Stock is required to
approve the Amendment to the Company’s Articles of
Incorporation.  Since the affirmative vote of two-thirds of the issued
and outstanding shares of Common Stock is required to approve the Amendment, as
opposed to a specified percentage of the shares present at the Annual Meeting,
the failure to vote in person or by proxy, or an abstention from voting, will
have the same effect as a vote against the Amendment.  If stockholders
do not approve the Amendment, then the Charter will continue in effect without
amendment.
 
 All
shares represented by duly executed proxies will be voted For the proposed Amendment to the Company’s
Articles of Incorporation unless authority to vote For such proposal has been
withheld or a vote Against is specified on such proxy.
 
 Recommendation
of the Board of Directors Concerning the Amendment to the Articles of
Incorporation
  THE BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE
AUTHORIZED NUMBER OF SHARES OF COMMON STOCK, AND UNANIMOUSLY RECOMMENDS THAT THE
COMPANY’S STOCKHOLDERS VOTE FOR THE APPROVAL OF
THE AMENDMENT.
 
 PROPOSAL
NO. 3
  APPROVAL
OF THE AMENDMENT AND RESTATEMENT OF THE COMPANY’S
 AMENDED
AND RESTATED 1999 STOCK PLAN
  Through
its Amended and Restated 1999 Stock Plan (the “Amended Plan”), the Company has
utilized stock options and restricted stock purchase awards as a key part of its
overall compensation strategy for directors and employees, including executive
officers, since its adoption in 1999.  In 2003, the stockholder’s
approved amendments to the Company’s original 1999 Stock Plan, including the
increase of shares reserved for issuance under the original plan to 1,200,000
(4,050,000 after adjusting for the 2004, 2005 and 2006 three-for-two stock
splits) from 600,000 and the authorization of stock awards under the original
plan. As of March 31, 2008, there are 343,328 shares available under the Amended
Plan.
  12
  The
Amended Plan is scheduled to expire in April, 2009, eliminating our ability to
utilize stock options, restricted stock purchase awards and other awards as part
of our compensation strategy for directors and employees.
  Our
Compensation Committee has recommended and our Board of Directors has approved,
subject to stockholder approval, the adoption of an amendment and
restatement of the Amended Plan (collectively to be referred to as the
“Second Amended Plan”), which will provide as follows:
  (1)
              for
      a termination date of April 9,
2018;
 (2)
              to
      authorize 4,000,000 shares reserved for future grants under the Second
      Amended Plan;
 (3)
              for
      the making of grants of stock appreciation rights, restricted stock and
      performance awards;
 (4)
              for
      immediate acceleration of vesting of awards issued under the plan in the
      event of a change in control of the Company;
and
 (5)
              for
      compliance with the requirements of Sections 409A and 162(m) of the
      Internal Revenue Code of 1986, as amended (the “Internal Revenue Code” or
      the “Code”).
 
 The
Second Amended Plan is necessary in order to permit us to continue utilizing
stock options and other equity awards as part of our compensation strategy for
employees, directors, consultants, including executive
officers.   The Second Amended Plan will enable us to continue
the purposes of the Amended Plan by providing continued additional incentives to
attract and retain qualified and competent employees and directors. This is in
keeping with our overall compensation philosophy, which attempts to place equity
in the hands of our employees in an effort to further instill shareholder
considerations and values in the actions of such employees.   The
Company has grown markedly over the past three years and fully expects this
trend to continue. Additionally, the Company operates in a highly competitive
labor market where equity awards to employees continue to be an important
ongoing compensation and motivational tool. Finally, opportunities may arise
during the course of business where stock based compensation to selected
suppliers of goods and services may be in the best interests of the
Company.
 
 The
Second Amended Plan also complies with Section 409A of the Internal Revenue
Code.  Section 409A was adopted in 2004, and relevant Company
documents must comply with the new rules by December 31, 2008. The changes to
comply with Section 409A are technical in nature.  In addition, to
ensure the deductibility of performance-based compensation under Section 162(m)
of the Internal Revenue Code, approval of the Second Amended Plan will
constitute approval of the permitted performance goals applicable to
performance-based awards and the limit on the number of awards granted to a
single participant in any plan year.
  Assuming
consistent practice of the Amended Plan, and if shareholders do not approve the
Second Amended Plan, we will not be able to make further grants to employees
under the Amended Plan after April 2009. For more information on our Equity
Based Compensation, see the sections of this Proxy Statement entitled
“Compensation Discussion and Analysis,” “Executive Compensation – Terms of
Awards,” and “Equity Compensation Plan Information.”
  Description
of the Second Amended Plan
  The
following summary of the Second Amended Plan is qualified in its entirety by
reference to the complete text of the Second Amended Plan, a copy of which is
attached to this proxy statement as Exhibit B.
 
 Shares Reserved For Issuance
Under the Second Amended Plan
 
 The
maximum aggregate number of shares of Common Stock that may be issued under the
Second Amended Plan is 4 million shares, subject to adjustment in the event
of stock dividends, stock splits, combination of shares, recapitalizations or
other changes in the outstanding common stock, all of which may be issued either
directly as restricted stock, stock appreciation rights, performance awards or
upon the exercise of the stock options granted under the Second Amended Plan. If
an Option granted under the Second Amended Plan expires or terminates without
having been fully exercised or otherwise ceases to be exercisable in full, the
unpurchased shares covered by such Option will again be available for use under
the Second Amended Plan.  The maximum number of shares subject to
award that any participant may be granted in a calendar year is
150,000.
  Administration of the Second Amended
Plan
  13
  Consistent
with current practice, the Second Amended Plan will be administered by the Board
of Directors of the Company or, if the Board of Directors so determines, the
Compensation Committee thereof. Subject to the terms of the Second Amended Plan,
the Board (or the Committee, as the case may be) has the authority to determine
to whom equity awards shall be granted (subject to certain eligibility
requirements for grants of incentive stock options), the number of shares
covered by each such grant, where applicable, the exercise or purchase price per
share, the time or times at which the equity awards shall be granted, and other
terms and provisions governing the equity awards, including any applicable
performance criteria, as well as the restrictions, if any, applicable to shares
of Common Stock granted as Awards or issuable or purchased pursuant to the
Second Amended Plan.
  Awards Under the Second Amended
Plan
  Stock Options. The
Board of Directors or the Compensation Committee (as the case may be) may grant
options qualifying as incentive stock options under the Internal Revenue Code
and/or nonqualified stock options. At the time the option is granted, the Board
of Directors or the Compensation Committee will determine the number of shares
subject to the option, the exercise (or purchase) price per share, the period
during which the option may be exercised and the restrictions and conditions on
and to that exercise. However, the exercise price of each option will be at
least equal to the fair market value of our common stock, and the term of an
incentive stock option may not exceed 10 years from the date of grant.
  Stock Appreciation Rights. The Board of Directors or the Compensation Committee (as the case
may be) may grant stock appreciation rights (“SARs”) either separately or in
conjunction with an award of stock options. The term, exercisability and other
provisions of an SAR will be fixed by the Board of Directors or Compensation
Committee. SARs generally allow the grantee to realize the appreciation in the
shares of our Common Stock subject to the grant over the life of the award.
Payment of an SAR may be made in cash, shares or a combination of both at the
discretion of the Board of Directors or the Compensation Committee. If an SAR
granted in combination with an underlying stock option is exercised, the right
under the underlying option to purchase shares would terminate.
  Stockand Restricted StockAwards. The Board of
Directors or the Compensation Committee (as the case may be) may also award
shares of our Common Stock either as a restricted stock award or as a bonus
award that is not subject to restriction. With respect to restricted stock, the
Board of Directors or the Compensation Committee shall fix the restrictions and
the restriction period applicable to each restricted stock award (which
restriction period may be accelerated or waived by the Board of Directors or
Compensation Committee). The recipient of a restricted stock award will be
unable to dispose of the shares prior to the expiration of the restriction
period. Unless otherwise determined by the Board of Directors or the
Compensation Committee, during this period, the recipient will be entitled to
vote the shares and receive any regular cash dividends on such shares. Each
stock certificate representing a restricted share award will be required to bear
a legend giving notice of the restrictions in the grant.
   Performance Share Awards. The Board of
Directors or the Compensation Committee (as the case may be) may grant
Performance Share Awards under which payment may be made in shares of our Common
Stock (including restricted shares). Such awards will be paid upon the
attainment of certain performance goals measured over a period of not less than
three months or more than five years. After the end of each performance period,
the Board of Directors or the Compensation Committee will determine the amount,
if any, of performance awards payable to each participant based upon the
achievement of certain established business criteria.  The Board of
Directors or the Compensation Committee, in its discretion, will determine the
performance goals, the length of an award period and the manner and medium of
payment of each Performance Award. In order to receive awards, a grantee must
remain in the employ of the Company until the completion of the award period,
except that the Board of Directors or Compensation Committee may provide
complete or partial exceptions to that requirement as it deems
equitable.
  The
Committee may determine that SARs, restricted stock or Performance Share Awards
granted to an employee shall be considered “qualified performance-based
compensation” under Code section 162(m).  In setting the performance
goals for grants designated as “qualified performance-based compensation”, the
Committee will use objectively determinable performance goals based on one or
more of the following criteria: pre- or after-tax net earnings, sales or
revenue, operating earnings, operating cash flow, return on net assets, return
on shareholders’ equity, return on assets, return on capital, stock price
growth, shareholder returns, gross or net profit margin, earnings per share,
price per share, market share, or strategic business criteria consisting of one
or more Corporation objectives based on meeting specified revenue goals, market
penetration goals, geographic business expansion goals, cost targets, product
development goals, goals relating to acquisitions or divestitures, or any other
objective measure derived from any of the foregoing criteria.  The
performance goals may relate to the employee’s business unit or the performance
of the Company as a whole, or any combination of the
foregoing.  Performance goals need not be uniform as among
employees.
  14
   Acceleration of Vesting upon Change of
Control
  Upon a
Change in Control, all outstanding awards will vest, become immediately
exercisable or payable or have all restrictions lifted as may apply to the type
of award granted.  A “Change of Control” is defined in the Second
Amended Plan as:
  (i)
              the
      acquisition of combined voting power of fifty percent (50%) or greater of
      the then outstanding equity securities of the Company by another entity or
      person;
 (ii)
              consummation
      of a reorganization, merger, or consolidation to which the Company is a
      party or a sale of all or substantially all the assets of the Company to
      another entity, if more than fifty percent (50%) of the combined voting
      power of the continuing or surviving entity’s securities outstanding
      immediately after such merger, consolidation or other reorganization is
      owned by persons who were not stockholders of the Company immediately
      prior to such merger, consolidation or other
    reorganization;
 (iii)
              approval
      by the stockholders of the Company of a complete liquidation or
      dissolution of the Company; or
 (iv)
              any
      other event, including a merger or other transaction, which the Committee
      designates as a Change in Control with respect to the
    Company.
 Eligible Participants
  Under the
Second Amended Plan, incentive stock options may be granted to employee and
officers of the Company.  Non-qualified options, SARs, Stock Awards,
Restricted Stock and Performance Share Awards may be granted to directors,
officers, directors emeritus and consultants.
  Transferability
  Awards
granted pursuant to the Second Amended Plan are not assignable or transferable
other than by will or by the laws of descent and distribution and are
exercisable during the grantee’s lifetime only by the grantee. The Board or the
Compensation Committee does, however, have the discretion to permit awards to be
transferable, consistent with the provisions of the Second Amended
Plan.
 
 Amendment
  The Board
of Directors may amend the Second Amended Plan, subject to the requirements of
applicable law and other regulatory requirements, including those imposed by
Nasdaq, except that stockholder approval must be obtained with respect to any
amendment increasing the total number of shares that may be issued, modifying
the eligibility for grants of incentive stock options, modifying the minimum
exercise price at which incentive stock options may be granted, or extending the
term of the Second Amended Plan.
  Term of the Second Amended
Plan
  The
Amended Plan was effective as of April 9, 1999 and will terminate on April 8,
2009.  If approved, the Second Amended Plan, will terminate on April
7, 2018, unless terminated earlier by the Board of Directors or extended by the
Board with the approval of the shareholders.
  Federal
Income Tax Consequences
  Stock Options. The
grant of an incentive stock option or a non-qualified stock option will not
result in income for the grantee or in a deduction for the Company. The exercise
of a non-qualified stock option will result in ordinary income for the grantee
and a deduction for the Company measured by the difference between the option
price and the fair market value of the shares received at the time of exercise.
The exercise of an incentive stock option will not result in income for the
grantee if the grantee (i) does not dispose of the shares within two years
after
  15
  the
date of grant or one year after the transfer of shares upon exercise and
(ii) is an employee of the Company or a subsidiary from the date of grant
until three months before the exercise date. If these requirements are met, the
basis of the shares upon later disposition will be the option price. Any gain
will be taxed to the employee as long-term capital gain and the Company would
not be entitled to a deduction. The excess of the market value on the exercise
date over the option price is an item of tax preference, potentially subject to
the alternative minimum tax.
  If the
grantee disposes of the shares prior to the expiration of either of the holding
periods, the grantee will recognize ordinary income, and we will be entitled to
a deduction equal to the lesser of the fair market value of the shares on the
exercise date minus the option price or the amount realized on disposition minus
the option price. Any gain in excess of the ordinary income portion will be
taxable as long-term or short-term capital gain.
  RestrictedStockAwards. The grant of
restricted stock should not result in income for the grantee or in a deduction
for the Company for federal income tax purposes, assuming the shares transferred
are subject to restrictions resulting in a “substantial risk of forfeiture.” If
there are no such restrictions, the grantee will recognize ordinary income upon
receipt of the shares. Dividends paid to the grantee while the stock remained
subject to restriction will be treated as compensation for federal income tax
purposes. At the time the restrictions lapse, the grantee will receive ordinary
income, and we will be entitled to a deduction measured by the fair market
value of the shares at the time of lapse (less any amounts paid for the
restricted stock at the time of grant.
  SARs and Performance Awards. The grant of an SAR or a Performance Share Award will not result in
income for the grantee or in a deduction for the Company. Upon the exercise of a
SAR or the receipt of shares or cash under a Performance Share Award, the
grantee will recognize ordinary income, and we will be entitled to a deduction
measured by the fair market value of the shares plus any cash
received.
  Section 162(m). The Second Amended Plan is intended to provide performance-based
compensation within the meaning of Section 162(m) of the Code, which
generally limits the deduction by an employer for compensation of certain
covered officers.
  Other Information
  Since it
is within the discretion of the Committee to determine which employees and
directors will receive awards under the Second Amended Plan, the number of
awards to be granted under the Second Amended Plan to specified persons cannot
be determined.  See “Executive Compensation – Grants of Plan-Based
Awards” and “Director Compensation” for information as to the number and types
of awards granted to the Company’s named executive officers and directors under
the Amended Plan in 2007.
  Vote
Required to Approve the Second Amended Plan
  Approval
of this proposal requires the affirmative vote of the holders of a majority of
the shares of the Company’s common stock present or represented by proxy at the
Meeting.
  All shares represented by duly executed
proxies will be voted For the proposed
Second Amended Plan unless authority to vote For any such proposal has been
withheld or a vote Against is specified on such proxy.
 
 Recommendation
of the Board of Directors Concerning the Second Amended Plan
  THE BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE PROPOSAL TO ADOPT THE SECOND AMENDED AND RESTATED 1999 STOCK PLAN,
AND UNANIMOUSLY RECOMMENDS THAT THE COMPANY’S STOCKHOLDERS VOTE FOR THE APPROVAL OF
SECOND AMENDED AND RESTATED 1999 STOCK PLAN.
  
  16
  
 
 COMPENSATION
DISCUSSION AND ANALYSIS
  Compensation
Committee
  During
the fiscal year ended December 31, 2007, 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
consultants to determine each facet of the compensation for our executive
officers.  The Committee also administers our Amended and Restated
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, as a
Principal of Arsenal Capital Partners, Inc. Dr. Televantos is exposed to
compensation trends of the various companies in which his firm has invested and
manages, and 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
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.  In 2007, the Deloitte Compensation Consulting Group
continued to provide assistance to the Compensation Committee with respect to
total cash compensation and long term compensation as such relates to both
executives and directors of the Company.  In particular, the Deloitte
Compensation Consulting Group delivered a benchmarking analysis of total cash
compensation and long term incentives of companies operating in the food,
pharmaceutical ingredients and specialty chemical industries, which also
have:  (1) demonstrated recent three year revenue growth of 15-25%;
(2) a market cap of two hundred million dollars to four hundred million dollars;
and (3) two hundred million dollars to five hundred million dollars in
revenue.  It is through these efforts that we have instituted the
structure of our program for granting executives and directors certain cash
compensation and equity in the Company, 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 peer
entities and considering 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-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.
  17
  
 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 Board of
Directors is, however, considering a proposal for the adoption of stock
ownership guidelines for directors and officers. 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 to
maintain salaries at reasonably competitive peer group 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, as well as Salary.com and Deloitte
Compensation Consulting Group.
 
 The
Committee solicits input from Mr. Rossi with respect to the performance of our
executive officers and their compensation levels. During 2007, the base salaries
of our executive officers, were increased to the amounts identified in the
Summary Compensation Table.
 
 Cash
Based Incentives
 
 Bonuses
represent the variable, at-risk, component of the executive compensation program
that is tied to both Company performance and individual achievement. The
Company's policy is to base a meaningful portion of its executive officers' cash
compensation on bonus opportunities.  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 objective levels 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
  18
  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 by the
Company.  The Compensation Committee established such minimum level of
NIBIT for the 2007 calendar year as part of the approval of the annual
plan.
 
 In addition to NIBIT goal, 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 defined job description
responsibility.  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 following table sets forth the
individual ICP goals for bonus cash compensation for the named executive
officers, Mr. Rossi, Mr. Fitzpatrick, Dr. Richardson, Mr. Ludwig and Mr. Houston
for the fiscal year ended December 31, 2007, together with the corresponding
percentage weight of each goal as such related to total ICP bonus for each
individual.  The goals below were  designed to be
challenging, yet attainable, but not assured.
 
 2007
      ICP GOALSName,
      Title
                Individual
      ICP Goals
                Percentage
                  WeightedDino
      Rossi,
                  Chairman,
                  President
      and
                  CEO
                §Achieve 2007
      Annual Plan NIBIT
                  §Achieve 2007
      Annual Plan Consolidated Net Sales at Minimum Gross Margin
      Percentage
                  §Achieve 2007
      Annual Plan Return on Company Assets
                  §Development,
      Integration and Completion of Corporate Acquisition(s)
                40%
                  10%
                  
                  10%
                  40%Frank
      Fitzpatrick,
                  CFO,
      Treasurer
                  and
      Assistant
                  Secretary
                §Achieve 2007
      Annual Plan NIBIT
                  §Achieve 2007
      Annual Plan Consolidated Net Sales at Minimum Gross Margin
      Percentage
                  §Achieve 2007
      Annual Plan Return on Company Assets
                  §Development,
      Integration and Completion of Corporate Acquisition(s)
                  §Achieve 2007
      Annual Plan Cash Flow
                  §Implementation of
      2007 Corporate Tax Strategy
                25%
                  15%
                  
                  15%
                  15%
                  15%
                  15%David
      Ludwig,
                  VP/GM,
                  Specialty
                  Products
                §Achieve 2007
      Annual Plan NIBIT
                  §Achieve
      2007Annual Plan Specialty Product Segment Sales
                  §Achieve 2007
      Specialty Products Segment NIBIT
                  §Achieve 2007
      Annual Plan Return on Company Assets
                  §Development and
      Completion of Acquisitions/New Products for to the Specialty Product
      Segment
                10%
                  15%
                  25%
                  15%
                  35%Paul
      Richardson,
                  VP,
      Research &
                  Development
                §Achieve 2007
      Annual Plan NIBIT
                  §Development of
      New Products, Coatings and Technology in 2008
                  §Achieve
      2007Annual Plan Encapsulated Products
    Segment  Sales
                10%
                  80%
                  10%Matthew
                  Houston,
                  General
      Counsel
                  &
      Secretary
                §Achieve 2007
      Annual Plan NIBIT
                  §Reduce 2007 Legal
      Expenses
                  §Development,
      Integration and Completion of Corporate Acquisition(s)
                  §Integrate
      European Operations with US Legal
                  §Develop and
      implement Corporate Records Retention Policy
                20%
                  20%
                  25%
                  20%
                  15%
  
  19
  When the Board of Directors establishes
the corporate goals for each fiscal year, the Compensation Committee similarly
establishes the relative weight ofeachindividual ICP goal based on its importance to the Company’s success
and the ability of the individual to affect the success or failure of the
particular goal.  For example, while each of the above individuals
shares responsibility to the minimum NIBIT, Dr. Richardson’s and Mr. Ludwig’s
weighted percentage associated with the minimum NIBIT are lower, because of the
concentration of their efforts on the Specialty Products and Encapsulated
Products segments, respectively.
 
 In
December of 2007, the Compensation Committee eliminated NIBIT as the determining
financial performance item upon which bonuses under the ICP would be paid and
replaced it with a specified minimum consolidated earnings before interest,
taxes, depreciation and amortization (“EBITDA”) to be achieved by the Company in
order for bonuses to be paid under the ICP.  It is the intent of the
Company to use EBITDA in this manner on a going forward
basis.  Accordingly, such minimum level of EBITDA for 2008 is based
upon the Company’s results of operations for the 2007 calendar year as part of
the approval of the annual business plan.
 
 The 2008
individual ICP goals are similar in scope to the 2007 ICP
goals.  Below are the 2008 ICP goals for the named executive officers
above. As with the 2007 performance goals, the 2008 goals are designed to be
challenging, yet attainable, but not assured.
 
 2008
      ICP GOALSName,
      Title
                Individual
      ICP Goals
                Percentage
                  WeightedDino
      Rossi,
                  Chairman,
                  President
      and
                  CEO
                §Achieve 2008
      Annual Plan EBITDA
                  §Achieve 2008
      Annual Plan Return on Company Assets
                  §Execute 2008
      Company Corporate Acquisition(s) Strategy
                  §Achieve 2008
      Annual Plan Earnings per Share of Common Stock
                  §Achieve 2008
      Annual Plan Consolidated Net Sales of Company
                  §Achieve 2008
      Annual Plan Equity and Benefits Plan Enhancement
                25%
                  20%
                  20%
                  20%
                  10%
                  5%Frank
      Fitzpatrick,
                  CFO,
      Treasurer
                  and
      Assistant
                  Secretary
                §Achieve 2008
      Annual Plan EBITDA
                  §Achieve 2008
      Annual Plan Return on Company Assets
                  §Execute 2008
      Company Corporate Acquisition(s) Strategy
                  §Achieve 2008
      Annual Plan Cash Flow
                  §Achieve 2008
      Annual Plan Earnings per Share of Common Stock
                  §Achieve 2008
      Annual Plan Equity and Benefits Plan Enhancement
                25%
                  15%
                  15%
                  15%
                  15%
                  15%David
      Ludwig,
                  VP/GM,
                  Specialty
                  Products
                §Achieve 2008
      Annual Plan EBITDA
                  §Achieve
      2008Annual Plan Specialty Product Segment Sales
                  §Achieve 2008
      Specialty Products Segment NIBIT
                  §Achieve 2008
      Annual Plan Return on Company Assets
                  §Development of
      New Products Specific to the Specialty Product Segment
                10%
                  15%
                  25%
                  10%
                  40%Paul
      Richardson,
                  VP
      Research &
                  Development
                §Development of
      New Products in 2008, with Minimal Sales
                  §Achieve 2008
      Annual Plan EBITDA
                  §Achieve
      2008Annual Plan Encapsulated Products
    Segment  Sales
                65%
                  20%
                  15%Matthew
                  Houston,
                  General
      Counsel
                  &
      Secretary
                §Achieve 2008
      Annual Plan EBITDA
                  §Achieve 2008
      Legal Expense Budget
                  §Reduce Company
      ISS Corporate Governance Quotient
                  §Execute 2008
      Company Acquisition(s) Strategy
                25%
                  20%
                  30%
                  25%
  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
  20
  target
bonus, based upon each executive officer's performance relative to the specific
established performance goals upon which the target bonus amounts were
based.
 
 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. ICP bonuses were paid in early 2008 to our executive
officers for performance during fiscal year ended 2007 in the amounts identified
under “Non-Equity Incentive Plan Compensation” 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 earn an
annual bonus of up to 100% of his base salary, based upon achieving operating
and/or financial targets established by the Board or an authorized committee
thereof. Half of such bonus compensation opportunity is determined pursuant to
the ICP and those specific goals are set forth above. The Compensation Committee
has established a minimum level of consolidated EBITDA for the 2008 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 for investment in the Company and
the incentive advantages inherent in stock ownership in the Company. 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 incremental 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 and continuing thereafter, the Company grants a combination of
restricted shares and options to our executives.  We also granted
restricted shares to our non-management directors in 2005 and 2006. Restricted
stock, which vests over an extended period, encourages ownership and commitment
at the director level.
 
 Awards
under the Company’s 1999 Stock Plan are based upon individual contribution and
expected contribution going forward, and may or may not be granted in any given
fiscal year. The Committee considers Company performance, as well. It is our
expectation to continue yearly grants of restricted stock awards and
non-qualified options to executive officers.  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 typically granted coinciding with the date of our
December Board of Directors Meeting.
 
 The
Compensation Committee postponed the grant awards of equity in December of 2007,
as is the usual practice and intention of the Committee, to await the results of
an executive compensation study which was performed by Deloitte Compensation
Consulting Group.  The final data of this study was presented to the
Compensation Committee in January of 2008.  These awards were then
granted in January of 2008, but intended to apply to the individual’s
performance for 2007. Accordingly, our named executive officers were granted the
following restricted shares in January of 2008: Mr. Rossi: 13,500 shares; Mr.
Fitzpatrick: 4,500 shares; Mr. Ludwig: 2,500 shares; Mr. Houston: 1,500 shares;
and Dr. Richardson: 4,000 shares.  Additionally, in January 2008, we
granted Non-Qualified Options to our executive officers as
follows:  Mr. Rossi, Mr. Fitzpatrick, Mr. Ludwig, Mr. Richardson and
Mr. Houston were granted options to purchase 45,000; 35,000; 26,500; 20,500; and
10,000 shares,
  21
  respectively,
at an exercise price of $20.41 per share, which was the common stock price at
the end of trading on day of grant.
  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. The Company does not have a
written policy regarding employment agreements.
 
 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 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 Houston 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. McMillanKenneth
      P. MitchellElaine
      R. Wedral
 
  22
  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
years ended December 31, 2007 and 2006.
 
 Summary
Compensation Table
 Name
      and Principal
              
              
              Salary
              
              
              Stock
      Awards (1)
              
              
              Option
      Awards (1)
              
              
              Non-Equity
      Incentive Plan Compensation (2)
              
              
              All
      Other Compensation (3)
              
              
              TotalPosition
              Year
              
              ($)
              
              
              ($)
              
              
              ($)
              
              
              ($)
              
              
              ($)
              
              
              ($)Dino
      A. Rossi
              2007
              
              $
              368,814
              
              
              $
              56,111
              
              
              $
              209,769
              
              
              $
              260,000
              
              
              $
              13,688
              (a)
              
              $
              908,382Chairman,
      President & CEO
              2006
              
              $
              338,600
              
              
              $
              3,778
              
              
              $
              198,528
              
              
              $
              212,445
              
              
              $
              17,364
              (b)
              
              $
              770,715Francis
      J. Fitzpatrick
              2007
              
              $
              180,000
              
              
              $
              18,704
              
              
              $
              161,359
              
              
              $
              59,220
              
              
              $
              21,993
              (c)
              
              $
              441,275CFO,
      Treasurer and Asst. Secretary
              2006
              
              $
              169,000
              
              
              $
              1,259
              
              
              $
              152,270
              
              
              $
              62,406
              
              
              $
              21,582
              (d)
              
              $
              406,517David
      F. Ludwig
              2007
              
              $
              201,385
              
              
              $
              12,469
              
              
              $
              129,226
              
              
              $
              52,636
              
              
              $
              13,689
              (e)
              
              $
              409,404VP/GM
      Specialty Products
              2006
              
              $
              193,481
              
              
              $
              839
              
              
              $
              123,072
              
              
              $
              41,894
              
              
              $
              18,026
              (f)
              
              $
              377,312Paul
      H. Richardson
              2007
              
              $
              166,000
              
              
              $
              18,704
              
              
              $
              101,854
              
              
              $
              34,160
              
              
              $
              20,773
              (g)
              
              $
              341,490VP,  R&D
              2006
              
              $
              155,385
              
              
              $
              1,259
              
              
              $
              80,852
              
              
              $
              43,575
              
              
              $
              20,357
              (h)
              
              $
              301,428Matthew
      D. Houston
              2007
              
              $
              168,115
              
              
              $
              6,235
              
              
              $
              36,807
              
              
              $
              42,250
              
              
              $
              18,327
              (i)
              
              $
              271,733General
      Counsel and Secretary
 
 (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, 2007, in accordance with FAS 123(R)
      adjusted to eliminate service-based forfeiture assumptions used for
      financial reporting purposes. With respect to the amounts reported for
      2006, these amounts relate to awards granted in 2006 and in prior years.
      With respect to the amounts reported for 2007, since we did not make any
      stock awards or option awards during the fiscal year ended December 31,
      2007, these amounts relate solely to awards granted 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, 2007, as filed with the SEC on March 17,
      2008.
 (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 for the indicated
  year:
 (a)
              Mr.
      Rossi’s other compensation for 2007 consists of $13,412 for contributions
      under the Company’s 401(k)/profit sharing plan, $5,000 for personal
      automobile allowance, and $276 for life, health and disability insurance
      benefits.
  23
  (b)
              Mr.
      Rossi’s other compensation for 2006 consists of $13,060 for contributions
      under the Company’s 401(k)/profit sharing plan, $3,506 for personal
      automobile allowance, and $798 for life, health and disability insurance
      benefits.
 (c)
              Mr.
      Fitzpatrick’s other compensation for 2007 consists of $13,412 for
      contributions under the Company’s 401(k)/profit sharing plan, $8,400 for
      automobile allowance, and $180 for life, health and disability insurance
      benefits.
 (d)
              Mr.
      Fitzpatrick’s other compensation for 2006 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.
 (e)
              Mr.
      Ludwig’s other compensation for 2007 consists of $13,412 for contributions
      under the Company’s 401(k)/profit sharing plan, $4,707 for personal
      automobile allowance, and $276 for life, health and disability insurance
      benefits.
 (f)
              Mr.
      Ludwig’s other compensation for 2006 consists of $13,060 for contributions
      under the Company’s 401(k)/profit sharing plan, $4,524 for personal
      automobile allowance, and $259 for life, health and disability insurance
      benefits.
 (g)
              Mr.
      Richardson’s other compensation for 2007 consists of $12,865 for
      contributions under the Company’s 401(k)/profit sharing plan, $7,800 for
      automobile allowance, and $108 for life, health and disability insurance
      benefits.
 (h)
              Mr.
      Richardson’s other compensation for 2006 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.
 (i)
              Mr.
      Houston’s other compensation for 2007 consists of $11,145 for
      contributions under the Company’s 401(k)/profit sharing plan, $7,062 for
      automobile allowance, and $120 for life, health and disability insurance
      benefits.
 
 Grants of Plan Based Awards
 
 The
following table discloses the plan based awards granted in 2007.  It
includes the target levels for bonus awards under our non-equity incentive plan
for 2007. As discussed in the Compensation Discussion and Analysis, the Company
did not grant stock options or restricted stock to its Named Executive Officers
in 2007.  Although the practice of the Company is to grant such equity
to those individuals in December of each fiscal year, the Compensation Committee
awaited results of an executive compensation study which was performed by
Deloitte Compensation Consulting Group.  The final data of this study
was presented to the Compensation Committee in January of 2008.  The
actual number of stock options and restricted stock awards granted in fiscal
2008, but applicable to fiscal 2007, are as set forth in the table
below.
 
 Estimated
      Future Payouts under Non-Equity IncentivePlan Awards
      (1)Name
              Grant
      Date
              
              Threshold
              
              
              Target
              
              
              Maximum
              
              
              All
      Other StockAwards:Number ofShares
      ofRestrictedStock (#)
              
              
              All
      OtherOption Awards:Number of Securities Underlying
      Options (#)
              
              
              ExercisePrice
      ofOption Awards($/Sh)
              
              
              Grant
      DateFair Value(2)Dino
      A. Rossi
              1/12/2008
              
              
              --
              
              
              $
              212,500
              
              
              $
              276,250
              
              
              
              13,500
              
              
              
              45,000
              
              
              $
              20.41
              
              
              $
              561,515Francis
      J. Fitzpatrick
              1/12/2008
              
              
              --
              
              
              $
              63,000
              
              
              $
              81,900
              
              
              
              4,500
              
              
              
              35,000
              
              
              $
              20.41
              
              
              $
              314,674David
      F. Ludwig
              1/12/2008
              
              
              --
              
              
              $
              70,700
              
              
              $
              91,910
              
              
              
              2,500
              
              
              
              26,500
              
              
              $
              20.41
              
              
              $
              219,799Paul
      H. Richardson
              1/12/2008
              
              
              --
              
              
              $
              60,200
              
              
              $
              78,260
              
              
              
              4,000
              
              
              
              20,500
              
              
              $
              20.41
              
              
              $
              212,063Matthew
      D. Houston
              1/12/2008
              
              
              --
              
              
              $
              42,250
              
              
              $
              54,925
              
              
              
              1,500
              
              
              
              10,000
              
              
              $
              20.41
              
              
              $
              94,310
 
 24
 (1)
              Represents
      target payout levels under the ICP for 2007 performance. The actual amount
      of incentive bonus earned by each Named Executive Officer in 2007 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
      FAS 123(R) value of awards granted on 1/12/2008 was $20.34 per share of
      restricted stock, and $6.38 per stock option with an exercise price of
      $20.41.
 
 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, subject to annual increases if approved by the Board of
Directors.  Mr. Rossi’s current salary for fiscal 2008 pursuant to the
Employment Agreement is $425,000.  Mr. Rossi is eligible to earn a
bonus of 50% of base salary under the ICP. Mr. Rossi is also eligible to receive
a performance bonus (as determined by the Board of Directors) of up to 50% of
annual salary, based on a target figure which exceeds financial targets
established by the Board of Directors in the ICP, 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 a modified payment
schedule 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
  25
  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.
 
 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, 2007 for each Named Executive Officer. The
table also discloses the number and value of unvested restricted stock awards as
of December 31, 2007.
 
 Option
      Awards
              
              Stock
      AwardsNumber
      of Securities Underlying UnexercisedOptions (#)
              
              
              
              
              
              Number
      of Sharesof
                Stock
      that Have Not Vested(2)
              
              Market
      Value ofShares of
                Stock
      that Have Not Vested (3)($)Name
              
              Exercisable(1)
              
              Un-Exercisable
      (1)
              
              OptionExercise
      Price ($)
              
              Option
      Expiration DateDino
      A. Rossi
              
              
              16,875
              
              
              
              -
              
              
              $
              1.88
              
              10/21/0923,625
              
              
              
              -
              
              
              $
              3.30
              
              09/15/1067,500
              
              
              
              -
              
              
              $
              6.27
              
              10/25/1167,500
              
              
              
              -
              
              
              $
              6.83
              
              09/12/1267,500
              
              
              
              -
              
              
              $
              6.77
              
              12/12/1374,250
              
              
              
              -
              
              
              $
              8.77
              
              09/16/1454,000
              (4)
              
              
              36,000
              (4)
              
              $
              13.81
              
              09/16/159,000
              (5)
              
              
              36,000
              (5)
              
              $
              17.81
              
              12/08/1613,500
              (6)
              
              $
              231,120Francis
      J. Fitzpatrick
              
              
              40,500
              
              
              
              -
              
              
              $
              6.83
              
              09/12/1250,625
              
              
              
              -
              
              
              $
              6.77
              
              12/12/1360,750
              
              
              
              -
              
              
              $
              8.77
              
              09/16/1440,500
              (7)
              
              
              27,000
              (7)
              
              $
              13.81
              
              09/16/156,900
              (8)
              
              
              27,600
              (8)
              
              $
              17.81
              
              12/08/164,500
              (9)
              
              $
              77,040
   26
  David
      F. Ludwig
              
              
              12,150
              
              
              
              -
              
              
              $
              6.83
              
              09/12/1232,400
              
              
              
              -
              
              
              $
              6.77
              
              12/12/1350,625
              
              
              
              -
              
              
              $
              8.77
              
              09/16/1432,400
              (10)
              
              
              21,600
              (10)
              
              $
              13.81
              
              09/16/155,400
              (11)
              
              
              21,600
              (11)
              
              $
              17.81
              
              12/08/163,000
              (12)
              
              $
              51,360Paul
      H. Richardson
              
              
              5,400
              
              
              
              -
              
              
              $
              6.77
              
              12/12/1313,500
              
              
              
              -
              
              
              $
              8.77
              
              09/16/1413,500
              (13)
              
              
              9,000
              (13)
              
              $
              13.19
              
              06/24/1513,500
              (14)
              
              
              9,000
              (14)
              
              $
              13.81
              
              09/16/154,500
              (15)
              
              
              18,000
              (15)
              
              $
              17.81
              
              12/08/164,500
              (16)
              
              $
              77,040Matthew
      D. Houston
              
              
              19,050
              
              
              
              -
              
              
              $
              9.87
              
              01/24/156,750
              (17)
              
              
              4,500
              (17)
              
              $
              13.81
              
              09/16/15900
              (18)
              
              
              3,600
              (18)
              
              $
              17.81
              
              12/08/161,500
              (19)
              
              $
              25,680
 
 
 (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
      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.
 
 (5)
              Mr. Rossi’s
      45,000 options granted on December 8, 2006 at $17.81 per share became
      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.
 
 (6)
              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.
 
 (7)
              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.
 
 (8)
              Mr. Fitzpatrick’s
      34,500 options granted on December 8, 2006 at $17.81 per share became
      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.
 
 (9)
              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.
 
 (10)
              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.
  27
 
  (11)
              Mr. Ludwig’s
      27,000 options granted on December 8, 2006 at $17.81 per share became
      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.
 (12)
              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.
 
 (13)
              Mr. Houston’s
      11,250 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.
 
 (14)
              Mr. Richardson’s
      13,500 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.
 
 (15)
              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.
 
 (16)
              Mr. Richardson’s
      22,500 options granted on December 8, 2006 at $17.81 per share became
      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.
 
 (17)
              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.
 
 (18)
              Mr. Houston’s
      4,500 options granted on December 8, 2006 at $17.81 per share became
      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. Houston’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.
 
 
 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, 2007.
 
 
 Option
      Exercises and Stock Vested TableOption
      Awards
              
              
              Stock
      AwardsName
              
              Number
      of SharesAcquired on Exercise (#)
              
              
              Value
      Realized on Exercise($)(1)
              
              
              Number
      ofSharesAcquired on Vesting (#)
              
              
              Value
      Realizedon Vesting ($)Dino
      A. Rossi
              
              
              96,525
              
              
              $
              1,253,501
              
              
              
              –
              
              
              
              –Francis
      J. Fitzpatrick
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –David
      F. Ludwig
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –Paul
      H. Richardson
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –Matthew
      D. Houston
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
 
  28
  (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 $425,000 in 2008, 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 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 with Mr. Rossi, “Cause” means:  habitual absence
or lateness; gross insubordination; failure to devote full time to Company's
business; failure to comply with the obligations of confidentiality; any action
which constitutes a violation of any applicable criminal statute; or any act
which frustrates or violates the undivided duty of loyalty owed by Mr. Rossi to
the Company.  In addition, “Change in Control” means:
  (a)           any
person or group is or becomes (including by merger, consolidation or otherwise)
the beneficial owner, directly or indirectly, of 50% or more of the voting power
of the total outstanding voting stock of Company;
  (b)           during
any period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Director of the Company (together with any new
directors whose election to the Board of Directors, or whose nomination for
election by the stockholders of the Company, was approved by a vote of 75% of
the directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease to constitute a majority of the Board of Directors then in
office; or
  (c)           the
sale or other disposition (other than by way of merger or consolidation) of all
or substantially all of the capital stock or assets of Company to any person or
group as an entirety or substantially as an entirety in one transaction or a
series of related transactions, unless the ultimate beneficial owners of the
voting stock of such person immediately after giving effect to such transaction
own, directly or indirectly, more than 80% of the total voting power of the
total outstanding voting stock of Company immediately prior to such transaction.
  The
amount of compensation payable to Mr. Rossi in the event of termination of
employment, assuming termination as of December 31, 2007, and a share price for
the Company’s common stock equal to the closing market price on the last trading day prior to that date, is set forth in the table below.
We are not obligated to provide any compensation to Mr. Rossi in the case of a
change in control that does not result in termination of
employment.
 
  29
  
 Benefits
      and Payments upon TerminationBase
      Salary
              
              
              ICP
      Bonus(1)
              
              
              Accelerationof
                Vesting
      ofOptions
                andRestricted
                Stock
              
              
              TotalVoluntary
      termination by Mr. Rossi or termination for Cause
              
              $
              0
              
              
              $
              368,814
              
              
              $
              5,658,311
              
              
              $
              5,658,311Termination
      by Mr. Rossi within 12 months after demotion by Company or as a result of
      constructive termination
              
              $
              553,221
              
              
              $
              368,814
              
              
              $
              6,376,118
              
              
              $
              7,298,153Termination
      by Company following a Change in Control, except for
    Cause(2)
              
              $
              737,628
              
              
              $
              737,628
              
              
              $
              6,376,118
              
              
              $
              7,851,374Voluntary
      termination by Mr. Rossi following a Change of Control(2)
              
              $
              368,814
              
              
              $
              368,814
              
              
              $
              6,376,118
              
              
              $
              7,113,749Termination
      by Company for any reason other than for Cause or after receipt of notice
      of termination from Mr. Rossi
              
              $
              553,221
              
              
              $
              368,814
              
              
              $
              6,376,118
              
              
              $
              7,298,153Death
              
              $
              0
              
              
              $
              368,814
              
              
              $
              5,658,311
              
              
              $
              5,658,311
 (1)           Represents
the target bonus level under the ICP.
 (2)           Assumes
the Change of Control occurred within the two year period prior to December 31,
2007.
 The
amounts shown in the table above do not include payments for accrued salary and
vacation, or payments made under the life insurance policy in the case of
death
 
 All of
our executive officers other than Mr. Rossi are employees-at-will and, as such,
do not have employment agreements, 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 2007,
the Company paid each of its directors, other than Mr. Rossi, an annual retainer
of $18,000 and $4,000 for each Board meeting attended, plus
expense.  For fiscal 2007, 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;
and all other Committee members, $1,000.  The Lead Director was paid
an additional $5,000 retainer fee for the year.
 
 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,
2007.
  30
  
 Name
              
              Fees
      Earned orPaid in Cash ($)
              
              
              Stock
      Awards(1)(2)($)
              
              
              All
      OtherCompensation($)
              
              
              Total
      ($)Hoyt
      Ammidon, Jr.
              
              $
              41,500
              
              
              $
              106,050
              
              
              
              –
              
              
              $
              147,550Edward
      McMillan
              
              $
              41,000
              
              
              $
              106,050
              
              
              
              –
              
              
              $
              147,050Kenneth
      Mitchell
              
              $
              47,000
              
              
              $
              106,050
              
              
              
              –
              
              
              $
              153,050Perry
      Premdas
              
              
              -
              
              
              $
              145,463
              
              
              
              –
              
              
              $
              145,463John
      Televantos
              
              $
              43,000
              
              
              $
              106,050
              
              
              
              –
              
              
              $
              149,050Elaine
      Wedral
              
              $
              42,000
              
              
              $
              106,050
              
              
              
              –
              
              
              $
              148,050
 
 (1)
              On
      February 27, 2008, each director, other than Mr. Rossi and Mr. Premdas was
      awarded 5,000 shares of restricted stock. Mr. Premdas was awarded 6,750
      shares of Restricted Stock on January 2, 2008. 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 February 27, 2008 or January 2, 2008, as
      applicable, between the Company and each such director.  The
      amounts included in the “Stock Awards” column reflect the dollar amount to
      be recognized for financial statement reporting purposes beginning for the
      fiscal year ended December 31, 2008, in accordance with FAS 123(R)
      adjusted to eliminate service-based forfeiture assumptions used for
      financial reporting purposes. The weighted average grant date fair value
      per share of each award was $21.35. 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, 2007, as
      filed with the SEC on March 17,
2008.
 (2)
              The
      following table shows the aggregate number of options and stock awards
      outstanding for each Outside Director as of December 31,
    2007:
 
 Name
              
              Aggregate
      StockOption Outstandingas of12/31/2007
              
              
              Aggregate
      StockAwardsOutstanding as of12/31/2007Hoyt
      Ammidon, Jr.
              
              
              38,011
              
              
              
              13,500Edward
      McMillan
              
              
              41,386
              
              
              
              13,500Kenneth
      Mitchell
              
              
              38,011
              
              
              
              13,500Perry
      Premdas
              
              
              -
              
              
              
              -John
      Televantos
              
              
              4,500
              
              
              
              13,500Elaine
      Wedral
              
              
              29,623
              
              
              
              13,500
 
 
 Directors
have 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 in which 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 13,500 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
  31
  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 2007.
 
 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, 2007, 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.
 
 (a)
              (b)
              (c)Plan
      Category
              Number
      of shares to beissued upon exercise ofoutstanding options,
      warrants and rights
              Weighted-average
      exercise price per share ofoutstanding options,warrants and
      rights
              Number
      of shares remaining available forfuture issuance underequity
      compensation plans (excluding shares reflectedin column
      (a))Equity
      compensation plans approved by securityholders
              2,061,159
              $10.05
              723,678Equity
      compensation plansnot approved by security holders
              -
              -
              -Total
              2,061,159
              $10.05
              723,678
 
  
 
 Security
Ownership of Certain Beneficial Owners and of Management
  32
  
 The table below sets forth as of April 1, 2008, 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 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:
 
 Name
      and Address of  Beneficial Owner
              
              Amount
      and Nature ofBeneficial Ownership (1)
              
              
              Percent
      of Class (2)Ashford
      Capital Management, Inc.(3)
              
              
              1,512,394
              
              
              
              8.4
              %Kayne
      Anderson Rudnick Investment Management, LLC (4)
              
              
              1,328,643
              
              
              
              7.3
              %Segall,
      Bryant & Hamill Investment Council (5)
              
              
              1,029,280
              
              
              
              5.7
              %Brown
      Capital Management (6)
              
              
              909,813
              
              
              
              5.0
              %Wellington
      Management Co. LLP (7)
              
              
              906,550
              
              
              
              5.0
              %Dino
      A. Rossi (8)*
              
              
              451,646
              
              
              
              2.5
              %Frank
      Fitzpatrick (9)*
              
              
              223,856
              
              
              
              1.2
              %David
      F. Ludwig (10)*
              
              
              145,722
              
              
              
              **Kenneth
      P. Mitchell (11)*
              
              
              64,779
              
              
              
              **Paul
      Richardson (12)*
              
              
              61,058
              
              
              
              **Edward
      L. McMillan (13)*
              
              
              60,851
              
              
              
              **Elaine
      R. Wedral (14)*
              
              
              48,123
              
              
              
              **Matthew
      D. Houston (15)*
              
              
              30,227
              
              
              
              **John
      Televantos(16)*
              
              
              23,000
              
              
              
              **Hoyt
      Ammidon, Jr. (17)*
              
              
              18,500
              
              
              
              **Perry
      Premdas (18)*
              
              
              7,250
              
              
              
              **All
      directors and executive officers as a group (12 persons)
                (19)
              
              
              1,201,972
              
              
              
              6.6
              %Shares
      Outstanding  April 1, 2008
              
              
              18,078,425
 
 *  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.
   33
  (5)   Based upon information provided in a
      Schedule 13F for such entity filed with the SEC.  Such entity’s
      address as reported in its Schedule 13F is 10 S. Wacker Dr. Suite 3500.
      Chicago, IL  60606.(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 1201 N. Calvert Street Baltimore, Maryland 21202.(7)  
      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 75 State Street
                Boston,
      MA 02109.(8)   Consists of 380,250 shares such person has
      the right to acquire pursuant to stock options, 27,000 shares of
      restricted stock, 13,346 shares held in such person’s Company
      401(k)/profit sharing plan account, and 31,050 shares held directly.(9)   Consists of 199,275 shares such person has
      the right to acquire pursuant to stock options, 9,000 shares of restricted
      stock, 10,518 shares held in such person’s Company 401(k)/profit sharing
      plan account, and 5,063 shares held directly.(10) Consists of 132,975 shares such person has the
      right to acquire pursuant to stock options, 5,500 shares of restricted
      stock and 7,247 shares held in such person’s Company 401(k)/profit sharing
      plan account.(11)
      Consists of 38,011 shares such person has the right to acquire pursuant to
      stock options, 18,500 shares of restricted stock, and 8,268 shared
      held directly.(12)
      Consists of 50,400 shares such person has the right to acquire pursuant to
      stock options, 8,500 shares of restricted stock and 2,158 shares held in
      such person’s Company 401(k)/profit sharing plan
  account.(13)
      Consists of 41,386 shares such person has the right to acquire pursuant to
      stock options and 18,500 shares of restricted stock and 965 shared held
      directly.(14)
      Consists of 29,623 shares such person has the right to acquire pursuant to
      stock options and 18,500 shares of restricted stock.(15)
      Consists of 26,700 shares such person has the right to acquire pursuant to
      stock options, 3,000 shares of restricted stock and 527 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 18,500 shares of restricted stock.(17)
      Consists of 18,500 shares of restricted stock.(18)
      Consists of 6,750 shares of restricted stock, and 500 shared held
      directly(19)
      Consists of options to purchase 964,161 shares, 154,750 shares of
      restricted stock, 37,215 shares in the accounts of six executive officers
      under the Company’s 401(k)/profit sharing plan, and 45,326 shares held by
      individuals directly..
 
 PROPOSAL
NO. 4
 
 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, 2008.
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 governance 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
2007, the Company retained M&P to audit the consolidated financial
statements for 2007.  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
  34
  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 2006 and 2007:
 
 2007
              
              
              2006Audit
      fees (1)
              
              
              487,500
              
              
              
              305,175Audit-related
      fees (2)
              
              
              40,688
              
              
              
              82,700Tax
      fees (3)
              
              
              53,124
              
              
              
              32,852Total
      fees
              
              
              581,312
              
              
              
              420,727
 
 
 (1)
              Fees
      relating to audit of the annual consolidated financial statements and
      quarterly reviews.
 (2)
              Fees
      relating to employee benefit plan audit, SEC comment letter and
      acquisition due diligence.
 (3)
              Fees
      for tax compliance, state tax audits, international tax issues and
      advisory services.
 
  35
  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 2007 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, 2008.
 
 
 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 four 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, 2007 with
management and discussed the audit with McGladrey & Pullen, LLP (“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 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
  36
  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, 2007 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 2008.
 
 Hoyt
      Ammidon, Jr. (Chair)Edward
      L. McMillanKenneth
      P. MitchellPerry
      W. Premdasbeing
      the members of the AuditCommittee
      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 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, 2008 (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 18,115,639 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 2009 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 28, 2008 in order to be
considered for inclusion in the Company's year 2009 proxy materials. With
respect to any stockholder proposal not submitted for inclusion in the Company's
year 2009 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 14, 2009 (45 days prior to the anniversary of the
date this Proxy Statement is first being sent to stockholders).
  37
   
 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
 __________
 
 
 The
Annual Report to Stockholders of the Company for the fiscal year ended December
31, 2007 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.
 
 
 
 
  38
  EXHIBIT
A
 
  BALCHEM
      CORPORATION
  ARTICLES
      OF AMENDMENT
  Balchem
Corporation, a Maryland corporation, hereby certifies to the Department of
Assessments and Taxation of Maryland that:
  1.           The
charter of Balchem Corporation (the “Corporation”) is hereby amended by deleting
existing Article FOURTH in its entirety and substituting in lieu thereof a new
article to read as follows:
  “FOURTH:  The
total number of shares of stock which the Corporation has authority to issue is
sixty-two million (62,000,000) shares consisting of sixty million (60,000,000)
shares of common stock, $.06  2/3 par value per share, and two million
(2,000,000) shares of preferred stock, $25.00 par value per
share.  The aggregate par value of all authorized shares of all
classes having a par value is fifty-four million two thousand dollars
($54,002,000).
  Subject
to the provisions of Section 2-105 of the Maryland General Corporation Law, the
board of directors of the Corporation is authorized to issue the preferred stock
of the Corporation, from time to time, in one or more series, each series to be
with such preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption as the board of directors shall determine.  Each share of
any series of preferred stock shall be identical with all other shares of that
series.
  Except as
otherwise provided by law, or as authorized by the board of directors of the
Corporation, all right to vote and all voting power incident to the
Corporation’s stock shall be vested exclusively in the holders of the common
stock, which shares shall also have all of the rights not specifically granted
to the preferred stock.  The holders of the preferred stock shall not
be entitled to notice of any meeting of stockholders except as authorized by the
board of directors or as may be specifically required by law.”
  2.           The
amendment to the charter of the Corporation as hereinabove set forth has been
duly advised by the board of directors and approved by the stockholders of the
Corporation as required by law.
  3.           The
total number of shares of all classes of stock which the Corporation had
authority to issue immediately prior to this amendment was twenty-seven million
(27,000,000) shares consisting of twenty-five million (25,000,000) shares of
common stock, $.06  2/3 par value per share, and two million
(2,000,000) shares of preferred stock, $25.00 par value per
share.  The aggregate par value of all such authorized shares of all
classes having a par value is fifty-one million six hundred sixty-seven thousand
and five hundred dollars ($51,667,500).
  4.           The
total number of shares of all classes of stock which the Corporation has
authority to issue, pursuant to the charter of the Corporation as hereby
amended, is sixty-two million (62,000,000) shares consisting of sixty million
(60,000,000) shares of common stock, $.06  2/3 par value per share,
and two million (2,000,000) shares of preferred stock, $25.00 par value per
share.  The aggregate par value of all authorized shares of all
classes having a par value is fifty-four million two thousand dollars
($54,002,000).
  5.           The
undersigned President acknowledges these Articles of Amendment to be the
corporate act of the Corporation and as to all matters or facts required to be
verified under oath, the undersigned President acknowledges that, to the best of
his knowledge, information and belief, these matters and facts are true in all
material respects and that this statement is made under the penalties for
perjury.
   39
  IN
WITNESS WHEREOF, the Corporation has caused these presents to be signed in its
name and on its behalf by its President and attested to by its Secretary as of
the ____ day of _________, 2008.
  ATTEST:                                                                           BALCHEM
CORPORATION
  
  _______________________________                                                                                     By:
_______________________________
  Matthew
D. Houston,
Secretary                                                                                                         
            Dino A.
Rossi, President
  
 
 
  40
  EXHIBIT
B
 SECOND
AMENDED AND RESTATED 1999 STOCK PLAN
 
 BALCHEM
CORPORATION
 SECOND
AMENDED AND RESTATED
 1999
STOCK PLAN
 
 
 1.             Purpose.  The
Second Amended and Restated Balchem Corporation 1999 Stock Plan (the "Plan") is
intended to provide Balchem Corporation, a Maryland corporation (the “Company”),
with a means of attracting and retaining the services of key persons and to
advance the interests of the Company and its stockholders by affording to
certain persons, upon whose judgment, initiative and efforts the Company is
largely dependent for the successful conduct of its business, an opportunity for
investment in the Company and the incentive advantages inherent in stock
ownership in the Company, by providing (a) to the officers and other employees
of the Company and any present or future parent or subsidiaries of the Company
(collectively, "Related Companies") opportunities to purchase stock in the
Company pursuant to options granted hereunder which qualify as "incentive stock
options" ("ISO" or "ISOs") under Section 422(b) of the Internal Revenue Code of
1986, as amended (the "Code"); (b) to directors, officers, employees and
directors emeritus of and consultants to the Company and Related Companies
opportunities to purchase stock in the Company pursuant to options granted
hereunder which do not qualify as ISOs ("Non-Qualified Option(s)"); (c) to
directors, officers, employees and directors emeritus of and consultants to the
Company and Related Companies opportunities to make direct purchases of stock in
the Company ("Purchases"); and (d) to directors, officers, employees, directors
emeritus and consultants of the Company and Related Companies awards of stock
and equity interests in the Company, including stock appreciation rights (SARs),
restricted stock and performance share awards (“Performance Shares”)
(collectively referred to herein as "Awards"). Both ISOs and Non-Qualified
Options are referred to hereinafter individually as an "Option" and collectively
as "Options".  Options, authorizations to make Purchases and Awards
are referred to hereafter collectively as "Stock Rights".  As used
herein, the terms "parent" and "subsidiary" mean "parent corporation" and
"subsidiary corporation", respectively, as those terms are defined in Section
424 of the Code.
 
 2.             Administration
of the Plan.
 
 (a)             Board
or Committee Administration.  The Plan shall be administered by the
Board of Directors of the Company (the "Board").  The Board may
appoint a Compensation Committee (the "Committee") to administer the Plan
consisting of two or more persons.  The Board, if it deems it
advisable, may cause such Committee to consist solely of persons who qualify as
both (i) "non-employee directors", within the meaning of Rule 16b-3 or any
successor provision ("Rule 16b-3") promulgated under the Securities Exchange Act
of 1934, as amended, and (ii) “outside directors”, within the meaning of Section
162(m)(4)(C)(i) of the Code.  To the extent required by Rule 16b-3,
with respect to specific grants of Stock Rights, the Plan shall be administered
in accordance with Rule 16b-3.  Subject to ratification of the grant
or authorization of each Stock Right by the Board (if so required by applicable
state law), and subject to the terms of the Plan, the Committee shall have the
authority to (i) determine the employees of the Company and Related Companies
(from among the class of employees eligible under paragraph 3 to receive ISOs)
to whom ISOs may be granted, and to determine (from among the class of
individuals and entities eligible under paragraph 3 to receive Non-Qualified
Options and Awards and to make Purchases) to whom Non-Qualified Options,
authorizations to make Purchases and Awards may be granted; (ii) determine the
time or times at which Options or Awards may be granted or Purchases made; (iii)
determine the option price of shares subject to each Option, which price, in
either case, shall not be less than fair market value per share of Common Stock
(as defined herein) on the date of such grant, and in the case of ISOs, shall
not be less than the minimum price specified in paragraph 6, and the purchase
price of shares subject to each Purchase; (iv) determine whether each Option
granted shall be an ISO or a Non-Qualified Option; (v) determine (subject to
paragraph 7) the time or times when each option shall become exercisable and the
duration of the exercise period; (vi) determine whether restrictions such as
vesting, forfeiture,  rights of first refusal and repurchase options
are to be imposed on shares subject to Stock Rights and the nature of such
restrictions, if any, and (vii) interpret the Plan and prescribe and rescind
rules and regulations relating to it.  If the Committee determines to
issue a Non-Qualified Option, it shall take whatever actions it deems necessary,
under Section 422 of the Code and the regulations promulgated thereunder, to
ensure that such Option is not treated as an ISO.  The interpretation
and construction by the Committee of any provisions of the Plan or of any Stock
Right granted under it shall be final unless otherwise determined by the
Board.  The Committee may from time to time adopt such rules and
regulations for carrying out
  41
  the Plan
as it may deem best.  Nothing contained herein shall limit the right
or authority of the Board to act on all matters as to which authority is or may
be granted to the Committee.  No member of the Board or the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Stock Right granted under it.
 
 (b)             Committee
Action.  The Committee may select one of its members as its chairman,
and shall hold meetings at such times and places as it may
determine.  Acts by a majority of the Committee, or acts reduced to or
approved in writing by a majority of the members of the Committee, shall be the
valid acts of the Committee.  All references in the Plan to the
Committee shall mean the Board if no Committee has been appointed or if the
Board determines to act in lieu of the Committee.  From time to time
the Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefore, fill vacancies however caused, or remove all members of
the Committee and thereafter directly administer the Plan.
 
 (c)             Grant
of Stock Rights to Board Members.  Stock Rights may be granted to
members of the Board consistent with the provisions of paragraph 2(a) above, if
applicable.  All grants of Stock Rights to members of the Board shall
in all other respects be made in accordance with the provisions of the Plan
applicable to other eligible persons.  Consistent with the provisions
of paragraph 2(a) above, members of the Board who are either (i) eligible for
Stock Rights pursuant to the Plan or (ii) have been granted Stock Rights may
vote on any matters affecting the administration of the Plan or the grant of any
Stock Rights pursuant to the Plan, except that no such member shall act solely
in his capacity as a member of the Committee and not as a member of the Board,
upon the granting to him of Stock Rights, it being understood that, except as
otherwise required by applicable law, such member may take part in a vote or
action by the Board itself (rather than by the Committee if then constituted and
acting), and that any such member who does not so act may nevertheless be
counted in determining the existence of a quorum at any meeting of the Board
during which action is taken, with respect to the granting to him of Stock
Rights.
 
 (d)           Stock
Appreciation Rights.
 
 (i)           Grant
and Exercise.  SARs may be granted separate from or in conjunction
with all or part of any Option granted under the Plan and shall be
nontransferable except that a SAR shall be transferable upon transfer of the
related Option.  In the case of a Non-Qualified Options, SARs may be
granted either at or after the time of the grant of such Option.  In
the case of an ISO, SARs may be granted only at the time of the grant of such
Option.
 
 (A)           A
SAR or applicable portion thereof granted with respect to a given Option shall
terminate and no longer be exercisable upon the termination or exercise of the
related Option, except that, unless otherwise determined by the Committee, in
its sole discretion at the time of grant, a SAR granted with respect to less
than the full number of shares covered by a related Option shall not be reduced
until the number of shares covered by an exercise or termination of the related
Option exceeds the number of shares not covered by the SAR.  A SAR not
granted in connection with an Option shall terminate at the time specified in
the grant.
 
 (B)           A SAR
granted in connection with an Option may be exercised by an optionee, in
accordance with Section 2(d)(ii) of the Plan, by surrendering the applicable
portion of the related Option.  Upon such exercise and surrender, the
optionee shall be entitled to receive an amount determined in the manner
prescribed in Section 2(d)(ii) of the Plan. Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the extent
the related SARs have been exercised.  A SAR not granted in connection
with an Option may be exercised by the grantee’s delivery to the Committee of a
notice of exercise, in the form prescribed by the Committee.
  (ii)           Terms
and Conditions.  SARs shall be subject to such terms and conditions,
not inconsistent with the provisions of the Plan, as shall be determined from
time to time by the Committee, in its sole discretion, including the
following:
  (A)           SARs
shall be exercisable only at such time or times established by the
Committee.  SARs granted in connection with Options shall be
exercisable only at such time or times and to the extent that the Options to
which they relate shall be exercisable.
  (B)           Upon
the exercise of a SAR, an optionee shall be entitled to receive up to, but not
more than, an amount in cash and/or shares of Common Stock equal in value to the
excess of
  42
  the Fair
Market Value of one share of Common Stock over the base amount established by
the Committee, multiplied by the number of shares in respect of which the SAR
shall have been exercised, with the Committee having the right to determine the
form of payment.  In the case of a SAR granted in connection with an
Option the base amount shall be the exercise price of the related
Option.  If the Committee shall determine to make all of such payments
in Common Stock, no fractional shares shall be issued and no payments shall be
made in lieu of fractional shares.
 (C)           Upon the
exercise of a SAR, the Option or part thereof to which such SAR is related, if
any, shall be deemed to have been exercised for the purpose of the limitation
set forth in Section 5 of the Plan on the number of shares of Common Stock to be
issued under the Plan, but only to the extent of the number of shares issued
under the SAR at the time of exercise based on the value of the SAR at such
time.
 (D)           A
SAR granted in connection with an Option may be exercised only if and when the
market price of the Common Stock subject to the Option exceeds the exercise
price of such Option.
  (E)           In the
event of a Change of Control, all SARs remaining subject to forfeiture shall
immediately cease to be subject to forfeiture, shall be deemed exercised and
cash or a stock certificate or stock certificates representing the proceeds of
such exercise shall be delivered to the grantee.
 
 (e)           Restricted
Stock.
 
 (i)           Administration.  Shares
of Restricted Stock may be issued either alone or in addition to other Awards
granted under the Plan.  The Committee shall determine the persons to
whom, and the time or times at which, grants of Restricted Stock will be made,
the number of shares to be awarded, the price (if any) to be paid by the
recipient of Restricted Stock, the time or times within which such awards may be
subject to forfeiture, and all other conditions of the awards.  The
Committee may condition the vesting of Restricted Stock upon the attainment of
specified performance goals or such other factors as the Committee may
determine, in its sole discretion, at the time of the award.  The
provisions of Restricted Stock awards need not be the same with respect to each
recipient.
 
 (ii)           Awards
and Certificates.  The prospective recipient of a Restricted Stock
award shall not have any rights with respect to such award, unless and until
such recipient has executed an agreement evidencing the award and has delivered
a fully executed copy thereof to the Company, and has otherwise complied with
the applicable terms and conditions of such award.  The purchase price
for shares of Restricted Stock may be zero, unless a higher price is required by
applicable law.  Each person receiving a Restricted Stock award shall
be issued a stock certificate in respect of such shares of Restricted
Stock.  Such certificate shall be registered in the name of such
person, and shall bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such award, substantially in the following
form:
 
 “The
transferability of this certificate and the shares of stock represented hereby
are subject to the terms and conditions (including forfeiture) of the Second
Amended and Restated Balchem Corporation 1999 Stock Plan and an Agreement
entered into between the registered owner and the Balchem
Corporation.  Copies of such Plan and Agreement are on file in the
principal corporate offices of Balchem Corporation.”
 
 The
Committee may require that the stock certificates evidencing shares of
Restricted Stock be held in custody by the Company until the restrictions
thereon shall have lapsed, and that, as a condition of any Restricted Stock
award, the grantee shall have delivered to the Company a stock power, endorsed
in blank, relating to the Common Stock covered by such award.
 
 (iii)           Restrictions
and Conditions.  The shares of Restricted Stock awarded pursuant to
this Section 2(e) shall be subject to the following restrictions and
conditions:
 
 (A)           During
a period set by the Committee commencing with the date of such award (the
“Restriction Period”), the grantee shall not be permitted to sell, transfer,
pledge, assign or otherwise encumber shares of Restricted Stock awarded under
the Plan.  The Committee, in its sole discretion, may
  43
  provide
for the lapse of such restrictions in installments and may accelerate or waive
such restrictions in whole or in part, based on service, performance and/or such
other factors or criteria as the Committee may determine, in its sole
discretion.
 
 (B)           Except
as provided herein, the grantee shall have, with respect to the shares of
Restricted Stock, all of the rights of a shareholder of the Company, including
the right to vote the Restricted Stock and the right to receive cash dividends,
if any.  The Committee, in its sole discretion, as determined at the
time of award, may permit or require the payment of cash dividends to be
deferred and, if the Committee so determines, reinvested in additional shares of
Restricted Stock to the extent shares are available under Section 5 of the
Plan.  Such dividends shall be converted into additional shares of
Restricted Stock by dividing (i) the aggregate amount or value of the dividends
paid with respect to that number of shares of Common Stock equal to the number
of shares of Restricted Stock then credited by (ii) the fair market value per
share of Common Stock on the payment date for such dividend. The additional
shares of Restricted Stock credited by reason of such dividend equivalents shall
be subject to all the terms and conditions of the shares of Restricted Stock to
which they relate.
 
 (C)           Subject
to the applicable provisions of the award agreement and this Section 2(e),
upon termination of a grantee’s service with the Company for reasons other than
death or Disability during the Restriction Period, all shares of Restricted
Stock still subject to restriction shall be forfeited by the
grantee.  Subject to the provisions of the Plan, the Committee, in its
sole discretion, may provide for the lapse of such restrictions in installments
and may waive such restrictions, in whole or in part, at any time, based on such
factors as the Committee shall deem appropriate in its sole
discretion.  Upon the death or Disability of a grantee during the
Restriction Period, the Committee may, in its sole discretion, cause all
Restricted Stock remaining subject to forfeiture to immediately cease to be
subject to forfeiture and a stock certificate or stock certificates representing
such shares of Common Stock to be issued and delivered to the grantee or the
grantee’s estate, as the case may be.
 
 (D)           In
the event of hardship or other special circumstances of a grantee whose service
with the Company is involuntarily terminated (other than for Cause), the
Committee may, in its sole discretion, waive in whole or in part any or all
remaining restrictions with respect to such grantee’s shares of Restricted
Stock, based on such factors as the Committee may deem appropriate.
 
 (E)           If
and when the Restriction Period expires without a prior forfeiture of the
Restricted Stock subject to such Restriction Period, the certificates for such
shares shall be promptly delivered by the Corporation to the grantee, if
retained by the Company.
 
 (F)           In
the event of a Change of Control, all Restricted Stock remaining subject to
forfeiture shall immediately cease to be subject to forfeiture and a stock
certificate or stock certificates representing such shares of Common Stock to be
issued and delivered to the grantee.
 
 (f)           Performance
Shares.
 
 (i)           Awards
and Administration.  The Committee shall determine the persons to whom
and the time or times at which Performance Shares shall be awarded, the number
of Performance Shares to be awarded to any such person, the duration of the
period (the “Performance Period”) during which, and the conditions under which,
receipt of the shares of Stock will be deferred, and the other terms and
conditions of the award in addition to those set forth below. The Committee may
condition the receipt of shares of Stock pursuant to a Performance Share award
upon the attainment of specified performance goals or such other factors or
criteria as the Committee shall determine, in its sole
discretion.  The provisions of Performance Share awards need not be
the same with respect to each Participant, and such awards to individual
Participants need not be the same in subsequent years.
 
 (ii)           Terms
and Conditions.  Performance Shares awarded pursuant to this Section
2(f) shall be subject to the following terms and conditions and such other terms
and conditions, not inconsistent with the terms of this Plan, as the Committee
shall deem desirable:
 
 (iii)           Conditions.  The
Committee, in its sole discretion, shall specify the Performance Period during
which, and the conditions under which, the receipt of shares of Stock covered by
the
  44
  Performance
Share award will be earned.  The Performance Period shall be no less
than three (3) months and not longer than five (5) years from the grant date of
the Performance Shares.
 
 (iv)           Stock
Certificate.  At the expiration of the Performance Period or interim
earn out performance periods, if the Committee, in its sole discretion,
determines that the conditions specified in the Performance Share agreement have
been satisfied, a stock certificate or stock certificates representing the
number of shares of Stock covered by the Performance Share award shall be issued
and delivered to the grantee.  A grantee shall not be deemed to be the
holder of Common Stock, or to have the rights of a holder of Common Stock, with
respect to the Performance Shares unless and until a stock certificate or stock
certificates representing such shares of Common Stock are issued to such
grantee.
 
 (v)           Death,
Disability or Retirement.  Subject to the provisions of the Plan, if a
grantee terminates service with the Company during a Performance Period because
of death, disability or retirement, such grantee (or his estate) shall be
entitled to receive, at the expiration of the Performance Period, a percentage
of Performance Shares that is equal to the percentage of the Performance Period
that had elapsed as of the date of termination, provided that the Committee, in
its sole discretion, determines that the conditions specified in the Performance
Share agreement have been satisfied.  In such event, a stock
certificate or stock certificates representing such shares of Common Stock shall
be issued and delivered to the grantee or the grantee’s estate, as the case may
be.
 
 (vi)           Termination
of Service.  Unless otherwise determined by the Committee at the time
of grant, the Performance Shares will be forfeited upon a termination of service
during the performance period for any reason other than death, disability or
retirement.
 
 (vii)           Change
of Control.  In the event of a Change of Control, all conditions
applicable to the Performance Shares shall terminate and a stock certificate or
stock certificates representing shares of Common Stock subject to the
Performance Shares shall be issued and delivered to the grantee.
 
 3.             Eligible
Employees and Others.  ISOs may be granted to any employee of the
Company or any Related Company.  Those officers and directors of the
Company who are not employees may not be granted ISOs under the
Plan.  Non-Qualified Options, authorizations to make Purchases and
Awards may be granted to any director (whether or not an employee), officer,
employee, or director emeritus of or consultant to the Company or any Related
Company.  The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant such individual a Stock
Right. The granting of any Stock Right to any individual or entity shall neither
entitle that individual or entity to, nor disqualify him from, participation in
any other grant of Stock Rights.
 
 4.             Stock.  The
stock subject to Options, Purchases and Awards shall be authorized but unissued
shares of Common Stock of the Company, par value six and two-thirds cents ($0.06
2/3) per share ("Common Stock"), or shares of Common Stock re-acquired by the
Company in any manner.  The aggregate number of shares which may be
issued pursuant to the Plan is 4,000,000 shares, all of which may be used for
grants of ISOs, and subject to adjustment as provided in paragraph
13.  Any such shares may be issued as Awards or pursuant to excersises
of ISOs or Non-Qualified Options, or to persons or entities making Purchases, so
long as the number of shares so issued does not exceed such aggregate number, as
adjusted or amended from time to time by a vote of stockholders or otherwise
pursuant to paragraph 13.  If any Option granted under the Plan shall
expire or terminate for any reason without having been exercised in full or
shall cease for any reason to be exercisable in whole or in part, the
unpurchased shares subject to such Option shall again be available for grants of
Stock Rights under the Plan. The maximum number of shares as to which Options,
Purchases and Awards may be granted to any particular individual in any calendar
year shall be 150,000, subject to adjustment as provided in paragraph
13.
 
 5.             Granting
of Stock Rights.
 
 (a)           Stock
Rights may be granted under the Plan at any time on or after April 9, 2008 and
prior to April 8, 2018.  The date of grant of a Stock Right under the
Plan will be the date specified by the Committee at the time it grants the Stock
Right; provided, however, that such date shall not be prior to the date on which
the Committee acts to approve the grant.  The Committee shall have the
right, with the consent of the optionee, to convert an ISO granted under the
Plan to a Non-Qualified Option pursuant to paragraph 17.
  45
  
 (b)           Anything
in the Plan to the contrary notwithstanding, the effectiveness of the Plan and
of the grant of all Stock Rights pursuant to the Plan are in all respects
subject to approval of the Plan, and the Plan and such Stock Rights granted
under it shall be of no force or effect unless and until, and no Stock Rights
granted hereunder shall in any way vest or become exercisable in any respect
unless and until, approval of the Plan is obtained, by the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock of the
Company present in person or by proxy and entitled to vote at a meeting of
stockholders at which the Plan is presented for approval, in form and substance
satisfactory to counsel for the Company.  In the event that such
stockholder approval as aforesaid has not been received by the first anniversary
of the date of adoption of the Plan by the Board, then in such event the Plan
and any Stock Rights granted under the Plan shall become null and void, and,
upon the occurrence of such stockholder approval, the Plan and such Stock Rights
shall become effective as of the date of the adoption by the Board of the Plan
or the grant of such Stock Rights, as the case may be.
 
 6.             Minimum
ISO Price; ISO Limitations.
 
 (a)             Price
for ISOs.  The exercise price per share specified in the agreement
relating to each ISO granted under the Plan shall not be less than the fair
market value per share of Common Stock on the date of such grant.  In
the case of an ISO to be granted to an employee owning stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Related Company, the price per share specified in
the agreement relating to such ISO shall not be less than one hundred ten
percent (110%) of the fair market value per share of Common Stock on the date of
grant.
 
 (b)             $100,000
Annual Limitation on ISOs.  Each eligible employee may be granted ISOs
only to the extent that, in the aggregate under the Plan and all incentive stock
option plans of the Company and any Related Company, such ISOs do not become
exercisable for the first time by such employee during any calendar year in a
manner which would entitle the employee to purchase, pursuant to the exercise of
incentive stock options (that is, ISOs), more than $100,000 in fair market value
(determined at the time the ISOs were granted) of Common Stock in that
year.  This provision is intended to impose the annual vesting
limitation contained in Section 422(b)(7) of the Code and shall be interpreted
consistently therewith.  Any Options granted to an employee in excess
of such amount will be treated as Non-Qualified Options.
 
 (c)             Determination
of Fair Market Value.  If, at the time an Option is granted under the
Plan, the Company's Common Stock is publicly traded, "fair market value" shall
be determined as of the last business day for which the prices or quotes
discussed in this sentence are available prior to the date such Option is
granted and shall mean (i) the average (on that date) of the high and low prices
of the Common Stock on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then traded on a national
securities exchange; or (ii) the last reported sale price (on that date) of the
Common Stock on the NASDAQ National Market List, if the Common Stock is not then
traded on a national securities exchange and is reported on the NASDAQ National
Market List; or (iii) the average of the closing bid and asked prices last
quoted (on that date) by an established quotation service for over-the-counter
securities, if the Common Stock is not then traded on a national securities
exchange and is not then reported on the NASDAQ National Market
List.  However, if the Common Stock is not publicly traded at the time
an option is granted under the Plan, "fair market value" shall be deemed to be
the fair value of the Common Stock as determined by the Committee after taking
into consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transac­tions negotiated at arm's length and the regulations issued by the
IRS under Code Section 409A.
 
 7.             Option
Duration.  Subject to earlier termination as provided in paragraphs 9
and 10, each Option shall expire on the date specified by the Committee, but not
more than (i) ten years from the date of grant, and (ii) five years from the
date of grant in the case of ISOs granted to an employee owning stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Related Company.  Subject to earlier
termination as provided in paragraphs 9 and 10, the term of each ISO shall be
the term set forth in the original instrument granting such ISO, except with
respect to any part of such ISO that is converted into a Non-Qualified Option
pursuant to paragraph 17.
 
 8.             Exercise
of Option.  Subject to the provisions of paragraphs 9 through 12, each
option granted under the Plan shall be exercisable as follows:
  46
  
 (a)  Full
Vesting or Partial Vesting.  The Option shall either be fully
exercisable on the date of grant or shall become exercisable thereafter in such
installments as the Committee may specify.
 
 (b)  Full
Vesting of Installments.  Once an installment becomes exercisable it
shall remain exercisable until expiration or termination of the Option, unless
otherwise specified by the Committee.
 
 (c)  Partial
Exercise.  Each Option or installment may be exercised at any time or
from time to time, in whole or in part, for up to the total number of shares
with respect to which it is then exercisable.
 
 (d)  Acceleration
of Vesting.  Options granted under the Plan shall be subject to the
accelerated vesting requirements of Section 14 below.
 
 9.             Termination
of Employment.  If an ISO optionee ceases to be employed by the
Company and all Related Companies other than by reason of death or disability as
defined in paragraph 10, no further installments of his ISOs shall become
exercisable, and his ISOs shall terminate after the passage of sixty (60) days
from the date of termination of his employment, but in no event later than on
their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to paragraph 17.  Employment shall be considered as
continuing uninterrupted during any bona fide leave of absence (such as those
attributable to illness, military obligations or governmental service), provided
that the period of such leave does not exceed ninety (90) days or, if longer,
any period during which such optionee's right to reemployment is guaranteed by
statute.  A bona fide leave of absence with the written approval of
the Committee shall not be considered an interruption of employment under the
Plan, provided that such written approval contractually obligates the Company or
any Related Company to continue the employment of the optionee after the
approved period of absence.  ISOs granted under the Plan shall not be
affected by any change of employment within or among the Company and Related
Companies, so long as the optionee continues to be an employee of the Company or
any Related Company.  No grant shall constitute an employment
contract.  Nothing in the Plan shall be deemed to give any grantee of
any Stock Right the right to be retained in employment or other service by the
Company or any Related Company for the length of any vesting schedule or for any
portion thereof or for any other period of time.
 
 10.             Death;
Disability.
 
 (a)             Death.  If
an ISO optionee ceases to be employed by the Company and all Related Companies
by reason of his death, any ISO of his may be exercised, to the extent of the
number of shares with respect to which he could have exer­cised it on the
date of his death, by his estate, personal representative or beneficiary who has
acquired the ISO by will or by the laws of descent and distribution, at any time
prior to the earlier of the specified expiration date of the ISO or 180 days
from the date of the optionee's death.
 
 (b)             Disability.  If
an ISO optionee ceases to be employed by the Company and all Related Companies
by reason of his disability, he shall have the right to exercise any ISO held by
him on the date of termination of employment, to the extent of the number of
shares with respect to which he could have exercised it on that date, at any
time prior to the earlier of the specified expiration date of the ISO or 180
days from the date of the termination of the optionee's
employment.  For the purposes of the Plan, the term "disabil­ity"
shall mean "permanent and total disability" as defined in Section 22(e)(3) of
the Code or successor statute.
 
 11.             Transferability.  The
Committee may, in its discretion, authorize all or a portion of the Options to
be granted to an optionee (other than any intended to qualify as ISOs) to be on
terms which permit transfer by such optionee to Family Members of the optionee,
provided that (i) any such transfer is not a transfer for value, (ii) the stock
option agreement pursuant to which such Options are granted must be approved by
the Committee, and must expressly provide for transferability in a manner
consistent with this paragraph 11, (iii) the specific transfer must be approved
by the Committee, and (iv) subsequent transfers of the transferred Options shall
be prohibited (except for a transfer to a Family Member of the optionee from
another Family Member of the optionee which otherwise complies with the
foregoing requirements).  For purposes hereof, a “Family Member” of an
optionee includes any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, brother-in-law, or sister-in-law, of the optionee, including
adoptive relationships, any person sharing the optionee's household (other than
a tenant or employee of the
  47
  optionee),
a trust in which above-described Family Members have more than fifty percent of
the beneficial interest, a foundation in which such above-described Family
Members (or the optionee) control the management of assets, and any other entity
in which such above-described Family Members (or the optionee) own more than
fifty percent of the voting interests.  The following transactions
shall not be deemed transfers for value: (A) a transfer under a domestic
relations order in settlement of marital property rights; and (B) a transfer to
an entity in which more than fifty percent of the voting interests are owned by
Family Members (or the optionee) in exchange for an interest in that
entity.  Except with respect to Options that shall be transferred in
accordance with this paragraph 11, all Options shall be exercisable during the
lifetime of the grantee only by him.  Following a transfer, any such
Options shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, provided that, for purposes of
paragraph 16, the term "optionee" or "grantee" shall be deemed to refer to the
transferee.  The events of termination of employment under paragraph 9
shall continue to be applied with respect to the original optionee, following
which the Options shall be exercisable by the transferee only to the extent, and
for the periods, specified in paragraph 9, and the Company shall have no
obligation to provide notice to a transferee of any early termination of an
Option on account of termination of the employment of the original optionee or
otherwise.  The original optionee shall remain subject to withholding
taxes upon exercise.
 
 12.             Terms
and Conditions.  Options and other Stock Rights shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve.  Such instruments shall conform to the
terms and conditions set forth in paragraphs 2 through 11 hereof, as applicable,
and may contain such other provisions as the Committee deems advisable which are
not incon­sistent with the Plan, including restrictions applicable to shares
of Common Stock issuable upon exercise of Options or issued or otherwise
acquired pursuant to other Stock Rights.  Without limiting the
foregoing, the Committee may provide in connection with the grant of a Stock
Right for the termination and/or cancellation of such Stock Right if the
grantee's employment shall be terminated for cause.  In granting any
Non-Qualified Option, the Committee may specify that such Non-Qualified Option
shall be subject to the restrictions set forth herein with respect to ISOs,
and/or to such termination and cancellation provisions as the Committee may
determine.  The Committee may from time to time confer authority and
responsibility on one or more of its own members and/or one or more officers of
the Company to execute and deliver such instruments.  The proper
officers of the Company are authorized and directed to take any and all action
necessary or advisable from time to time to carry out the terms of such
instruments.
 
 13.             Adjustments.  Upon
the occurrence of any of the follow­ing events, an optionee's rights with
respect to options granted to him under the Plan shall be adjusted as
hereinafter provided, unless otherwise specifically provided in the written
agreement between the optionee and the Company relating to such
Option:
 
 (a)             Stock
Dividends and Stock Splits.  If the shares of Common
Stock  shall be subdivided or combined into a greater or smaller
number of shares or if the Company shall issue any shares of Common Stock as a
stock dividend on its outstanding Common Stock, the number of shares of Common
Stock deliver­able upon the exercise of Options shall be appropriately
increased or decreased proportionately, and appropriate adjustments shall be
made in the purchase price per share to reflect such subdivision, combination or
stock dividend.
 
 (b)             Consolidations
or Mergers.  If the Company is to be consolidated with or acquired by
another entity in a merger, sale of all or substantially all of the Company's
assets or otherwise (an "Acquisition"), the Committee or the board of directors
of any entity assuming the obligations of the Company under the Plan (the
"Successor Board"), shall, as to outstanding Options, take one or more of the
following actions: (i) make appropriate provision for the continuation of such
Options by substituting on an equitable basis for the shares then subject to
such Options, or make provision for the exchange of such Options for, the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition (less the exercise price thereof not paid); or
(ii) make appropriate provision for the continuation of such Options by
substituting on an equitable basis for the shares then subject to such Options
any equity securities of the successor corporation; or (iii) upon written notice
to the optionees, provide that all Options must be exercised, to the extent then
exercisable, within a specified number of days from the date of such notice, at
the end of which period the Options shall terminate; or (iv) terminate all
Options in exchange for a cash payment equal to the excess of the fair market
value (determined as of the date in question in a manner consistent with
paragraph 6(c)) of the shares subject to such Options (to the extent then
exercisable) over the exercise price thereof; or (v) accelerate the date of
exercise of such Options or of any installment of any such Options; or (vi)
terminate all Options in exchange on an equitable
  48
  basis for
the grant of similar stock options for the purchase of shares of capital stock
of any successor corporation; or (vii) any combination of any of the foregoing
referred to in clauses (i) through (vi) above.
 
 (c)             Recapitalization
or Reorganization.  In the event of a recapitalization or
reorganization of the Company (other than a transaction described in
subparagraph (b) above) pur­suant to which securities of the Company or of
another corporation are issued with respect to the outstanding shares of Common
Stock, an optionee upon exercising an Option shall be entitled to receive for
the purchase price paid upon such exercise the securities he would have received
if he had exercised his Option prior to such recapitalization or
reorganization.
 
 (d)             Modification
of ISOs.  Notwithstanding the foregoing, any adjustments made pursuant
to subparagraphs (a), (b) or (c) with respect to ISOs shall be made only after
the Committee, after consulting with counsel for the Company, determines whether
such adjustments would constitute a "modification" of such ISOs (as that term is
defined in Section 424 of the Code) or would cause any adverse tax consequences
for the holders of such ISOs.  If the Committee determines that such
adjustments made with respect to ISOs would constitute a modification of such
ISOs, it may refrain from making such adjustments.
 
 (e)             Dissolution
or Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, each Option will terminate immediately prior to the
consummation of such proposed action or at such other time and subject to such
other conditions as shall be determined by the Commit­tee.
 
 (f)             Issuances
of Securities.  Except as expressly provided herein, no issuance by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares subject to
Options.  No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
 
 (g)             Fractional
Shares.  No fractional shares shall be issued under the Plan and the
optionee shall receive from the Company cash in lieu of such fractional
shares.
 
 (h)             Adjustments.  Upon
the happening of any of the foregoing events described in subparagraphs (a), (b)
or (c) above, the class and aggregate number of shares set forth in paragraph 4
that are subject to Stock Rights which previously have been or subsequently may
be granted under the Plan, and the maximum number of shares as to which Options
may be granted to any one individual, as provided in paragraph 4, shall also be
appropriately adjusted to reflect the events described in such
subparagraphs.  The Committee or the Successor Board shall determine
the specific adjustments to be made under this paragraph 13 and, subject to
paragraph 2, its determination shall be conclusive.  If any person or
entity owning restricted Common Stock obtained by exercise of a Stock Right made
under the Plan receives shares or securities or cash in connection with a
corporate transaction described in subparagraphs (a), (b) or (c) above as a
result of owning such restricted Common Stock, such shares or securities or cash
shall be subject to all of the conditions and restrictions applicable to the
restricted Common Stock with respect to which such shares or securities or cash
were issued, unless otherwise determined by the Committee or the Successor
Board.
  14.           Change
of Control.
  (a)           “Change
of Control” means the occurrence of any of the following events:
  (i)
            the
acquisition or holding by any Person of combined voting power of fifty percent
(50%) or greater of the then outstanding equity securities of the
Company;
  (ii)         
consummation of a reorganization, merger, or consolidation to which the Company
is a party or a sale of all or substantially all the assets of the Company to
another entity, if more than fifty percent (50%) of the combined voting power of
the continuing or surviving entity’s securities outstanding immediately after
such merger, consolidation or other reorganization is owned by persons who were
not stockholders of the Company immediately prior to such merger, consolidation
or other reorganization;
  (iii)           approval
by the stockholders of the Company of a complete liquidation or dissolution of
the Company; or
  49
   (iv)           any
other event, including a merger or other transaction, which the Committee
designates as a Change in Control with respect to the Company.
 (v)           Notwithstanding
the foregoing, in the event of any Award subject to Code Section 409A, Change of
Control shall mean a Change of Control as provided under Code Section 409A and
the regulations issued thereunder.
 
 (b)           Unvested
Awards.  Notwithstanding any provision in this Plan or any Award agreement,
in the event of a Change of Control, as defined in paragraph (a) above,
(i) all outstanding Options and SARs shall vest immediately and become
exercisable in full, (ii) the restrictions applicable to any outstanding
shares of Restricted Stock shall lapse, (iii) the Performance Period
applicable to any outstanding Performance Shares shall lapse, and (iv) the
performance goals applicable to any outstanding Performance Shares shall be
deemed to be satisfied.
  15.             Means
of Exercising Stock Rights.  A Stock Right (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address.  Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the purchase price therefore
either (a) in United States dollars in cash or by check, or (b) at the
discretion of the Committee, through delivery of shares of Common Stock having a
fair market value equal as of the date of the exercise (determined as of the
date in question in a manner consistent with paragraph 6(c)) to the cash
exercise price of the Stock Right, or (c) at the discretion of the Committee, by
delivery of the grantee's personal recourse note bearing interest payable not
less than annually at no less than 100% of the lowest Applicable Federal Rate,
as defined in Section 1274(d) of the Code, or (d) in the discretion of the
Committee, by delivery (including by telecopier) to the Company or its
designated agent of an executed irrevocable option exercise form together with
irrevocable instructions to a broker-dealer to sell (or margin) a sufficient
portion of the shares and deliver the sale (or margin loan) proceeds directly to
the Company to pay for the exercise price, or (e) at the discretion of the
Committee, by any combination of (a), (b), (c) or (d) above.  If the
Committee exercises its discretion to permit payment of the exercise price of an
ISO by means of the methods set forth in clauses (b), (c) or (d) of the
preceding sentence, such discretion shall be exercised in writing at the time of
the grant of the ISO in question.  The holder of a Stock Right shall
not have the rights of a stockholder with respect to the shares covered by his
Stock Right until the date of issuance of a stock certificate to him for such
shares.  Except as expressly provided above in paragraph 13 with
respect to changes in capitalization and stock dividends, no adjustment shall be
made for dividends or similar rights for which the record date is before the
date such stock certificate is issued.
 
 16.             Term
and Amendment of Plan.  The Plan shall expire on April 7, 2018 (except
as to Options outstanding on that date).  The Board may terminate or
amend the Plan in any respect at any time, except that, without the approval of
the stockholders obtained within 12 months before or after the Board adopts a
resolution authorizing any of the following actions: (a) the total number of
shares that may be issued under the Plan may not be increased (except by
adjustment pursuant to paragraph 13); (b) the provisions of paragraph 3
regarding eligibility for grants of ISOs may not be modified; (c) the provisions
of paragraph 6(a) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph
13); and (d) the expiration date of the Plan may not be
extended.  Except as otherwise provided in this paragraph 16, in no
event may action of the Board or stockholders amending the Plan alter or impair
the rights of a grantee, without his consent, under any Stock Right previously
granted to him.
 
 17.             Conversion
of ISOs into Non-Qualified Options; Termination of ISOs.  The
Committee, at the written request of any optionee, may in its discretion take
such actions as may be necessary to convert such optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the optionee is an employee of
the Company or a Related Company at the time of such conversion.  Such
actions may include, but not be limited to, extending the exercise period or
reducing the exercise price of the appropriate installments of such
Options.  At the time of such conversion, the Committee (with the
consent of the optionee) may impose such conditions on the exercise of the
resulting Non-Qualified Options as the Committee in its discretion may
determine, provided that such conditions shall not be inconsistent with the
Plan.  Nothing in the Plan shall be deemed to give any optionee the
right to have such optionee's ISOs converted into Non-Qualified Options, and no
such conversion shall occur until and unless the Committee takes appropriate
action.  The Committee, with the consent of the optionee, may also
terminate any portion of any ISO that has not been exercised at the time of such
termination.
  50
   
 18.             Application
of Funds.  The proceeds received by the Company from the sale of
shares pursuant to Options granted and Purchases authorized under the Plan shall
be used for general corporate purposes.
 
 19.             Governmental
Regulation.  The Company's obligation to sell and deliver shares of
the Common Stock under this Plan is subject to the approval of any governmental
authority required in connection with the authorization, issuance or sale of
such shares.
 
 20.             Withholding
of Income Taxes.  Upon the exercise of a Non-Qualified Option, the
making of a Purchase of Common Stock for less than its fair market value, the
making of a Disqualifying Disposition (as defined in paragraph 21), the exercise
of an Option transferred by the original optionee in accordance with paragraph
11, the award of vested shares of Common Stock, or the vesting of restricted
Common Stock acquired pursuant to a Stock Right under the Plan, the Company, may
require the optionee,  purchaser, grantee or original optionee to pay
to the Company in cash an amount equal to all applicable withholding taxes in
respect of the amount that is considered compensation includable in such
person's gross income.  The Committee in its discretion may condition
(i) the exercise of an Option,  (ii) the making of a Purchase of
Common Stock for less than its fair market value, (iii) the Awards of vested
shares of Common Stock, (iv) the vesting of restricted Common Stock acquired
pursuant to a Stock Right, or (i) the exercise of a transferred Option, on the
grantee's payment of such amount.
 
 21.             Notice
to Company of Disqualifying Disposition.  Each employee who receives
an ISO must agree to notify the Company in writing immediately after the
employee makes a Disqualifying Disposition of any Common Stock acquired pursuant
to the exercise of an ISO.  A “Disqualifying Disposition” is any
disposition (including any sale) of such Common Stock before the later of (a)
two years after the date the employee was granted the ISO, or (b) one year after
the date the employee acquired Common Stock by exercising the ISO.  If
the employee has died before such stock is sold, these holding period
requirements do not apply and no Disqualifying Disposition can occur
thereafter.
 
 22.             Governing
Law; Construction.  The validity and construc­tion of the Plan and
the instruments evidencing Stock Rights shall be governed by the laws of the
State of Maryland or the laws of any jurisdiction in which the Company or its
successors in interest may be organized.  In construing this Plan, the
singular shall include the plural and the masculine gender shall include the
feminine and neuter, unless the context otherwise requires.
 
 23.           Qualified
Performance-Based Compensation.
 
 (a)           Designation
as Qualified Performance-Based Compensation.  The Committee may
determine that SARs, Restricted Stock or Performance Shares granted to an
employee shall be considered “qualified performance-based compensation” under
Code section 162(m). The provisions of this Section 23 shall apply to any such
grants that are to be considered “qualified performance-based compensation”
under Code section 162(m).  To the extent that grants of SARs,
Restricted Stock or Performance Shares are designated as “qualified
performance-based compensation” under Code section 162(m) are made, no such
grant may be made as an alternative to another grant that is not designated as
“qualified performance based compensation” but instead must be separate and
apart from all other grants made.
 
 (b)           Performance
Goals.  When SARs, Restricted Stock or Performance Shares that are to
be considered “qualified performance-based compensation” are granted, the
Committee shall establish in writing (i) the objective performance goals that
must be met, (ii) the period during which performance will be measured, (iii)
the maximum amounts that may be paid if the performance goals are met, and (iv)
any other conditions that the Committee deems appropriate and consistent with
the Plan and the requirements of Code section 162(m) for “qualified
performance-based compensation.”  The performance goals shall satisfy
the requirements for “qualified performance-based compensation,” including the
requirement that the achievement of the goals be substantially uncertain at the
time they are established and that the performance goals be established in such
a way that a third party with knowledge of the relevant facts could determine
whether and to what extent the performance
  51
  goals
have been met.  The Committee shall not have discretion to increase
the amount of compensation that is payable upon achievement of the designated
performance goals, but the Committee may reduce the amount of compensation that
is payable upon achievement of the designated performance goals.
 
 (c)           Criteria
Used for Objective Performance Goals.  In setting the performance
goals for grants designated as “qualified performance-based compensation”
pursuant to this Section 23, the Committee shall use objectively determinable
performance goals based on one or more of the following criteria: pre- or
after-tax net earnings, sales or revenue, operating earnings, operating cash
flow, return on net assets, return on shareholders’ equity, return on assets,
return on capital, stock price growth, shareholder returns, gross or net profit
margin, earnings per share, price per share, market share, or strategic business
criteria consisting of one or more Corporation objectives based on meeting
specified revenue goals, market penetration goals, geographic business expansion
goals, cost targets, product development goals, goals relating to acquisitions
or divestitures, or any other objective measure derived from any of the
foregoing criteria.  The performance goals may relate to the
employee’s business unit or the performance of the Corporation as a whole, or
any combination of the foregoing.  Performance goals need not be
uniform as among employees.
 
 (d)           Timing
of Establishment of Goals. The Committee shall establish the performance goals
in writing either before the beginning of the performance period or during a
period ending no later than the earlier of (i) 90 days after the beginning of
the performance period or (ii) the date on which 25% of the performance period
has been completed, or such other date as may be required or permitted under
applicable regulations under Code section 162(m).
 
 (e)           Announcement
of Results.  The Committee shall certify and announce the results for
the performance period to all grantees after the Corporation announces the
Corporation’s financial results for the performance period.  If and to
the extent that the Committee does not certify that the performance goals have
been met, the applicable grants for the performance period shall be forfeited or
shall not be paid, as applicable.
 
 (f)           Death,
Disability or Other Circumstances.  The Committee may provide that
grants shall be payable or restrictions shall lapse, in whole or in part, in the
event of the grantee’s death or disability during the performance period, a
Change of Control or under other circumstances consistent with the Treasury
regulations and rulings under Code section 162(m).
 
 (g)           Shareholder
Approval for “Qualified Performance-Based Compensation.”  If SARs,
Restricted Stock or Performance Shares are to be granted as “qualified
performance-based compensation”, the Plan must be re-approved by the Company’s
shareholders no later than the first shareholders meeting that occurs in the
fifth year following the year in which the shareholders previously approved the
Plan, if additional grants are to be made under Section 23 and if required by
section 162(m) of the Code or the regulations thereunder.  Any such
re-approval shall not affect outstanding grants made within the five-year period
following the year in which the previous approval was obtained.
 
 24.           Unfunded
Status of Plan.  The Planis intended to
constitutean “unfunded” plan for incentive and deferred
compensation.  With respect to any payments not yet made to a grantee
or optionee by the Company, nothing contained herein shall give any such grantee
or optionee any rights that are greater than those of a general creditor of the
Company.  In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Common Stock or payments in lieu of Common Stock or with
respect to awards hereunder.
 
 25.           No
Right to Continued Employment.  The adoption of the Plan shall not
confer upon any employee of the Company any right to continued employment with
the Company, nor shall it interfere in any way with the right of the Company to
terminate the employment of any of its employees at any time.
 
 26.           Section
409A Compliance.  This Plan is intended to comply with the
requirements of Code Section 409A, and the regulations issued
thereunder.  To the extent of any inconsistencies with the
requirements of Code Section 409A, the Plan shall be interpreted and amended in
order to meet such Code Section 409A requirements.  Notwithstanding
anything contained in this Plan or in any amendments attached hereto to the
contrary, it is the intent of the Company to have this Plan interpreted and
construed to comply with any and all provisions Code Section 409A including any
subsequent amendments, rulings or interpretations from appropriate governmental
agencies.
  52
   
 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 12, 2008
 
 The
undersigned hereby appoints Dino A. Rossi, 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 12, 2008, 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
 
  54
  
 Election
      of Directors:
                
                Election
      of two (2)
                Class
      3 Directors
                
                Nominees
      for Election as Class 3 Directors: Perry W. Premdas and Dr. John
      Y. Televantos
              For
      All
                
                
                [   ]
              Withhold
      All
                
                
                [   ]
              For
      All Except*
                
                [   ]Proposal
      to approve an amendment to the Articles of Incorporation increasing the
      number of authorized shares of Common Stock from 25,000,000 to
      60,000,000.
              For
                
                [   ]
              Against
                
                [   ]
              Abstain
                
                [   ]Proposal
      to approve the amendments to the Amended and Restated 1999 Stock
      Plan
              For
                
                [   ]
              Against
                
                [   ]
              Abstain
                
                [   ]Ratification
      and approval of the appointment of McGladrey and Pullen, LLP, as the
      Company's independent registered accounting firm for the year
      2008
              For
                
                [   ]
              Against
                
                [   ]
              Abstain
                
                [   ]
 
 *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;
FOR the ratification and approval of the appointment of McGladrey and Pullen,
LLP, as the Company’s independent registered accounting firm for the year 2008;
FOR the proposal to amend the Articles of Incorporation as described above; and
FOR the approval of the amendment to the Amended and Restated 1999 Stock
Plan.
 
 The Board
of Directors recommends a vote: FOR each named nominee for election as a
Director; FOR the ratification and approval of the appointment of McGladrey and
Pullen, LLP, as the Company’s independent registered accounting firm for the
year 2008; FOR the proposal to amend the Articles of Incorporation as described
above; and FOR the approval of the amendment to the Amended and Restated 1999
Stock Plan.
 
 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