10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended June 30, 2008

or

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Transition Period from    to

Commission File Number 0-10763

Atrion Corporation

(Exact Name of Registrant as Specified in its Charter)

Delaware	63-0821819
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

One Allentown Parkway, Allen, Texas  75002

(Address of Principal Executive Offices)   (Zip Code)

(972) 390-9800

(Registrant’s Telephone Number, Including Area Code)

Indicate by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.               x Yes                 o No

Indicate by check whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “accelerated filer.” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer  o Accelerated filer  x Non-accelerated filer  o Smaller reporting company  o

Indicate by check whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

       o   Yes                          x   No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Title of Each Class	Number of Shares Outstanding at July 30, 2008
Common stock, Par Value $0.10 per share	1,967,285

ATRION CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

PART I.    Financial Information		2
Item 1.	Financial Statements
	Consolidated Statements of Income (Unaudited) For the Three and Six months Ended June 30, 2008 and 2007	3
	Consolidated Balance Sheets (Unaudited) June 30, 2008 and December 31, 2007	4
	Consolidated Statements of Cash Flows (Unaudited) For the Six months Ended June 30, 2008 and 2007	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	12
Item 4.	Controls and Procedures	13
PART II.   Other Information		14
Item 1.	Legal Proceedings	14
Item 1A.	Risk Factors	14
Item 4.	Submission of Matters to a Vote of Security Holders	14
Item 6.	Exhibits and Reports on Form 8-K	14
SIGNATURES		15

1

PART I

FINANCIAL INFORMATION

2

Item 1.  Financial Statements

ATRION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
	(in thousands, except per share amounts)
Revenues	$	24,242		$	23,199		$	48,844		$	46,237
Cost of goods sold		13,137			12,880			27,059			26,258
Gross profit		11,105			10,319			21,785			19,979
Operating expenses:
Selling		1,646			1,672			3,345			3,323
General and administrative		2,505			2,471			5,245			5,088
Research and development		823			750			1,610			1,405
		4,974			4,893			10,200			9,816
Operating income		6,131			5,426			11,585			10,163
Other income:
Interest income		49			10			85			20
Interest expense		--			(77	)		--			(218	)
Other income (expense), net		1			--			1			--
		50			(67	)		86			(198	)
Income before provision for income taxes		6,181			5,359			11,671			9,965
Provision for income taxes		(2,046	)		(1,741	)		(3,880	)		(3,210	)
Net income	$	4,135		$	3,618		$	7,791		$	6,755
Income per basic share	$	2.11		$	1.92		$	4.00		$	3.60
Weighted average basic shares outstanding		1,956			1,883			1,946			1,878
Income per diluted share	$	2.06		$	1.83		$	3.89		$	3.42
Weighted average diluted shares outstanding		2,005			1,978			2,004			1,977
Dividends per common share	$	0.24		$	0.20		$	0.48		$	0.40

The accompanying notes are an integral part of these statements.

3

ATRION CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30,			December 31,
Assets	2008			2007
	(in thousands, except per share amounts)
Current assets:
Cash and cash equivalents	$	7,803		$	3,531
Accounts receivable		12,116			9,601
Inventories		20,231			17,387
Prepaid expenses		1,167			1,483
Other		607			607
		41,924			32,609
Property, plant and equipment		92,819			89,736
Less accumulated depreciation and amortization		38,187			35,686
		54,632			54,050
Other assets and deferred charges:
Patents		1,853			2,011
Goodwill		9,730			9,730
Other		1,102			913
		12,685			12,654
	$	109,241		$	99,313
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	6,473		$	6,349
Accrued income and other taxes		1,862			515
		8,335			6,864
Line of credit		--			--
Other non-current liabilities		7,150			7,007
Stockholders’ equity:
Common shares, par value $0.10 per share; authorized 10,000 shares, issued 3,420 shares		342			342
Paid-in capital		18,674			15,790
Accumulated other comprehensive loss		(486	)		(486	)
Retained earnings		110,865			104,021
Treasury shares,1,453 at June 30, 2008 and 1,509 at December 31, 2007, at cost		(35,639	)		(34,225	)
Total stockholders’ equity		93,756			85,442
	$	109,241		$	99,313

The accompanying notes are an integral part of these financial statements.

4

ATRION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months Ended June 30,
	2008			2007
	(In thousands)
Cash flows from operating activities:
Net income	$	7,791		$	6,755
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,054			2,637
Deferred income taxes		242			333
Stock-based compensation		327			131
Other		37			35
		11,451			9,891
Changes in operating assets and liabilities:
Accounts receivable		(2,515	)		(1,026	)
Inventories		(2,844	)		140
Prepaid expenses		316			303
Other non-current assets		(189	)		(35	)
Accounts payable and current liabilities		125			294
Accrued income and other taxes		1,347			572
Other non-current liabilities		(98	)		118
		7,593			10,257
Cash flows from investing activities:
Property, plant and equipment additions		(3,515	)		(3,758	)
Cash flows from financing activities:
Line of credit advances		--			13,826
Line of credit repayments		--			(20,525	)
Exercise of stock options		525			499
Shares tendered for employees’ taxes on stock option exercises		(870	)		(47	)
Tax benefit related to stock options		1,481			456
Dividends paid		(942	)		(756	)
		194			(6,547	)
Net change in cash and cash equivalents		4,272			(48	)
Cash and cash equivalents at beginning of period		3,531			333
Cash and cash equivalents at end of period	$	7,803		$	285
Cash paid for:
Interest (net of capitalization)	$	--		$	258
Income taxes	$	261		$	1,220

The accompanying notes are an integral part of these financial statements.

5

ATRION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Basis of Presentation

In the opinion of management, all adjustments necessary for a fair presentation of results of operations for the periods presented have been included in the accompanying unaudited consolidated financial statements of Atrion Corporation and its subsidiaries (the “Company”). Such adjustments consist of normal recurring items. The accompanying financial statements have been prepared in accordance with the instructions to Form 10-Q and include the information and notes required by such instructions. Accordingly, the consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes included in the Company’s 2007 Annual Report on Form 10-K.

(2) Inventories

Inventories are stated at the lower of cost or market. Cost is determined by using the first-in, first-out method. The following table details the major components of inventories (in thousands):

	June 30, 2008		December 31, 2007
Raw materials	$	8,384	$	7,452
Work in process		5,378		4,513
Finished goods		6,469		5,422
Total inventories	$	20,231	$	17,387

(3) Income per share

The following is the computation for basic and diluted income per share:

(1)	Three months ended June 30,				Six months ended June 30,
(2)	2008		2007		2008		2007
(3)	(in thousands, except per share amounts)
Net income	$	4,135	$	3,618	$	7,791	$	6,755
Weighted average basic shares outstanding		1,956		1,883		1,946		1,878
Add:  Effect of dilutive securities		49		95		58		99
Weighted average diluted shares outstanding		2,005		1,978		2,004		1,977
Earnings per share:
Basic	$	2.11	$	1.92	$	4.00	$	3.60
Diluted	$	2.06	$	1.83	$	3.89	$	3.42

Outstanding options, restricted stock, and deferred stock units that were not included in the diluted income per share calculation because their effect would be anti-dilutive totaled 20,336 for the three-month and the six-month periods ended June 30, 2008, respectively, and none for the same periods in 2007.

6

ATRION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(4) Pension Benefits

The components of net periodic pension cost for the Atrion Corporation Cash Balance Plan (the “Plan”) are as follows (in thousands):

	Three Months ended June 30,						Six Months ended June 30,
	2008			2007			2008			2007
Service cost	$	--		$	65		$	--		$	130
Interest cost		56			80			112			160
Expected return on assets		(55	)		(123	)		(110	)		(246	)
Prior service cost amortization		--			(9	)		--			(18	)
Actuarial loss		8			15			16			30
Net periodic pension cost	$	9		$	28		$	18		$	56

In September 2007, the Company terminated the Plan. Participants accrued pension benefits through December 31, 2007, but will not accrue any additional benefits under the Plan after that date. However, participants will continue to earn interest credits on their account balances until the Plan has settled all its obligations with respect to termination. The Company believes that the Plan is adequately funded to cover its settlement obligations. The final payout for the Plan termination will likely occur in early 2009 after all regulatory approvals are received.

(5) Recent Accounting Pronouncements

In May 2008, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 162, “The Hierarchy of Generally Accepted Accounting Principles (GAAP)” (SFAS 162). The purpose of the new standard is to provide a consistent framework for determining what accounting principles should be used when preparing U.S. GAAP financial statements. Previous guidance did not properly rank the accounting literature. The new standard is effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” The Company expects that the adoption of SFAS 162 will not have a material effect on the Company’s financial statements.

From time to time, new accounting pronouncements applicable to the Company are issued by the FASB or other standards setting bodies, which the Company will adopt as of the specified effective date. Unless otherwise discussed, the Company believes the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial statements upon adoption.

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Company designs, develops, manufactures, sells and distributes products and components, primarily for the medical and healthcare industry. The Company markets components to other equipment manufacturers for incorporation in their products and sells finished devices to physicians, hospitals, clinics and other treatment centers. The Company’s medical products primarily serve the fluid delivery, cardiovascular, and ophthalmology markets. The Company’s other medical and non-medical products include instrumentation and disposables used in dialysis, contract manufacturing and valves and inflation devices used in marine and aviation safety products.

The Company's products are used in a wide variety of applications by numerous customers. The Company encounters competition in all of its markets and competes primarily on the basis of product quality, price, engineering, customer service and delivery time.

The Company's strategy is to provide a broad selection of products in the areas of its expertise. Research and development efforts are focused on improving current products and developing highly-engineered products that meet customer needs and have the potential for broad market applications and significant sales. Proposed new products may be subject to regulatory clearance or approval prior to commercialization and the time period for introducing a new product to the marketplace can be unpredictable. The Company also focuses on controlling costs by investing in modern manufacturing technologies and controlling purchasing processes. The Company has been successful in consistently generating cash from operations and has used that cash to reduce indebtedness, to fund capital expenditures, to repurchase stock and to pay dividends.

The Company's strategic objective is to further enhance its position in its served markets by:

· Focusing on customer needs;

· Expanding existing product lines and developing new products;

· Maintaining a culture of controlling cost; and

· Preserving and fostering a collaborative, entrepreneurial management structure.

For the three months ended June 30, 2008, the Company reported revenues of $24.2 million, operating income of $6.1 million and net income of $4.1 million, up 4 percent, 13 percent and 14 percent, respectively, from the three months ended June 30, 2007. For the six months ended June 30, 2008, the Company reported revenues of $48.8 million, operating income of $11.6 million and net income of $7.8 million, up 6 percent, 14 percent and 15 percent, respectively, from the six months ended June 30, 2007.

Results for the three months ended June 30, 2008

Consolidated net income totaled $4.1 million, or $2.11 per basic and $2.06 per diluted share, in the second quarter of 2008. This is compared with consolidated net income of $3.6 million, or $1.92 per basic and $1.83 per diluted share, in the second quarter of 2007. The income per basic share computations are based on weighted average basic shares outstanding of 1,955,749 in the 2008 period and 1,883,120 in the 2007 period. The income per diluted share computations are based on weighted average diluted shares outstanding of 2,004,924 in the 2008 period and 1,977,871 in the 2007 period.

8

Consolidated revenues of $24.2 million for the second quarter of 2008 were 4 percent higher than revenues of $23.2 million for the second quarter of 2007. These increases were generally attributable to higher sales volumes.

Revenues by product line were as follows (in thousands):

	Three Months ended June 30,
	2008		2007
Fluid Delivery	$	8,648	$	7,533
Cardiovascular		7,116		6,009
Ophthalmology		3,588		4,863
Other		4,890		4,794
Total	$	24,242	$	23,199

Cost of goods sold of $13.1 million for the second quarter of 2008 was 2 percent higher than in the comparable 2007 period. Increased sales volume and increased manufacturing overhead costs were the primary contributors to the increase in cost of goods sold for the second quarter of 2008.

Gross profit of $11.1 million in the second quarter of 2008 was $786,000, or 8 percent, higher than in the comparable 2007 period. The Company’s gross profit percentage in the second quarter of 2008 was 45.8 percent of revenues compared with 44.5 percent of revenues in the second quarter of 2007. The increase in gross profit percentage in the 2008 period compared to the 2007 period was primarily related to improved product mix and improved manufacturing efficiencies.

The Company’s second quarter 2008 operating expenses of $5.0 million were $81,000 higher than the operating expenses for the second quarter of 2007. This increase was comprised of a $34,000 increase in General and Administrative (G&A) expenses and a $73,000 increase in Research and Development (R&D) expenses partially offset by a $26,000 decrease in selling (Selling) expenses. The increase in G&A expenses for the second quarter of 2008 was principally attributable to increased compensation and benefit costs, and outside services. The increase in R&D costs was primarily related to prototype expenses, new product testing costs and increased compensation partially offset by decreased outside services. The decrease in Selling expenses for the second quarter of 2008 was primarily related to decreased promotion and advertising expenses. Operating income in the second quarter of 2008 increased $705,000, to $6.1 million, a 13 percent increase over operating income in the quarter ended June 30, 2007. Operating income was 25.3 percent of revenues in the second quarter of 2008 compared to 23.4 percent of revenues in the second quarter of 2007. The previously mentioned increase in gross profit partially offset by the increase in operating expenses were the major contributors to the operating income improvement in the second quarter of 2008.

9

The Company had no interest expense for the second quarter of 2008 due to the retirement of outstanding debt in the third quarter of 2007. Interest expense was $77,000 for the 2007 period and was attributable to borrowings related to a new Company facility. Income tax expense for the second quarter of 2008 was $2.0 million compared to income tax expense of $1.7 million for the same period in the prior year. The effective tax rate for the second quarter of 2008 was 33.1 percent compared with 32.5 percent for the second quarter of 2007. The higher effective income tax rate for the second quarter of 2008 is primarily a result of benefits from tax incentives for R&D expenditures being a smaller percentage of taxable income in 2008 than in 2007.

Results for the six months ended June 30, 2008

Consolidated net income totaled $7.8 million, or $4.00 per basic and $3.89 per diluted share, in the first six months of 2008. This is compared with consolidated net income of $6.8 million, or $3.60 per basic and $3.42 per diluted share, in the first six months of 2007. The income per basic share computations are based on weighted average basic shares outstanding of 1,946,258 in the 2008 period and 1,877,763 in the 2007 period. The income per diluted share computations are based on weighted average diluted shares outstanding of 2,004,006 in the 2008 period and 1,976,502 in the 2007 period.

Consolidated revenues of $48.8 million for the first six months of 2008 were 6 percent higher than revenues of $46.2 million for the first six months of 2007. These increases were generally attributable to higher sales volumes.

Revenues by product line were as follows (in thousands):

	Six Months ended June 30,
	2008		2007
Fluid Delivery	$	16,896	$	14,747
Cardiovascular		14,584		12,061
Ophthalmology		7,368		9,517
Other		9,996		9,912
Total	$	48,844	$	46,237

Cost of goods sold of $27.1 million for the first six months of 2008 was 3 percent higher than in the comparable 2007 period. Increased sales volume and increased manufacturing overhead costs were the primary contributors to the increase in cost of goods sold for the first six months of 2008.

Gross profit of $21.8 million in the first six months of 2008 was $1.8 million, or 9 percent, higher than in the comparable 2007 period. The Company’s gross profit percentage in the first six months of 2008 was 44.6 percent of revenues compared with 43.2 percent of revenues in the first six months of 2007. The increase in gross profit percentage in the 2008 period compared to the 2007 period was primarily related to improved product mix and improved manufacturing efficiencies.

10

The Company’s first six months 2008 operating expenses of $10.2 million were $384,000 higher than the operating expenses for the first six months of 2007. This increase was comprised of a $22,000 increase in Selling expenses, a $157,000 increase in G&A expenses and a $205,000 increase in R&D expenses. The increase in Selling expenses for the first six months of 2008 was primarily related to travel-related expenses. The increase in G&A expenses for the first six months of 2008 was principally attributable to increased compensation and benefits costs. The increase in R&D costs was primarily related to prototype expenses, new product testing costs and increased compensation and outside services. Operating income in the first six months of 2008 increased $1.4 million to $11.6 million, a 14 percent increase over operating income in the six months ended June 30, 2007. Operating income was 23.7 percent of revenues in the first six months of 2008 compared to 22.0 percent of revenues in the first six months of 2007. The previously mentioned increase in gross profit partially offset by the increase in operating expenses were the major contributors to the operating income improvement in the first six months of 2008.

The Company had no interest expense for the first six months of 2008 due to the retirement of outstanding debt in the third quarter of 2007. Interest expense was $218,000 for the 2007 period and was attributable to borrowings related to a new Company facility. Income tax expense for the first six months of 2008 was $3.9 million compared to income tax expense of $3.2 million for the same period in the prior year. The effective tax rate for the first six months of 2008 was 33.2 percent compared with 32.2 percent for the first six months of 2007. The higher effective income tax rate for the first six months of 2008 is primarily a result of benefits from tax incentives for R&D expenditures being a smaller percentage of taxable income in 2008 than in 2007.

Liquidity and Capital Resources

At June 30, 2008, the Company had cash and cash equivalents of $7.8 million compared with $3.5 million at December 31, 2007. The Company had no outstanding borrowings under its $25.0 million revolving credit facility (“Credit Facility”) at June 30, 2008 and December 31, 2007. The Credit Facility, which expires November 12, 2009, and may be extended under certain circumstances, contains various restrictive covenants, none of which is expected to impact the Company’s liquidity or capital resources. At June 30, 2008, the Company was in compliance with all financial covenants.

As of June 30, 2008, the Company had working capital of $33.6 million, including $7.8 million in cash and cash equivalents. The $7.8 million increase in working capital during the first six months of 2008 was primarily related to increases in cash, accounts receivable, and inventories partially offset by increases in accrued income and other taxes. The increase in accounts receivable during the first six months of 2008 was primarily related to the increase in revenues for the second quarter of 2008 as compared to the fourth quarter of 2007. The change in inventories is related to increased stocking levels necessary to support current operations. In addition, the Company began a program to purchase critical raw material in large volumes to hedge against future price increases and take advantage of volume discounts. The increase in accrued income and other taxes is primarily related to federal income taxes and local property taxes. Cash flows from operating activities generated $7.6 million for the six months ended June 30, 2008 as compared to $10.3 million for the six months ended June 30, 2007. The 2008 decrease was primarily attributable to increased inventory and accounts receivable as compared to the 2007 period. During the first six months of 2008, the Company expended $3.5 million for the addition of property and equipment. During the first six months of 2008, stock option activities generated $1.1 million of cash and the Company paid dividends of $942,000.

11

The Company believes that its existing cash and cash equivalents, cash flows from operations, borrowings available under the Company’s credit facility, supplemented, if necessary, with equity or debt financing, which the Company believes would be available, will be sufficient to fund the Company’s cash requirements for the foreseeable future.

Forward-Looking Statements

The statements in this Management’s Discussion and Analysis that are forward-looking are based upon current expectations, and actual results may differ materially. Therefore, the inclusion of such forward-looking information should not be regarded as a representation by the Company that the objectives or plans of the Company would be achieved. Such statements include, but are not limited to, the Company’s expectations regarding future liquidity and capital resources. Words such as “anticipates,” “believes,” “expects,” “estimated” and variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements contained herein involve numerous risks and uncertainties, and there are a number of factors that could cause actual results or future events to differ materially, including, but not limited to, the following: changing economic, market and business conditions; acts of war or terrorism; the effects of governmental regulation; the impact of competition and new technologies; slower-than-anticipated introduction of new products or implementation of marketing strategies; implementation of new manufacturing processes or implementation of new information systems; the Company’s ability to protect its intellectual property; changes in the prices of raw materials; changes in product mix; intellectual property and product  liability claims and product recalls; the ability to attract and retain qualified personnel; and the loss of, or any material reduction in sales to, any significant customers. In addition, assumptions relating to budgeting, marketing, product development and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic review which may cause the Company to alter its marketing, capital expenditures or other budgets, which in turn may affect the Company’s results of operations and financial condition.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For the quarter ended June 30, 2008, the Company did not experience any material changes in market risk exposures that affect the quantitative and qualitative disclosures presented in the Company’s 2007 Annual Report on Form 10-K.

12

Item 4. Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and its Chief Financial Officer, evaluated the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2008. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective. There were no changes in the Company’s internal control over financial reporting for the quarter ended June 30, 2008 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

13

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company may be involved in claims or litigation that arise in the normal course of business. The Company is not currently a party to any legal proceedings, which, if decided adversely, would have a material adverse effect on the Company’s business, financial condition, or results of operations.

Item 1A. Risk Factors

There were no material changes to Risk Factors disclosed in our annual report on Form 10-K for the year ended December 31, 2007.

Item 4. Submission of Matters to a Vote of Security Holders

The Company held its 2008 Annual Meeting of Stockholders on May 9, 2008 at its offices in Allen, Texas. At such meeting, the Company’s stockholders ratified the appointment of Grant Thornton LLP as independent accountants with 1,753,436 shares voted for ratification, 6,790 voted against, 15,197 abstentions and zero broker non-votes. The voting with respect to the nominees for election as directors was as follows:

Nominee	Votes For	Votes Withheld
Emile A. Battat	1,716,449	58,975
Ronald N. Spaulding	1,366,343	409,081

The terms of the following directors continued after the meeting: Roger F. Stebbing, John P. Stupp, Jr., and Hugh J. Morgan, Jr.

Item 6. Exhibits and Reports on Form 8-K

(a)	Exhibits
	10.1	2006 Equity Incentive Plan (As last amended on May 9, 2008)
	31.1	Sarbanes-Oxley Act Section 302 Certification of Chief Executive Officer
	31.2	Sarbanes-Oxley Act Section 302 Certification of Chief Financial Officer
	32.1	Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of The Sarbanes – Oxley Act Of 2002
	32.2	Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of The Sarbanes – Oxley Act Of 2002
(b)	Reports on Form 8-K

On May 8, 2008, the Company filed a report on Form 8-K with the SEC regarding the public dissemination of a press release announcing its financial results for the first quarter ended March 31, 2008 (Item 12).

14

SIGNATURES

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

Atrion Corporation

(Registrant)

Date:  August 8, 2008	/s/ EmileA.Battat
	Emile A. Battat
	Chairman and
	Chief Executive Officer
Date:  August 8, 2008	/s/ Jeffery Strickland
	Jeffery Strickland
	Vice President and
	Chief Financial Officer

15

EX-10.1

Exhibit 10.1

ATRION CORPORATION

2006 EQUITY INCENTIVE PLAN

(As last amended on May 9, 2008)

Table of Contents

		Page
ARTICLE 1.	DEFINITIONS	3
ARTICLE 2.	COMMON STOCK SUBJECT TO PLAN	6
2.1	Common Stock Subject to Plan	6
2.2	Add-back of Grants	6
ARTICLE 3.	ELIGIBILITY; GRANTS; AWARD AGREEMENTS	7
3.1	Eligibility	7
3.2	Awards	7
3.3	Provisions Applicable to Key Employees	7
3.4	Award Agreement	7
ARTICLE 4.	OPTIONS	8
4.1	Award Agreement for Option Grant	8
4.2	Option Price	8
4.3	Qualification of Incentive Stock Options	8
4.4	Change in incentive Stock Option Grant	8
4.5	Option Term	9
4.6	Option Exercisability and Vesting	9
ARTICLE 5.	EXERCISE OF OPTIONS	9
5.1	Exercise	9
5.2	Manner of Exercise	10
5.3	Conditions to issuance of Common Stock	10
5.4	Rights as Stockholders	11
5.5	ownership and transfer restrictions	11
5.6	limitations of Exercise of Options	11
ARTICLE 6.	STOCK AWARDS	11
6.1	Award Agreement	11
6.2	Awards of Restricted Common Stock, Restricted Stock Units and Deferred Stock Units	12
6.3	Rights as Stockholders	12
6.4	Restriction	13
6.5	Lapse of Restrictions	13
6.6	Repurchase of Restricted Common Stock	13
6.7	Escrow	13

i

Table of Contents

(continued)

		Page
6.8	Legend	13
6.9	Conversion	13
ARTICLE 7.	STOCK APPRECIATION RIGHTS	14
7.1	Award Agreement for SARs	14
7.2	General Requirements	14
7.3	Base Amount	14
7.4	Tandem SARS	14
7.5	SAR Exercisability	14
7.6	Value of SARS	15
7.7	Form of Payment	15
ARTICLE 8.	PERFORMANCE UNITS	15
8.1	Award Agreement for Performance Units	15
8.2	General Requirements	15
8.3	Performance Period and performance Goals	15
8.4	Payment With Respect to Performance Units	15
ARTICLE 9.	ADMINISTRATION	16
9.1	COMMITTEE	16
9.2	Duties and Powers of Committee	16
9.3	Compensation; Professional Assistance; Good Faith Actions	16
ARTICLE 10.	MISCELLANEOUS PROVISIONS	16
10.1	Transferability	16
10.2	Amendment, Suspension of Termination of this Plan	17
10.3	Changes in Common Stock or Assets of the Company, Acquisition Or Liquidation of the Company and Other Corporate Events	17
10.4	Continued Employment	19
10.5	Tax Withholding	19
10.6	Forfeiture Provisions	20
10.7	Limitations Applicable to Section 16 Persons and Performance- Based Compensation	20
10.8	Effect of Plan Upon Option and Compensation Plans	20
10.9	Compliance with laws	20
10.10	Effective Date	21
10.11	Titles	21
10.12	Governing Law	21

ii

ATRION CORPORATION

2006 EQUITY INCENTIVE PLAN

Atrion Corporation, a Delaware corporation (the "Company"), has established the Atrion Corporation 2006 Equity Incentive Plan (the "Plan") for the benefit of employees and consultants of the Company.

The purposes of this Plan are (a) to recognize and compensate selected employees and consultants who contribute to the success of the Company and its Subsidiaries, (b) to attract and retain employees and consultants, and (c) to provide incentive compensation to employees and consultants based upon the performance of the Company and its Subsidiaries.

ARTICLE 1. DEFINITIONS

Whenever the following initially capitalized terms are used in the Plan, they shall have the meanings specified below, unless the context clearly indicates otherwise.

"Award" shall mean the grant or award of Options, Restricted Common Stock, Restricted Stock Units, Deferred Stock Units, SARs or Performance Units under this Plan.

"Award Agreement" shall mean the agreement granting or awarding Options, Restricted Common Stock, Restricted Stock Units, Deferred Stock Units, SARs or Performance Units.

"Board" shall mean the Board of Directors of the Company, as comprised from time to time.

"Change of Control" shall mean the occurrence of any of the following events: (a) any person, entity or affiliated group, excluding the Company or any employee benefit plan of the Company, acquiring more than twenty-five percent (25%) of the then outstanding shares of voting stock of the Company, (b) the consummation of any merger or consolidation of the Company into another company, such that the holders of the shares of the voting stock of the Company immediately before such merger or consolidation own less than fifty percent (50%) of the voting power of the securities of the surviving company or the parent of the surviving company, (c) the adoption of a plan for complete liquidation of the Company or the sale or disposition of all or substantially all of the Company's assets of the Company, such that after the transaction, the holders of the shares of the voting stock of the Company immediately prior to the transaction own less than fifty percent (50%) of the voting securities of the acquiror or the parent of the acquiror, or (d) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by the Company's stockholders was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board.

"Code" shall mean the Internal Revenue Code of 1986, as amended.

"Committee" shall mean the Compensation Committee of the Board.

3

"Common Stock " shall mean the common stock, par value ten cents ($0.10) per share, of the Company.

"Company" shall mean Atrion Corporation, a Delaware corporation, or any business organization which succeeds to all or substantially all of its business, whether by virtue of a purchase, merger, consolidation, or otherwise. For purposes of this Plan, the term Company shall include, where applicable, a Subsidiary that employs the Key Employee or engages the Consultant.

"Consultant" shall mean a professional or technical expert, consultant or independent contractor who provides services to the Company or a Subsidiary, and who may be selected to participate in the Plan.

"Deferred Stock Unit" shall mean a right to receive Common Stock awarded under Article 6 of this Plan.

"Employment Agreement" shall mean the employment, consulting or similar contractual agreement entered into by the Key Employee or the Consultant, as the case may be, and the Company governing the terms of the Key Employee's or Consultant's employment or engagement with the Company, if any.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

"Fair Market Value" of a share of Common Stock, as of a given date, means (i) with respect to an Award of an Incentive Stock Option and an Award which is intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code, the average of the high and low sales price of shares of Common Stock on such date as reported by (1) any national securities exchange on which the shares of Common Stock are traded or (2) The Nasdaq Stock Market or, if no shares of Common Stock are traded on such exchange or system on such date, then on the next preceding date on which any shares of Common Stock were traded on such exchange or system; and (ii) with respect to all other Awards, the closing sales price of a share of Common Stock on such date as reported by (1) any national securities exchange on which the shares of Common Stock are traded or (2) The Nasdaq Stock Market or, if no shares of Common Stock are traded on such exchange or system on such date, then on the next preceding date on which any shares of Common Stock were traded on such exchange or system.

"Incentive Stock Option" shall mean an option which conforms to the applicable provisions of Section 422 of the Code and which is designated as an Incentive Stock Option by the Committee.

"Key Employee" shall mean any employee (as defined in accordance with the regulations and revenue rulings then applicable under Section 3401(c) of the Code) of the Company or a Subsidiary of the Company, whether such employee was so employed at the time this Plan was initially adopted or becomes so employed subsequent to the adoption of this Plan, who is designated as a key employee by the Committee.

"Non-Qualified Stock Option" shall mean an Option which the Committee does not designate as an Incentive Stock Option.

4

"Option" shall mean an option to purchase shares of Common Stock that is granted under Article 4 of this Plan. An option granted under this Plan shall, as determined by the Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option; provided, however, that Options granted to consultants shall be Non-Qualified Stock Options.

"Participant" shall mean an Key Employee or Consultant who has been granted an Award.

"Performance Units" shall mean performance units granted under Article 8 of this Plan.

"Permanent Disability" or "Permanently Disabled" shall mean the inability of a Participant, due to a physical or mental impairment, to perform the material services of the Participant's position with the Company for a period of six (6) months, whether or not consecutive, during any 365-day period.  A determination of Permanent Disability shall be made by a physician satisfactory to both the Participant and the Committee, provided that if the Participant and the Committee do not agree on a physician, each of them shall select a physician and those two physicians together shall select a third physician, whose determination as to Permanent Disability shall be binding on all parties.

"Plan" shall mean the Atrion Corporation 2006 Equity Incentive Plan, as embodied herein and as amended from time to time.

"Plan Year" shall mean the fiscal year of the Company.

"Restricted Common Stock" shall mean Common Stock awarded under Article 6 of this Plan.

"Restricted Stock Unit" shall mean a right to receive Common Stock awarded under Article 6 of this Plan.

"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such rule may be amended from time to time.

"SAR" shall mean stock appreciation rights awarded under Article 7 of this Plan.

"Stock Award" shall mean an Award of Restricted Common Stock, Restricted Stock Units or Deferred Stock Units under Article 6 of this Plan.

"Stock Award Account" shall mean the bookkeeping account reflecting Awards of Restricted Stock Units and Deferred Stock Units under Article 6 of this Plan.

"Subsidiary" shall mean an entity in an unbroken chain beginning with the Company if each of the entities other than the last entity in the unbroken chain owns fifty percent (50%) or more of the total combined voting power of all classes of equity in one of the other entities in such chain.

5

"Termination of Employment" shall mean the date on which the employee-employer, consulting, contractual or similar relationship between a Participant and the Company is terminated for any reason, with or without cause, including, but not by way of limitation, a termination of employment by resignation, discharge, death, Permanent Disability or Retirement, but excluding (i) termination of employment where there is a simultaneous reemployment or continuing employment of a Participant by the Company, and (ii) at the discretion of the Committee, termination of employment which results in a temporary severance of the employee-employer relationship. The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to a Termination of Employment (subject to the provisions of any Employment Agreement between a Participant and the Company), including, but not limited to all questions of whether particular leaves of absence constitute a Termination of Employment; provided, however, that, unless otherwise determined by the Committee in its discretion, a leave of absence, change in status from an employee to an independent contractor or other change the employee-employer, consulting, contractual or similar relationship shall constitute a Termination of Employment if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section.

ARTICLE 2. COMMON STOCK SUBJECT TO PLAN

2.1           Common Stock Subject to Plan.

2.1.1         The Common Stock subject to an Award shall be shares of the Company's authorized but unissued, reacquired, or treasury Common Stock. Subject to adjustment as described in Section 10.3.1, the aggregate number of shares of Common Stock that may be issued under the Plan as Restricted Common Stock, Restricted Stock Units, Deferred Stock Units or pursuant to the exercise of Options is one hundred thousand (100,000) shares.  The Company, during the term of the Plan, will at all times reserve and keep available such number of shares of Common Stock as shall be sufficient to satisfy the requirements of the Plan.

2.1.1         The maximum number of shares of Common Stock which may be awarded to any individual in any calendar year shall not exceed thirty-five thousand (35,000) shares, effective as of August 1, 2006.

2.2           Add-back of Grants.  If any Option or SAR expires or is canceled without having been fully exercised, is exercised in whole or in part for cash as permitted by this Plan, or is exercised prior to becoming vested as permitted under Section 4.6.3 and is forfeited prior to becoming vested, the number of shares of Common Stock subject to such Option or SAR but as to which such Option, SAR or other right was not exercised or vested prior to its expiration, cancellation or exercise may again be optioned, granted or awarded hereunder.  Shares of Common Stock which are delivered by the Participant or withheld by the Company upon the exercise of any Option or other Award under this Plan, in payment of the exercise price thereof, may again be optioned, granted or awarded hereunder.  If any shares of Common Stock awarded as Restricted Common Stock, Restricted Stock Units or other Award hereunder or as payment for Performance Units are forfeited by the Participant, such shares may again be optioned, granted or awarded hereunder.  Notwithstanding the provisions of this Section 2.2, no shares of Common Stock may again be optioned, granted or awarded pursuant to an Incentive Stock Option if such action would cause such Option to fail to qualify as an Incentive Stock Option under Section 422 of the Code.

6

ARTICLE 3. ELIGIBILITY; GRANTS; AWARD AGREEMENTS

3.1           Eligibility.  Any Key Employee or Consultant selected to participate pursuant to Section 3.2 shall be eligible to participate in the Plan.

3.2           Awards. The Committee shall determine which Key Employees and Consultants shall receive Awards, whether the Key Employee or Consultant will receive Options, Restricted Common Stock, Restricted Stock Units, Deferred Stock Units, SARs or Performance Units, whether an Option grant shall be of Incentive Stock Options or Non-Qualified Stock Options, and the number of shares of Common Stock subject to such Award.  Notwithstanding the foregoing, the terms and conditions of an Award intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall include, but not be limited to, such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code.

3.3           Provisions Applicable to Section 162(m).

3.3.1         Notwithstanding anything in the Plan to the contrary, the Committee may grant Options, Restricted Common Stock, Restricted Stock Units, SARs or Performance Units to a Key Employee that vest upon the attainment of performance targets for the Company which are related to one or more of the following performance goals:  (i) pre-tax income, (ii) operating income, (iii) cash flow,  (iv) earnings per share, (v) return on equity, (vi) return on invested capital or assets, (vii) cost reductions or savings, (viii) earnings from continuing operations, (ix) total stockholder return, or (x) such other identifiable and measurable performance objectives, as determined by the Committee.

3.3.2         To the extent necessary to comply with the performance-based compensation  requirements of Section 162(m)(4)(C) of the Code, no later than ninety (90) days following the commencement of any fiscal year in question or any other designated fiscal period (or such other time as may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (i) select the performance goal or goals applicable to the fiscal year or other designated fiscal period, (ii) establish the various targets and bonus amounts which may be earned for such fiscal year or other designated fiscal period, (iii) specify the relationship between performance goals and targets and the amounts to be earned by each Key Employee for such fiscal year or other designated fiscal period and (iv) take such other action as the Committee may deem appropriate to comply with the performance-based compensation requirements of Section 162(m)(4)(C) of the Code. Following the completion of each fiscal year or other designated fiscal period, the Committee shall certify in writing whether the applicable performance targets have been achieved for such fiscal year or other designated fiscal period. In determining the amount earned by such Key Employee, the Committee shall have the right to reduce (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the fiscal year or other designated fiscal period.

3.4           Award Agreement.  Upon the selection of a Key Employee or Consultant to receive an Award, the Committee shall cause a written Award Agreement to be issued to such individual encompassing the terms and conditions of such Award, as determined by the Committee in its sole discretion; provided, however, that, if applicable, the terms of such Award Agreement shall comply with the terms of such Key Employee’s or Consultant’s Employment Agreement, if any. Such Award Agreement shall provide for the exercise price for Options and SARs; the purchase price for Restricted Common Stock, Restricted Stock Units and Deferred Stock Units; the performance criteria for Performance Units; and the exercisability and vesting schedule, payment terms and such other terms and conditions of such Award, as determined by the Committee in its sole discretion.  Each Award Agreement shall be executed by the Participant and an officer of the Company authorized to sign such Award Agreement and shall contain such terms and conditions that are consistent with the Plan, including but not limited to the exercisability and vesting schedule, if any, as the Committee in its sole discretion shall determine. All Awards shall be made conditional upon the Participant's acknowledgment, in writing in the Award Agreement or otherwise by acceptance of the Award, that all decisions and determinations of the Committee shall be final and binding on the Participant, his beneficiaries and any other person having or claiming an interest under such Award.

7

ARTICLE 4. OPTIONS

4.1           Award Agreement for Option Grant.  Option grants shall be evidenced by an Award Agreement, pursuant to Section 3.4.  All Award Agreements evidencing Options intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. All Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code.

4.2           Option Price.  The price per share of the Common Stock subject to each Option shall be set by the Committee; provided, however, that (i) such price shall not be less than the par value of a share of Common Stock and shall not be less than one hundred percent (100%) of the Fair Market Value of a share of Common Stock on the date the Option is granted, (ii) in the case of Incentive Stock Options granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code), such price shall not be less than one hundred and ten percent (110%) of the Fair Market Value of a share of Common Stock on the date the Option is granted.

4.3           Qualification for Incentive Stock Options.  The Committee may grant an Incentive Stock Option to an individual only if such person is an employee of the Company or is an employee of a Subsidiary as permitted under Section 422(a)(2) of the Code.

4.4           Change in Incentive Stock Option Grant.  Any Incentive Stock Option granted under this Plan may be modified by the Committee to disqualify such Option from treatment as an Incentive Stock Option under Section 422 of the Code. To the extent that the aggregate Fair Market Value of shares of Common Stock with respect to which Incentive Stock Options (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by a Participant during any calendar year (under the Plan and all other Incentive Stock Option plans of the Company) exceeds one hundred thousand dollars ($100,000), such Options shall be treated as Non-Qualified Stock Options to the extent required or permitted by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking Options into account in the order in which they were granted. For purposes of this Section 4.4, the Fair Market Value of shares of Common Stock shall be determined as of the time the Option with respect to such shares of Common Stock is granted, pursuant to Section 4.7.

8

4.5           Option Term.  The term of an Option shall be set by the Committee in its discretion; provided, however, in the case of Incentive Stock Options, the term shall not be more than ten (10) years from the date the Incentive Stock Option is granted, or five (5) years from such date if the Incentive Stock Option is granted to an Employee then owning (within the meaning of Section 424(d) of the Code) more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code). Such Incentive Stock Options shall be subject to Section 5.6, except as limited by the requirements of Section 422 of the Code and regulations and rulings thereunder applicable to Incentive Stock Options.

4.6           Option Exercisability and Vesting.

4.6.1         The period during which Options in whole or in part become exercisable and vest in the Participant shall be set by the Committee and shall be as provided for in the Award Agreement. At any time after the grant of an Option, the Committee may, in its sole and absolute discretion and subject to whatever terms and conditions it selects, accelerate the period during which an Option becomes exercisable and vests.

4.6.2         Each Award Agreement shall set forth the extent to which, if any, the Participant shall have the right to exercise the Options after the Participant's Termination of Employment.  Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among the Options granted and may  differentiate between the reasons for the Participants’ Termination of Employment.

4.6.3         At any time on or after the grant of an Option, the Committee may provide in an Award Agreement that the Participant may elect to exercise part or all of an Option before it otherwise has become exercisable. Any shares of Common Stock so purchased shall be restricted Common Stock and shall be subject to a repurchase right in favor of the Company during a specified restriction period, with the repurchase price equal to the lesser of (i) the price per share paid by the Participant for the Common Stock, or (ii) the Fair Market Value of such Common Stock at the time of repurchase, or such other restrictions as the Committee deems appropriate. The Participant shall have, unless otherwise provided by the Committee in the Award Agreement, all the rights of an owner of Common Stock, subject to the restrictions and provisions of his Award Agreement, including the right to vote such Common Stock and to receive all dividends and other distributions paid or made with respect to Common Stock.

4.6.4         Any Options which are not exercisable and vested immediately prior to a Change of Control, including shares of restricted Common Stock received upon the exercise of an Option as described in Section 4.6.3 above, shall, upon a Change of Control, become one hundred percent (100%) exercisable, if not previously exercised, and one hundred percent (100%) vested, unless the Award Agreement or the Participant's Employment Agreement provides otherwise.

ARTICLE 5.  EXERCISE OF OPTIONS

5.1           Exercise.  At any time and from time to time prior to the time when any exercisable Option or portion thereof becomes unexercisable under the Plan or the Award Agreement, such Option or portion thereof may be exercised in whole or in part; provided, however, that the Company shall not be required to issue fractional shares of Common Stock and the Committee may, by the terms of the Option, require any partial exercise to be with respect to a minimum number of shares of Common Stock.

9

5.2           Manner of Exercise.  An exercisable Option, or any exercisable portion thereof, may be exercised solely by delivery to the Company of all of the following prior to the time when such Option or such portion becomes unexercisable under the Plan or the Award Agreement:

5.2.1         A written notice signed by the Participant or other person then entitled to exercise such Option or portion thereof, stating that such Option or portion is being exercised, provided such notice complies with all applicable rules established by the Committee from time to time.

5.2.2         Such representations and documents as the Committee, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act of 1933, as amended, and any other federal or state securities laws or regulations. The Committee may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, causing legends to be placed on certificates for shares of Common Stock and issuing stop-transfer notices to agents and registrars.

5.2.3         In the event that the Option shall be exercised pursuant to Section 10.1 by any person or persons other than the Participant, appropriate proof of the right of such person or persons to exercise the Option or portion thereof.

5.2.4         Full payment (in cash or by check) for the shares of Common Stock with respect to which the Option or portion thereof is exercised, including the amount of any withholding tax due, unless with the prior written consent of the Committee:

5.2.4.1                      payment, in whole or in part, is made through the delivery of shares of Common Stock owned by the Participant, duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof, provided, that shares of Common Stock used to exercise the Option have been held by the Participant for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the Option;

5.2.4.2                      payment, in whole or in part, is made through the surrender of shares of Common Stock then issuable upon exercise of the Option having a Fair Market Value on the date of Option exercise equal to the aggregate exercise price of the Option or exercised portion thereof; or

5.2.4.3                      payment is made through any combination of the consideration provided for in this Section 5.2.4 or such other method approved by the Committee consistent with applicable law.

5.3           Conditions to Issuance of Common Stock.  The Company shall not be required to issue or deliver any certificate or other indicia evidencing ownership of shares of Common Stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions:

10

5.3.1         The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its sole discretion, determine to be necessary or advisable.

5.3.2         The lapse of such reasonable period of time following the exercise of the Option as the Committee may establish from time to time for reasons of administrative convenience.

5.3.3         The receipt by the Company of full payment for such Common Stock, including payment of any applicable withholding tax.

5.3.4         The Participant agreeing to the terms and conditions of the Plan and the Award Agreement.

5.4           Rights as Stockholders.  The holders of Options shall not be, nor have any of the rights or privileges of, stockholders of the Company in respect of any shares of Common Stock purchasable upon the exercise of any part of an Option unless and until certificates or other indicia representing such shares of Common Stock have been issued by the Company to such holders.

5.5           Ownership and Transfer Restrictions.  The Committee, in its absolute discretion, may impose at the time of grant such restrictions on the ownership and transferability of the shares of  Common Stock purchasable upon the exercise of an Option as it deems appropriate. Any such restriction shall be set forth in the Award Agreement and may be referred to on the certificates or other indicia evidencing such shares of Common Stock.

5.6           Limitations on Exercise of Options.

5.6.1         Vested Incentive Stock Options may not be exercised after the earlier of (i) their  expiration date, (ii) twelve (12) months from the date of the Participant's Termination of Employment by reason of his death, (iii) twelve (12) months from the date of the Participant's Termination of Employment by reason of his Permanent Disability, or (iv) the expiration of three (3) months from the date of the Participant's Termination of Employment for any reason other than such Participant's death or Permanent Disability, unless the Participant dies within said three (3) month period and the Award Agreement or the Committee permits later exercise.  Leaves of absence for less than ninety (90) days shall not cause a Termination of Employment for purposes of Incentive Stock Options.

5.6.2         Non-Qualified Stock Options may be exercised up until their expiration date, unless the Committee provides otherwise in the Award Agreement.

ARTICLE 6.  STOCK AWARDS

6.1           Award Agreement.  Awards of Restricted Common Stock, Restricted Stock Units and Deferred Stock Units shall be evidenced by an Award Agreement, pursuant to Section 3.4.  All Award Agreements evidencing Restricted Common Stock, Restricted Stock Units and Deferred Stock Units intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code.

11

6.2           Awards of Restricted Common Stock, Restricted Stock Units and Deferred Stock Units.

6.2.1         The Committee may from time to time, in its absolute discretion, consistent with this Plan:

6.2.1.1                      determine which Key Employees and Consultants shall receive Stock Awards; determine the aggregate number of shares of Common Stock to be awarded as Stock Awards to Key Employees and Consultants;

6.2.1.2                      determine the terms and conditions applicable to such Stock Awards; and

6.2.1.4                      determine when the restrictions, if any, lapse.

6.2.2         The Committee may establish the purchase price, if any, and form of payment for a Stock Award.  If the Committee establishes a purchase price, the purchase price shall be no less than the par value of the Common Stock to be purchased, unless otherwise permitted by applicable state law.

6.2.3         Upon the selection of a Key Employee or Consultant to be awarded Restricted Common Stock, the Committee shall instruct the Secretary of the Company to issue such Restricted Common Stock and may impose such conditions on the issuance of such Restricted Common Stock as it deems appropriate, subject to the provisions of Article 9.

6.2.4         Upon the selection of a Key Employee or Consultant to be awarded Restricted Stock Units or Deferred Stock Units, the Committee shall instruct the Secretary of the Company to establish a Stock Award Account on behalf of each such Participant.  The Committee may impose such conditions on the issuance of such Restricted Stock Units or Deferred Stock Units as it deems appropriate.

6.2.5         Awards of Restricted Common Stock and Restricted Stock Units shall vest pursuant to the Award Agreement.

6.2.6         Upon the occurrence of a Change of Control, all Restricted Common Stock and Restricted Stock Units shall become one hundred percent (100%) vested, unless the Participant’s Award Agreement or the Participant’s Employment Agreement provides otherwise.

6.2.7         A Participant shall be one hundred percent (100%) vested in the number of Deferred Stock Units held in his or her Stock Award Account at all times.  The term for which the Deferred Stock Units shall be deferred shall be provided for in the Award Agreement.

6.3           Rights as Stockholders.

6.3.1         Upon delivery of the shares of Restricted Common Stock to the Participant or the escrow holder pursuant to Section 6.7, the Participant shall have, unless otherwise provided by the Committee in the Award Agreement, all the rights of an owner of Common Stock, subject to the restrictions and provisions of his Award Agreement; provided, however, that in the discretion of the Committee, any extraordinary distributions with respect to the Common Stock shall be subject to the restrictions set forth in Section 6.4.

12

6.3.2         Nothing in this Plan shall be construed as giving a Participant who receives an Award of Restricted Stock Units or Deferred Stock Units any of the rights of an owner of Common Stock unless and until shares of Common Stock are issued and transferred to the Participant in accordance with the terms of the Plan and the Award Agreement.  Notwithstanding the foregoing, in the event that any dividend is paid by the Company with respect to the Common Stock (whether in the form of cash, Common Stock or other property), then the Committee shall, in the manner it deems equitable or appropriate, adjust the number of Restricted Stock Units or Deferred Stock Units allocated to each Participant's Stock Award Account to reflect such dividend.

6.4           Restriction.  All shares of Restricted Common Stock issued under this Plan (including any Common Stock received as a result of stock dividends, stock splits or any other form of recapitalization, if any) shall at the time of the Award, in the terms of each individual Award Agreement, be subject to such restrictions as the Committee shall, in its sole discretion, determine, which restrictions may include, without limitation, restrictions concerning voting rights, transferability, vesting, Company performance and individual performance; provided, however, that by action taken subsequent to the time shares of Restricted Common Stock are issued, the Committee may, on such terms and conditions as it may determine to be appropriate, remove any or all of the restrictions imposed by the terms of the Award Agreement. Restricted Common Stock may not be sold or encumbered until all restrictions are terminated or expire.

6.5           Lapse of Restrictions.  The restrictions on Awards of Restricted Common Stock and Restricted Stock Units shall lapse in accordance with the terms of the Award Agreement. Each Award Agreement shall set forth whether shares of Restricted Common Stock or Restricted Stock Units then subject to restrictions are forfeited or if the restrictions shall lapse upon the Participant's Termination of Employment. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among the Awards of Restricted Common Stock or Restricted Stock Units and may differentiate between the reasons for the Participant's Termination of Employment.

6.6           Repurchase of Restricted Common Stock.  The Committee may provide in the terms of the Award Agreement awarding Restricted Common Stock that the Company shall have call rights, a right of first offer or a right of refusal regarding shares of Restricted Common Stock then subject to restrictions.

6.7           Escrow.  The Company may appoint an escrow holder to retain physical custody of each certificate or control of each other indicia representing shares of Restricted Common Stock until all of the restrictions imposed under the Award Agreement with respect to the shares of Common Stock evidenced by such certificate expire or shall have been removed.

6.8           Legend.  In order to enforce the restrictions imposed upon shares of Restricted Common Stock hereunder, the Committee shall cause a legend or restrictions to be placed on certificates of Restricted Common Stock that are still subject to restrictions under Award Agreements, which legend or restrictions shall make appropriate reference to the conditions imposed thereby.

6.9           Conversion.  Upon vesting in the case of Restricted Stock Units, and upon the lapse of the deferral period in the case of Deferred Stock Units, such Restricted Stock Units or Deferred Stock Units shall be converted into an equivalent number of shares of Common Stock that will be distributed to the Participant, or in the case of the Participant's death, to the Participant's legal representative.  Such distribution shall be evidenced by a stock certificate, appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company, or other appropriate means as determined by the Company.  All distributions shall be made no later than March 15th of the calendar year following the year, with respect to the Restricted Stock Units, in which such Restricted Stock Units vest or, with respect to Deferred Stock Units, in which the deferral period lapses.

13

ARTICLE 7.  STOCK APPRECIATION RIGHTS

7.1           Award Agreement for SARs.  Awards of SARs shall be evidenced by an Award Agreement, pursuant to Section 3.4.  All Award Agreements evidencing SARs intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code.

7.2           General Requirements.  The Committee may grant SARs separately or in tandem with any Option (for all or a portion of the applicable Option). The Committee shall determine which Key Employees and Consultants shall receive Awards of SARs and the amount of such Awards.

7.3           Base Amount.  The Committee shall establish the base amount of the SAR at the time the SAR is granted.  The base amount of each SAR shall be equal to the price per share of the related Option or, if there is no related Option, the Fair Market Value of a share of Common Stock as of the date of grant of the SAR, unless the Committee determines a higher base amount.

7.4           Tandem SARs.  Tandem SARs may be granted either at the time the Option is granted or at any time thereafter while the Option remains outstanding; provided, however, that, in the case of an Incentive Stock Option, SARs may be granted only at the time of grant of the Incentive Stock Option. In the case of tandem SARs, the number of SARs granted to a Key Employee or Consultant that shall be exercisable during a specified period shall not exceed the number of shares of Common Stock that the Key Employee or Consultant may purchase upon the exercise of the related Option during such period. Upon the exercise of an Option, the SARs relating to the Common Stock covered by such Option shall terminate. Upon the exercise of the SARs, the related Option shall terminate to the extent of an equal number of shares of Common Stock.

7.5           SAR Exercisability.

7.5.1                      The period during which SARs in whole or in part become exercisable shall be set by the Committee and shall be as provided for in the Award Agreement. At any time after the grant of an SAR, the Committee may, in its sole and absolute discretion and subject to whatever terms and conditions its selects, accelerate the period during which the SAR becomes exercisable.

14

7.5.2                      In each Award Agreement, the Committee shall indicate whether the portion of the SAR, if any, that remains non-exercisable upon the Participant’s Termination of Employment with the Company is forfeited. In so specifying, the Committee may differentiate between the reason for the Participant’s Termination of Employment.

7.6           Value of SARs.  When a Participant exercises an SAR, the Participant shall receive in settlement of such SAR an amount equal to the value of the stock appreciation for the number of SARs exercised payable in cash, Common Stock or a combination thereof. The stock appreciation for an SAR is the amount by which the Fair Market Value of the underlying Common Stock on the date of exercise of the SAR exceeds the base amount of the SAR.

7.7           Form of Payment.  The Committee shall determine whether the appreciation in an SAR shall be paid in the form of cash, Common Stock or a combination of the two, in such proportion as the Committee deems appropriate. For purposes of calculating the number of shares of Common Stock to be received, shares of Common Stock shall be valued at their Fair Market Value on the date of exercise of the SAR. If shares of Common Stock are received upon exercise of a SAR, cash shall be delivered in lieu of any fractional shares of Common Stock.

ARTICLE 8  PERFORMANCE UNITS

8.1           Award Agreement for Performance Units.  Awards of Performance Units shall be evidenced by an Award Agreement, pursuant to Section 3.4.  All Award Agreements evidencing Performance Units intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code.

8.2           General Requirements.  Each Performance Unit shall represent the right of the Participant to receive an amount based on the value of the Performance Unit, if performance goals established by the Committee are met. A Performance Unit shall be based on the Fair Market Value of a share of Common Stock or such other measurement base as the Committee deems appropriate. The Committee shall determine and set forth in the Award Agreement the number of Performance Units to be granted and the requirements applicable to such Performance Units. The Committee shall determine which Key Employees and Consultants shall receive Awards of a Performance Unit and the amount of such Awards.

8.3           Performance Period and Performance Goals. When Performance Units are granted, the Committee shall establish the performance period during which performance shall be measured (the "Performance Period"), performance goals applicable to the Performance Units ("Performance Goals") and such other conditions of the Award as the Committee deems appropriate. Performance Goals may relate to the financial performance of the Company or its Subsidiaries, the performance of Common Stock, individual performance or such other criteria as the Committee deems appropriate.

8.4           Payment With Respect to Performance Units.  At the end of each Performance Period, the Committee shall determine to what extent the Performance Goals and other conditions of the Performance Units are met, the value of the Performance Units (if applicable), and the amount, if any, to be paid with respect to the Performance Units. Payments with respect to Performance Units shall be made in cash, in Common Stock or in a combination of the two, as determined by the Committee.  All payments shall be made no later than March 15 of the calendar year following the year in which the Performance Period ends."

15

ARTICLE 9.  ADMINISTRATION

9.1           Committee.  The Plan shall be administered by the Compensation Committee of the Board. The Board may remove members, add members, and fill vacancies on the Committee from time to time, all in accordance with the Company's Certificate of Incorporation, Bylaws, and with applicable law. The majority vote of the Committee, or for acts taken in writing without a meeting by the unanimous written consent of the members of the Committee, shall be valid acts of the Committee.  Committee members may resign at any time by delivering written notice to the Board.

9.2           Duties and Powers of Committee.  It shall be the duty of the Committee to conduct the general administration of this Plan in accordance with its provisions. The Committee shall have the power to designate the Key Employees and consultants who shall participate in the Plan and to construe and interpret this Plan and the agreements pursuant to which Options, Restricted Common Stock, Restricted Stock Units, Deferred Stock Units, SARs and Performance Units are granted or awarded, and to adopt such rules for the administration, interpretation, and application of this Plan as are consistent therewith and to interpret, amend or revoke any such rules. Any such Award under this Plan need not be the same with respect to each Participant. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code.  All determinations and decisions made by the Committee pursuant to the provisions of the Plan shall be final, conclusive and binding.

9.3           Compensation; Professional Assistance; Good Faith Actions.  Unless otherwise determined by the Board, members of the Committee shall receive no compensation for their services pursuant to this Plan. All expenses and liabilities which members of the Committee incur in connection with the administration of this Plan shall be borne by the Company. The Committee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers, or other persons. The Committee, the Company and the Company's officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee or the Board in good faith shall be final and binding upon all Participants, the Company and all other interested persons.  No members of the Committee or Board shall be personally liable for any action, determination or interpretation made in good faith with respect to this Plan or any Awards made hereunder, and all members of the Committee and the Board shall be fully protected by the Company in respect of any such action, determination or interpretation.

ARTICLE 10. MISCELLANEOUS PROVISIONS

10.1         Transferability.

10.1.1       No Option, Restricted Common Stock, Restricted Stock Unit, Deferred Stock Unit, SAR, Performance Unit, or any right therein or part thereof shall be liable for the debts, contracts or engagements of the Participant or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means, whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section 10.1.1 shall prevent transfers by will or by the applicable laws of descent and distribution or as permitted in Section 10.1.2 below. The Committee shall not be required to accelerate the exercisabilty of an Award or otherwise take any action pursuant to a divorce or similar proceeding in the event Participant's spouse is determined to have acquired a community property interest in all or any portion of an Award. Except as provided below, during the lifetime of the Participant, only he may exercise an Award (or any portion thereof) granted to him under the Plan. After the death of the Participant, any exercisable portion of an Award, prior to the time when such portion becomes unexercisable under the Plan or the applicable Award Agreement or other agreement, may be exercised by his personal representative or by any person empowered to do so under the deceased Participant's will or under the then applicable laws of descent and distribution.

16

10.1.2       Notwithstanding the foregoing, the Committee may provide in an Award Agreement, or amend an otherwise outstanding Award Agreement to provide, that a Participant may transfer Non-Qualified Stock Options to family members, or one or more trusts or other entities for the benefit of or owned by family members, consistent with applicable securities laws, according to such terms as the Committee may determine; provided that the Participant receives no consideration for the transfer of a Non-Qualified Stock Option and the transferred Non-Qualified Stock Option shall continue to be subject to the same terms and conditions as were applicable to the Non-Qualified Stock Option immediately before the transfer and shall be exercisable by the transferee according to the same terms as applied to the Participant.

10.2         Amendment, Suspension or Termination of this Plan.

10.2.1       Except as otherwise provided in this Section 10.2, this Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board; provided, however, no action of the Board may be taken that would otherwise require stockholder approval as a matter of applicable law, regulation or rule, without the consent of the stockholders. The Board and the Committee cannot reprice, replace or regrant through cancellation or by lowering the price per share of a previously granted Option unless the stockholders of the Company provide prior approval.  No amendment, suspension or termination of this Plan shall impair any rights or obligations under any Award theretofore made to a Participant, unless such right has been reserved in the Plan or the Award Agreement, without the consent of the Participant holding such Award. No Award may be made during any period of suspension or after termination of this Plan. In no event may any Award be made under this Plan after May 22, 2016.

10.2.2       Notwithstanding the foregoing, the Board or the Committee may take any action necessary to comply with a change in applicable law, irrespective of the status of any Award as vested or unvested, exercisable or unexercisable, at the time of such change in applicable law.

10.3         Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events.

10.3.1       In the event that the Committee determines, in its sole discretion, that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), on account of a recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar event, affects the Common Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee may, in such manner as it may deem equitable, adjust any or all of the following:

17

10.3.1.1 the maximum number of shares of Common Stock available for Awards;

10.3.1.2 the maximum number of shares of Common Stock subject to the Plan;

10.3.1.3 the number and kind of Company stock with respect to which an Award may be made under the Plan;

10.3.1.4 the number and kind of Company stock subject to an outstanding Award; and

10.3.1.5 the exercise price or purchase price with respect to any Award.

10.3.2       In the event of any transaction or event described in Section 10.3.1 or any unusual or nonrecurring transactions or events affecting the Company, or the financial statements of the Company, or of changes in applicable laws, regulations, or accounting principles, the Committee in its discretion is hereby authorized to take any one or more of the following actions whenever the Committee determines, in its sole discretion, that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award or right under this Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:

10.3.2.1               the Committee may provide, by the terms of the Award Agreement or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Participant's request, for (i) the purchase of any such Award for the payment of an amount of cash equal to the amount that could have been attained upon the exercise of such Award or realization of the Participant's rights had such Award been currently exercisable, payable, fully vested or the restrictions lapsed, or (ii) the replacement of such Award with other rights or property selected by the Committee;

10.3.2.2               the Committee may provide, by the terms of such Award Agreement or by action taken prior to the occurrence of such transaction or event, that the Award cannot be exercised after such event;

10.3.2.3               the Committee may provide, by the terms of such Award or by action taken prior to the occurrence of such transaction or event, that for a specified period of time prior to such  transaction or event such Award shall be exercisable, notwithstanding anything to the contrary in Section 4.6 or the provisions of such Award;

10.3.2.4               the Committee may provide, by the terms of such Award or by action taken prior to the occurrence of such transaction or event, that upon such event, such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar Awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;

18

10.3.2.5               the Committee may make adjustments in the number, type and kind of shares of Common Stock subject to outstanding Options, Restricted Common Stock, Restricted Stock Units, Deferred Stock Units, SARs and Performance Units and in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards, and rights and awards which may be granted in the future; and

10.3.2.6               the Committee may provide, by the terms of an Award of Restricted Common Stock or Restricted Stock Units or by action taken prior to the occurrence of such event, that for a specified period of time prior to such event, the restrictions imposed under an Award Agreement upon some or all shares of the Restricted Common Stock or the Restricted Stock Units may be terminated, and some or all shares of such Restricted Common Stock or some or all of such Restricted Stock Units may cease to be subject to forfeiture under Section 6.5 or repurchase under Section 6.6 after such event.

10.3.3       Subject to Section 10.7, the Committee may, in its sole discretion, at the time of grant, include such further provisions and limitations in any Award Agreement or certificate, as it may deem appropriate and in the best interests of the Company; provided, however, that no such provisions or limitations shall be contrary to the terms of the Participant's Employment Agreement or the terms of this Plan.

10.3.4       Notwithstanding the foregoing, in the event of a transaction or event described in Sections 10.3.1 or any unusual or nonrecurring transactions or events affecting the Company, no action pursuant to this Section 10.3 shall be taken that is specifically prohibited under applicable law, the rules and regulations of any governing governmental agency or national securities exchange, or the terms of the Participant's Employment Agreement.

10.4         Continued Employment.  Nothing in this Plan or in any Award Agreement hereunder shall confer upon any Participant any right to continue his employment, consulting or similar relationship with the Company, whether as an employee or consultant or otherwise, or shall interfere with or restrict in any way the rights of the Company, which are hereby expressly reserved, to discharge or terminate the relationship with any Participant at any time for any reason whatsoever, subject to the terms of any Employment Agreement entered into by the Participant and the Company.

10.5         Tax Withholding.  The Company shall be entitled to require payment in cash or deduction from other compensation payable to each Participant of any sums required by federal, state or local tax law to be withheld with respect to the issuance, vesting, exercise or lapse of any restriction of any Option, Restricted Common Stock, Restricted Stock Unit, Deferred Stock Unit, SAR or Performance Unit.  The Committee shall be authorized to establish procedures for election by Participants to satisfy such obligation for the payment of such taxes (i) by delivery of, or transfer of, shares of Common Stock to the Company or (ii) by directing the Company to retain shares of Common Stock otherwise deliverable under an Award; provided, however, that the total tax withholding where shares of Common Stock are being used to satisfy such obligation shall not exceed the minimum amount required to be withheld.  Shares of Common Stock withheld or delivered in accordance with this Section 10.5 shall be valued at Fair Market Value as of such date as may be specified in procedures established by the Committee.

19

10.6         Forfeiture Provisions.  Pursuant to its general authority to determine the terms and conditions applicable to Awards, the Committee shall have the right to provide, in the terms of such Award, or to require the Participant to agree by separate written instrument, that the Award shall terminate and any unexercised portion of such Award (whether or not vested) shall be forfeited if (i) a Termination of Employment occurs prior to a specified date, or within a specified time period following receipt or exercise of the Award, (ii) the Participant at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Committee or as specified in the Participant's Employment Agreement, or (iii) the Company terminates the Participant with or without cause.

10.7         Limitations Applicable to Section 16 Persons and Performance-Based Compensation.  Notwithstanding any other provision of this Plan, any Option, Restricted Common Stock, Restricted Stock Unit, Deferred Stock Unit, SARs, or Performance Units granted or awarded to any individual who is then subject to Section 16 of the Exchange Act shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act). To the extent permitted by applicable law, Options granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. Furthermore, notwithstanding any other provision of this Plan to the contrary, any Award that is intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as performance-based compensation as described in Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the extent necessary to conform to such requirements.

10.8         Effect of Plan Upon Option and Compensation Plans.  The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company. Nothing in this Plan shall be construed to limit the right of the Company (i) to establish any other forms of incentives or compensation for employees or consultants, or (ii) to grant or assume options or other rights otherwise than under this Plan in connection with any proper corporate purpose including but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, limited liability company, firm or association.

10.9         Compliance with Laws.  This Plan, the granting and vesting of Awards under this Plan and the issuance and delivery of shares of Common Stock and the payment of money under this Plan or under Awards awarded hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under this Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.  No Award under this Plan (or modification thereof) shall provide for the deferral of compensation that does not comply with Section 409A of the Code, unless the Committee, at the time of grant, specifically provides that the Award is not intended to comply with Section 409A of the Code.  Notwithstanding any provision of this Plan to the contrary, if one or more of the payments or benefits received or to be received by a Participant pursuant to an Award would cause the Participant to incur any additional tax or interest under Section 409A of the Code, the Committee may reform such provision to maintain to the maximum extent practicable the original intent of the applicable provision without violating the provisions of Section 409A of the Code.

20

10.10       Effective Date.  This Plan shall be effective on the date it is approved by the stockholders of the Company.

10.11       Titles.  Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Plan.

10.12       Governing Law.  This Plan and any agreements hereunder shall be administered, interpreted and enforced under the laws of the State of Texas, without regard to that state’s conflicts of laws rules.

21

EX-31.1

Exhibit 31.1

Chief Executive Officer Certification

I, Emile A. Battat, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Atrion Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over the financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 8, 2008
	/s/ EmileA.Battat
	Emile A. Battat
	Chairman and
	Chief Executive Officer

EX-31.2

Exhibit 31.2

Chief Financial Officer Certification

I, Jeffery Strickland, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Atrion Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over the financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 8, 2008
	/s/ Jeffery Strickland
	Jeffery Strickland
	Vice President and
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES – OXLEY ACT OF 2002

Pursuant to 18 U.S.C. § 1350, the undersigned officer of Atrion Corporation (the “Company”), hereby certifies, to such officer’s knowledge, that the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 8, 2008	/s/ EmileA.Battat
	Emile A. Battat
	Chief Executive Officer

The foregoing certification is made solely for purpose of  18 U.S.C. § 1350 and not for any other purpose.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES – OXLEY ACT OF 2002

Pursuant to 18 U.S.C. § 1350, the undersigned officer of Atrion Corporation (the “Company”), hereby certifies, to such officer’s knowledge, that the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 8, 2008	/s/ Jeffery Strickland
	Jeffery Strickland
	Chief Financial Officer

The foregoing certification is made solely for purpose of 18 U.S.C. § 1350 and not for any other purpose.