ASSET PURCHASE AGREEMENT

      AGREEMENT made this ____ day of November, 2007, by and between PFALTZ & BAUER, INC. , a Connecticut corporation having its principal office at 172 East Aurora Street, Waterbury, Connecticut 06708 ("Buyer"), UNITED-GUARDIAN, INC. , a Delaware corporation having its principal office at 230 Marcus Boulevard, Hauppauge, New York,

      WHEREAS , the Seller operates a small quantity and bulk chemical business (the “Business”) in Hauppauge, New York, which the Seller desires to close down and liquidate; and

     WHEREAS , the Buyer operates a laboratory and bulk chemical business in Waterbury, Connecticut; and;

     WHEREAS , the Buyer desires to acquire certain assets of the Seller utilized to conduct the Business and the Seller desires to sell said assets; and

     WHEREAS , the Guarantor is willing to facilitate said sale by guaranteeing all of the obligations of the Seller, its wholly owned subsidiary, under this Agreement and to make certain supporting agreements of its own.

      NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements hereinafter contained, the parties agree as follows:

§1. SALE OF ASSETS . Seller agrees that, subject to the terms and conditions of this Agreement, Seller will convey, sell, assign, transfer and deliver to the Buyer free and clear of all liens, security interests and encumbrances, at the Closing hereinafter specified, all of the following assets, both tangible and intangible, of the Seller of every kind and description wherever located owned or controlled by the Seller as of the close of

1

business on the date of Closing (excluding only those assets specified below) including without limitation:

2

The assets to be conveyed, transferred, assigned and delivered as set forth in this Section 1 are hereinafter collectively referred to as the "Assets", and shall include, without limitation, all assets and property of the Seller of the same type hereafter acquired by the Seller prior to the Closing Date, except for (i) inventory disposed of in the ordinary course of business or otherwise in accordance with this Agreement, and (ii) the following Assets (hereinafter the "Excluded Assets"):

3

§2 . PRICE AND CONSIDERATION .

      §2.01 Basic Purchase Price . The purchase price of the Assets (herein called the "Purchase Price") shall be THREE HUNDRED THOUSAND DOLLARS ($300,000), based on September 9, 2007 inventory value of $179,203. If the inventory value at Closing is higher or lower by more than 5% the price shall be adjusted upward or downward by the inventory value in excess of the 5% permitted variance. The Purchase Price shall be allocated as set forth in SCHEDULE 2.01 attached hereto. The Buyer and the Seller (i) shall execute and file all tax returns in a manner consistent with the allocation so set forth on SCHEDULE 2.01 and (ii) shall not take any position on any tax return, before any governmental authority or in any judicial proceeding that is inconsistent with such allocation. The Seller and the Buyer shall each timely file a Form 8594 with the Internal Revenue Service in accordance with the requirements of Section 1060 of the Internal Revenue Code. .

      §2.02 Inventory Count . Prior to the Closing Seller and Buyer will jointly undertake an inventory count and listing of chemicals, to assure proper labeling of all of Eastern Chemical’s which are being purchased pursuant to this Agreement. Upon signing of this Agreement the parties will work together to plan in detail the packing, labeling and shipping of the inventory to Buyer’s plant in Waterbury, Connecticut at Buyer’s expense. No hazardous waste shall be included.

      §2.03 Restrictions Against Competition. The Seller shall deliver at Closing Non-Competition Agreements in the form attached hereto as EXHIBIT 2.03 , executed by the Seller and Guarantor, together with Derek Hampson (a key employee of Seller). The parties agree that the undertaking by each party and the key employee not to

4

compete with the Buyer is a material part of this Agreement and therefore shall be a Buyer’s condition of Closing.

      §2.04 Excluded Liabilities. The Buyer shall not assume, and shall not be responsible for the payment, performance or discharge of any debts, liabilities or obligations of the Seller of any kind or nature whatsoever and whether now or hereafter arising, except as specifically set forth above under Sub-Section 1(h) hereof, and, without limiting the generality of the foregoing, Buyer shall not assume and shall not be responsible for the payment, performance or discharge of the following:

5

      All of the foregoing liabilities shall hereinafter be referred to as the “Excluded Liabilities”.

      §2.05. DOWN PAYMENT . Simultaneously with the execution of this Agreement the Buyer has paid to the Seller a nonrefundable, good faith deposit in the amount of Forty Thousand Dollars ($40,000.00) which shall be credited to the Purchase Price at the Closing. In the event, however, Buyer fails to complete the sale by the close of business on December 10, 2007, through no fault on the part of the Seller and the Seller not being in default, then said Forty Thousand Dollars shall be forfeited and constitute liquidated damages to compensate Seller for all damages, including not being

6

able to offer the Business to any other potential buyers during the period between the signing of this Agreement and the Closing. Buyer acknowledges that time is of the essence in completing this transaction by the end of 2007 due to the retirement of a key employee of the Seller.

      §3. CONSENTS . To the extent that the assignment of any contract, license, lease, agreement, commitment, sales order or purchase order to be assigned to the Buyer as provided herein shall require the consent of other parties thereto or of any third parties, this Agreement shall not constitute an agreement to assign the same if an attempted assignment would constitute a breach thereof or of other obligations or commitments of the Seller. The Seller, Guarantor and the Buyer agree to use their respective commercially reasonable efforts (without expenditure of funds) to obtain all such consents and, at the request of the other, to continue such efforts after the Closing Date, it being agreed between the parties that neither the Seller, Guarantor nor Buyer shall be obligated to make any payment to any person as consideration for the granting by such person of any such consent. If any such consent is not obtained, the Seller agrees to cooperate with Buyer in any reasonable arrangement (such as subcontracting, sublicensing or subleasing) designed to provide for the Buyer all of the benefits of the Seller under such contract, license, lease, agreement, commitment, sales order or purchase order, as the case may be (including enforcement for the benefit of the Buyer and at the Buyer’s cost) and any and all rights of the Seller arising out of the breach or cancellation of such contract, license, lease, agreement, commitment, sales order or purchase order.

      §4. CLOSING. The Closing of this Agreement shall take place at the offices of United Guardian, Inc. in Hauppauge, New York at 10:30 a.m., local time, December 3, 2007, or at such other time, date and place as the parties may agree upon in writing, but in no event later than December 10, 2007. Such time and date are herein referred to as the "Closing Date." By mutual agreement of the parties, however, the Closing may also occur by exchange of documents via fax and overnight mail. Funds for the balance of the

7

Purchase Price, after deducting the deposit, will be wire transferred to the Seller, or its designated agent, as required by Section 12 below.

      §5. REPRESENTATIONS AND WARRANTIES . As used in this Agreement the term “Seller’s Knowledge” shall mean the actual knowledge of each of the Seller’s officers and directors, and “Guarantor’s Knowledge” shall refer the actual knowledge of each of Guarantor’s officers, based on, and assuming that each of such officers and directors, had conducted, a reasonable investigation of the relevant matters. The Seller and Guarantor make the following representations and warranties to the Buyer as an inducement to enter into this Agreement:

      §5.01 Seller . The Seller and Guarantor are each a corporation duly organized, validly existing and in good standing under the laws of the State of New York and the State of Delaware respectively, having the corporate power to carry on its business as it is now being conducted, and are duly qualified or licensed as a foreign corporation in each jurisdiction where its activities or property owned, leased or operated by it require such qualification, and is in good standing therein, all as set forth in SCHEDULE 5.01 attached hereto and made a part hereof.

      §5.02 Authority and Consents . The execution and delivery of this Agreement and the sale contemplated herein have been duly authorized by the Seller's sole Stockholder and Board of Directors, and by Guarantor’s Board of Directors, which have full power and authority to authorize such actions. Neither the execution and delivery of this Agreement, the consummation of the transactions herein contemplated nor compliance with the terms of this Agreement will conflict with or constitute a default under any indenture or other agreement or instrument to which the Seller or the Guarantor is a party or by which either of them is bound.

8

     §5.03 Financial Information .

      (a) Seller has delivered to the Buyer certain financial information about the Seller’s business operations, including segment information taken from Guarantor’s audited consolidated financial statements. The segment information concerning the Seller contained in the Guarantor’s audited financial statements and notes fairly present, in accordance with generally accepted accounting principals consistently applied, the revenues, net income and allocated assets for the Seller. By entering into this Agreement Buyer acknowledges that the information provided to it has been sufficient for it to evaluate the Business.

      (b) Since January 1, 2007, the Seller has operated the Business only in the ordinary course. There has not been, and neither the Seller nor Guarantor is aware of any circumstance which could reasonably be foreseen as possibly giving rise to, any material adverse change in the financial condition, business operations or prospects of the Seller or the Business.

      §5.04 Tax Matters . Seller has filed all tax returns of every kind, nature or description required to be filed by Seller and has paid or remitted to the proper authority all taxes and assessments, including, without limitation, all excise taxes, sales taxes, payroll withholding taxes, FICA taxes, unemployment taxes, and personal property taxes, which are required to be paid or remitted by Seller, where the failure to file such returns or pay such taxes and assessments could result in a lien on any of the Assets or in any other liability to the Buyer as a result of the transactions contemplated by this Agreement.

      §5.05 Title to Assets . The Seller is the owner of all assets used in its operations including, without limitation, those Assets to be sold to Buyer pursuant to this Agreement, free and clear of all liens, encumbrances, security interests, exceptions to title or any other charges or restrictions or title retention agreements of any kind or character whatsoever, except as set forth in SCHEDULE 5.05 . At the Closing, the Assets will be sold to Buyer free and clear of all liens, encumbrances, security interests, exceptions to

9

title or any other charges or restrictions or title retention agreements of any kind or character whatsoever.

      §5.06 Patents and Trademarks . There are no patents, trademarks, service marks, tradenames or copyrights owned or used by or licensed to the Seller in connection with the Business except the names “Eastern Chemical Corp” and “Paragon Organic Chemicals”. No Stockholder, affiliate, or to Seller’s or Guarantor’s Knowledge, employee of the Seller owns any patents or patent applications or any inventions, secret formulae or processes, trade secrets or other similar rights used by Seller in the Business, nor is any of them a party to any license agreement used by the Seller in the Business.

      §5.07 Insurance. The Seller maintains casualty insurance, general liability insurance, and product liability insurance policies with respect to the Seller and the Assets. Such policies are in full force and effect and are free from any right of termination on the part of the insurance carriers without ten (10) days prior written notice to the Seller. Such policies, with respect to their amounts and types or coverage, are adequate to fully insure against risks to which the Seller and its property and assets are normally exposed in the operation of its Business. All such policies as presently written will be maintained in full force and effect through the Closing Date.

      §5.08 Status of Contracts Seller represents that it has no binding contracts for the purchase or sale of chemicals, leases, licenses, or any other legally binding agreements. It does have some blanket orders for both the purchase and sale of inventory items, but those can be cancelled at any time by either party thereto. Except as set forth in SCHEDULE 5.08 , to Seller’s Knowledge or Guarantor’s Knowledge, there are no material pending disputes with customers of the Seller regarding quality or return of goods which will not be reasonably resolved prior to the Closing Date, and since December 31, 2006 there has been no loss or threatened loss of a major customer.

     §5.9 Compliance With the Law . To Seller’s or Guarantor’s Knowledge, the Seller's operation of the Business is not in violation of any applicable federal, state, or

10

local law, regulation or any requirement of any governmental, regulatory or administrative agency or authority or court or other tribunal (including, but not limited to, any law, regulation, order or requirement relating to securities, properties, business, products, manufacturing processes, the environment, advertising, sales or employment practices, terms and conditions of employment, occupational safety, health and welfare conditions of occupied premises, product safety and liability or civil rights), which might become an impediment to consummation of the transactions contemplated by this Agreement, or might result in the imposition of transferee liability on the Buyer. The Seller is not now charged with, nor to Seller’s or Guarantor’s Knowledge is it under investigation with respect to, any violation of any applicable law, regulation, order or requirement relating to any of the foregoing.

     §5.10 Litigation . Except as set forth in SCHEDULE 5.10 :

      (a) There are no legal, administrative, arbitration or other proceedings or governmental investigations pending or, to Seller’s or Guarantor’s Knowledge, threatened, against Seller specifically relating to the Seller or the Assets or the transactions contemplated by the Agreement or under insolvency laws for the protection of creditors;

      (b) There are no judgments, decrees or orders of any court, or any governmental department, commission, board, agency or instrumentality binding upon the Seller, the effect of which is to prohibit any business practice or the acquisition of any property or the conduct of any business by the Seller or which limit or control or otherwise adversely affect the Seller's method or manner of doing business.

      §5.11 Product Warranty . To Seller’s or Guarantor’s Knowledge, each product manufactured, sold, leased, installed, or delivered or service performed by the Seller has been in conformity with all applicable contractual commitments and all express and implied warranties, and the Seller has no liability for replacement or repair thereof or other damages in connection therewith.

11

      §5.12 Product Liability . To Se