10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2008

¨ 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: 0-6511

O. I. CORPORATION

(Exact name of registrant as specified in its charter)

OKLAHOMA	73-0728053
State of Incorporation	I.R.S. Employer Identification No.

P.O. Box 9010 151 Graham Road College Station, Texas	77842-9010
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (979) 690-1711

Indicate by check mark 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.    Yes  x    No  ¨

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of May 1, 2008, there were 2,612,537 shares of the issuer’s common stock, $.10 par value, outstanding.

Caution Regarding Forward-Looking Information; Risk Factors

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of United States securities laws, including the United States Private Securities Litigation Reform Act of 1995. From time to time, our public filings, press releases and other communications will contain forward-looking statements. Forward-looking information is often, but not always, identified by the use of words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “forecast”, “target”, “project”, “may”, “will”, “should”, “could”, “estimate”, “predict” or similar words suggesting future outcomes or language suggesting an outlook. Forward-looking statements in this quarterly report on Form 10-Q include, but are not limited to, statements with respect to expectations of our prospects, future revenues, earnings, activities and technical results.

Forward-looking statements and information are based on current beliefs as well as assumptions made by, and information currently available to, us concerning anticipated financial performance, business prospects, strategies and regulatory developments. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. The forward-looking statements in this quarterly report on Form 10-Q are made as of the date it was issued and we do not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks that outcomes implied by forward-looking statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates and intentions expressed in such forward-looking statements. These risks and uncertainties may cause our actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. When relying on our forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events.

Our public filings are available at www.oico.com and on EDGAR at www.sec.gov.

Please see “Part I, Item 1A—Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2007 for further discussion regarding our exposure to risks. Additionally, new risk factors emerge from time to time and it is not possible for us to predict all such factors nor to assess the impact such factors might have on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

O.I. Corporation

and Subsidiary

Condensed Consolidated Balance Sheets

(In Thousands, Except Par Value)

	March 31, 2008 (Unaudited)			December 31, 2007
Assets
Current assets:
Cash and cash equivalents	$	1,017		$	3,356
Accounts receivable, trade, net of allowance for doubtful accounts of $337 and $350, respectively		7,183			6,931
Investments at market		5,314			3,120
Inventories, net		5,380			5,357
Current deferred income tax assets		1,028			1,028
Other current assets		541			652
Total current assets		20,463			20,444
Property, plant and equipment, net		3,283			3,446
Long-term deferred income tax assets		503			472
Intangible assets, net		422			409
Other assets		239			235
Total assets	$	24,910		$	25,006
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable, trade		1,773		$	1,872
Accrued compensation and other related expenses		1,009			1,316
Accrued warranties		496			496
Accrued liabilities		1,474			1,173
Total current liabilities		4,752			4,857
Uncertain tax positions-Long term liabilities		27			27
Commitments and contingencies
Stockholders’ equity:
Common stock, $.10 par value, 10,000 shares authorized, 4,103 shares issued, 2,610 and 2,620 shares outstanding, respectively		410			410
Additional paid-in capital		5,331			5,288
Treasury stock, 1,493 and 1,483 shares, respectively, at cost		(10,353	)		(10,232	)
Retained earnings		24,912			24,803
Accumulated other comprehensive loss, net of taxes		(169	)		(147	)
Total stockholders’ equity		20,131			20,122
Total liabilities and stockholders’ equity	$	24,910		$	25,006

See Notes to Unaudited Condensed Consolidated Financial Statements.

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O.I. Corporation

and Subsidiary

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(In Thousands, Except Per $ Share Amounts)

(Unaudited)

	Three Months Ended March 31,
	2008			2007
Net revenues:
Products	$	6,407		$	6,493
Services		920			849
		7,327			7,342
Cost of revenues:
Products		3,280			3,223
Services		599			389
		3,880			3,612
Gross profit		3,447			3,730
Selling, general and administrative expenses		2,299			3,661
Research and development expenses		908			932
Operating income (loss)		240			(863	)
Other income, net		80			399
Income (loss) before income taxes		320			(464	)
Provision (benefit) for income taxes		80			(102	)
Net income (loss)	$	240		$	(362	)
Other comprehensive (loss) income, net of tax, unrealized (losses) gains on investments		(22	)		25
Comprehensive income (loss)	$	218		$	(337	)
Earnings (loss) per share:
Basic	$	0.09		$	(0.13	)
Diluted	$	0.09		$	(0.13	)
Shares used in computing earnings (loss) per share:
Basic		2,615			2,862
Diluted		2,654			2,862
Cash dividends declared per share of common stock	$	0.05		$	0.05

See Notes to Unaudited Condensed Consolidated Financial Statements.

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O.I. Corporation

and Subsidiary

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

	Three Months Ended March 31,
	2008			2007
Cash Flows from Operating Activities:
Net income (loss)	$	240		$	(362	)
Depreciation and amortization		153			148
Stock based compensation		41			26
(Gain) loss on disposition of property, plant and equipment		1			(214	)
Change in working capital		(287	)		(408	)
Net cash flows provided by (used in) operating activities		148			(810	)
Cash Flows from Investing Activities:
Purchase of investments		(2,533	)		(1,225	)
Maturity of investments		301			2,895
Purchase of property, plant and equipment		(26	)		(269	)
Proceeds from sale of property, plant and equipment		37			237
Change in other assets		(17	)		(53	)
Net cash flows (used in) provided by investing activities		(2,238	)		1,585
Cash Flows from Financing Activities:
Proceeds from issuance of common stock pursuant to exercise of employee stock options and employee stock purchase plan		14			13
Purchase of Treasury stock		(132	)		(90	)
Payment of cash dividends on common stock		(131	)		(143	)
Net cash flows (used in) financing activities		(249	)		(220	)
Net (decrease) increase in cash and cash equivalents		(2,339	)		555
Cash and cash equivalents:
Beginning of period		3,356			2,665
End of period	$	1,017		$	3,220

See Notes to Unaudited Condensed Consolidated Financial Statements.

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O.I. CORPORATION and SUBSIDIARY

Notes to Unaudited Condensed Consolidated Financial Statements

1. Basis of Presentation

O.I. Corporation (the “Company,” “we,” “OI”or “our”), an Oklahoma corporation, was organized in 1963. The Company designs, manufactures, markets, and services analytical, monitoring and sample preparation products, components, and systems used to detect, measure and analyze chemical compounds.

The consolidated financial statements included in this report have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and include all normal and recurring adjustments which are, in the opinion of management, necessary for a fair presentation. These financial statements have not been audited by an independent accountant. The consolidated financial statements include the accounts of the Company and its subsidiary. All inter-company transactions and balances have been eliminated in the financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations for interim reporting.

The Company believes that the disclosures are adequate to prevent the information from being misleading. However, these financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007. The financial data for the interim periods presented may not necessarily reflect the results to be anticipated for the complete year.

2. Inventories, Net

Inventories, net, which include material, labor and manufacturing overhead, are stated at the lower of first-in, first-out cost or market (in thousands):

	March 31, 2008			December 31, 2007
Raw materials	$	4,822		$	4,506
Work-in-process		434			742
Finished goods		765			841
Reserves		(641	)		(732	)
	$	5,380		$	5,357

3. Comprehensive Income (Loss)

Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under generally accepted accounting principles are recorded as an element of stockholders’ equity. The Company’s components of comprehensive income (loss) are net income and unrealized gains and losses on available-for-sale investments.

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4. Earnings (Loss) Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share:

	Quarter Ended March 31,
	2008		2007
Numerator, earnings (loss) attributable to common stockholders	$	240	$	(362	)
Denominator:
Basic-weighted average common shares outstanding		2,615		2,862
Dilutive effect of employee stock options		39		—
Diluted outstanding shares		2,654		2,862
Basic earnings (loss) per common share	$	0.09	$	(0.13	)
Diluted earnings (loss) per common share	$	0.09	$	(0.13	)

For the three months ended March 31, 2008, there were 98,000 anti-dilutive shares. For the three months ended March 31, 2007, the Company’s potentially dilutive options of 64,638 were not used in the calculation of diluted earnings since the effect of potentially dilutive securities in computing a loss per share was antidilutive.

5. Stock-Based Compensation

On January 1, 2006, we adopted the provisions of Statement 123 (revised 2004) (“Statement 123(R)”), “Share-Based Payment”, which revises Statement 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion 25, Accounting for Stock Issued to Employees. In accordance with Statement 123(R), our financial statements recognize expense related to our stock-based compensation awards that were granted after January 1, 2006, or that were unvested as of January 1, 2006, based on their grant-date fair value.

Our pre-tax compensation cost for stock-based compensation for the three months ended March 31, 2008 and 2007 was $41,000 and $26,000 ($25,000 and $16,000 after tax effects), respectively.

Statement 123(R) requires that cash flows from the exercise of stock options resulting from tax benefits in excess of recognized cumulative compensation cost (excess tax benefits) be classified as financing cash flows. For the three months ended March 31, 2008 and 2007, there was no excess tax benefit, respectively.

During the three months ended March 31, 2008, no options were granted. During the same period of the prior year, our CEO/CFO, who was hired in January, was granted 20,000 incentive stock options under the 2003 Incentive Compensation Plan. The weighted average fair value of these options was calculated using the following assumptions:

	Employee Incentive Stock Options
Risk free interest rate	4.75%
Expected dividend yield	1.75%
Expected life	3 years
Expected volatility	37.00%

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Other Information

As of March 31, 2008, we had $421,000 of total unrecognized compensation cost related to non-vested awards granted under our various share-based plans, which we expect to recognize over 2.3 years.

We received cash from options exercised during the first three months of fiscal years 2008 and 2007 of $9,000 and $8,000, respectively. The impact of these cash receipts is included in financing activities in the accompanying consolidated statements of cash flows.

The Company’s practice has been to issue shares for option exercises out of treasury stock as provided under the terms of the 2003 Incentive Compensation Plan. We believe our treasury stock holdings are sufficient to satisfy any exercises in 2008.

6. Long-Term Obligations

On May 1, 2008, the Company entered into a credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank. The Credit Agreement expires in 2011 and provides a revolving credit facility up to $6 million based on a formula that includes eligible accounts receivable and inventory. Interest is payable quarterly at the bank’s prime rate minus 0.5% or, at the Company’s option, LIBOR plus 2.0%. The Company incurs no fee on the unused portion of the credit facility.

The Credit Agreement includes certain restrictive covenants common for such agreements and requires maintenance of certain minimum financial ratios. The Company’s accounts receivable and inventory secure the credit facility.

7. Recent Pronouncements

Effective January 1, 2008 the Company adopted the provisions of SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. In February 2008, the FASB agreed to a one-year deferral of the effective date for nonfinancial assets and liabilities that are recognized or disclosed at fair values in the financial statements on a nonrecurring basis. The adoption of SFAS did not have a material impact on the Company’s consolidated financial statements. The Company does not expect that the adoption of the provisions for other nonfinancial assets or liabilities will have a material impact on the Company’s consolidated financial statements.

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under SFAS 157 are described below:

Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3—Inputs that are both significant to the fair value measurement and unobservable.

The Company uses quoted market prices to determine the fair value of investment securities. They consist of exchange-traded fixed income and equity securities, and are classified in Level 1 of the fair value hierarchy.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto. This discussion also contains forward-looking statements. Please see the “Caution Regarding Forward-Looking Information; Risk Factors” above.

COMPANY OVERVIEW

O. I. Corporation, referred to as “the Company,” “OI,” “we,” “our” or “us”, was organized in 1963 in accordance with the Business Corporation Act of the State of Oklahoma as Clinical Development Corporation, a builder of medical and research laboratories. In 1969, we moved from Oklahoma City, Oklahoma to College Station, Texas and changed our name to Oceanography International Corporation. To better reflect current business operations, we again changed our name to O.I. Corporation in July 1980, and in January 1989 we began doing business as OI Analytical.

At OI, we provide innovative products for chemical monitoring and analysis. Our products perform chemical detection, analysis, measurement and monitoring applications in a wide variety of industries including food, beverage, pharmaceutical, semiconductor, power generation, chemical, petrochemical and security. Headquartered in College Station, Texas, we sell our products throughout the world utilizing a direct sales force as well as a network of independent sales representatives and distributors.

RECENT DEVELOPMENTS

In April 2008, we announced a strategic alliance with DANI Instruments, S.p.A. which will allow us to broaden our gas chromatography product line by selling DANI’s sample-introduction and detector accessories on a world-wide basis. We anticipate this alliance will add incremental revenues beginning in the second half of 2008.

We also recently entered into a three-year credit agreement with JPMorgan Chase Bank providing a $6 million line of credit. While we currently have no bank debt outstanding, this line of credit will provide additional liquidity to support our working capital needs in the event we find a suitable acquisition opportunity.

Results of Operations

Revenues

	Three Months Ended March 31,								Increase (Decrease)
(dollars in 000’s)	2008		% of Rev.		2007		% of Rev.
Net revenue:
Products	$	6,407	87.4	%	$	6,493	88.4	%	$	(86	)
Services		920	12.6	%		849	11.6	%		71
	$	7,327	100.0	%	$	7,342	100.0	%	$	(15	)

Consolidated net revenues for the three months ended March 31, 2008 were essentially unchanged from 2007, down $15,000, or 0.2%, compared to the same period of the prior year. Our laboratory product sales increased 27.6% in the first quarter of 2008 compared to the previous year. However, this increase was offset by a decline in sales of our MINICAMS^® air-monitoring systems. During the first quarter of 2007, we delivered a significant shipment of MINICAMS to the U.S. Army fulfilling the requirements under our contract announced on May 17, 2006. Although we believe prospects for MINICAMS sales beyond 2008 look promising, we currently have no major contracts in hand. Our goal is to overcome the anticipated short-term decline in MINICAMS revenues through sales growth in our laboratory products business. To that end, we have refocused our sales efforts in this product area and recently completed a strategic alliance with DANI Instruments to expand our portfolio of gas chromatography products.

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Our first quarter growth in laboratory products revenues was primarily attributable to higher domestic sales of our gas chromatography products. Domestic demand for this product line has increased due in part to increased petrochemical industry demand and also to the renewal of orders from TestAmerica, which deferred orders during 2007 after its fourth quarter merger with Severn Trent Laboratories. Domestic sales of our TOC product line also increased, while our overall international sales grew modestly. During the first quarter of 2008, we experienced a higher than normal level of shipments on which revenue was deferred until the subsequent quarter. Without these deferrals, our net revenue would have been approximately 5% higher. We ended the first quarter with a strong backlog and anticipate continued sales growth in our laboratory product lines over the balance of the year.

Service revenues increased $71,000, or 8.4%, during the first quarter of 2008 compared to the same period of the prior year. The increase in service revenues during the first quarter was primarily attributable to higher billings under our U.S. Army contract which we signed in the first quarter of 2007. We began to generate billings under this contract late in the second quarter of 2007. Billings under this contract may decline during subsequent quarters based on the availability of governmental funding.

Gross Profit

	Three Months Ended March 31,
	2008				2007
(dollars in 000’s)	$		%		$		%
Cost of revenues:
Products	$	3,280	51.2	%	$	3,223	49.6	%
Services		599	65.1	%		389	45.8	%
Total cost of revenues	$	3,880	53.0	%	$	3,612	49.2	%
Gross profit	$	3,447	47.0	%	$	3,730	50.8	%

Gross profit for the three months ended March 31, 2008 decreased $283,000, or 7.6%, compared to the same period of the prior year, primarily due to higher cost of sales associated with the U.S. Army contract which has lower margins than our commercial service revenue. In addition, the large volume of MINICAMS^® shipments during 2007 favorably impacted our margins during the first quarter last year. On a percentage of sales basis, our first quarter margin decreased 3.8% in comparison to the same period of the prior year.

Operating Expenses

	Three Months Ended March 31,
	2008				2007
(dollars in 000’s)	$		% of Rev.		$		% of Rev.
Selling, general and administrative expenses	$	2,299	31.4	%	$	3,661	49.9	%
Research and development expenses		908	12.4	%		932	12.7	%

Selling, general and administrative (“SG&A”) expenses for the three months ended March 31, 2008 decreased $1,362,000, or 37.2%, compared to the same period of the prior year. This decrease was primarily attributable to the inclusion in the first quarter of 2007 of various non-recurring expenses incurred in connection with our internal review of historical stock option prices and related accounting. During 2007, we recorded approximately $1,350,000 in expenses associated with this stock option investigation, consisting primarily of legal, accounting and consulting fees. This decrease in SG&A expenses brings us more in line with our historical expenditure level, and we expect to maintain these expenses at this reduced level in the coming quarters.

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Research and development (“R&D”) expenses for the three months ended March 31, 2008 decreased by $24,000, or 2.6%, compared to the first quarter of 2007 and represented 12.4% of sales, down 0.3% from 2007. This decline was primarily due to the reclassification of certain R&D expenses into service cost of sales in 2008 because of the inclusion of related contract revenues in service revenues. During the first quarter of 2008, we utilized a larger portion of our R&D resources to perform work under our U.S. Army contract than we used during the same period of 2007 prior to the initiation of work under this contract. R&D expenses in future periods may increase if we reallocate R&D resources to internal projects due to decreased contract funding.

	Three Months Ended March 31,
	2008				2007
(dollars in 000’s)	$		% of Rev.		$			% of Rev.
Operating income (loss)	$	240	3.3	%	$	(863	)	-11.8	%
Other income, net		80	1.1	%		399		5.4	%
Income (loss) before income taxes		320	4.4	%		(464	)	-6.3	%
Provision (benefit) for income taxes		80	1.1	%		(102	)	-1.4	%
Net income (loss)	$	240	3.3	%	$	(362	)	-4.9	%

Operating Income (Loss)

For the three months ended March 31, 2008, we generated operating income of $240,000, or 3.3% of revenues compared to a loss of $863,000 in the same period of the prior year. The loss in the first quarter of 2007 was primarily due to non-recurring stock option investigation expenses that we incurred last year.

Other Income, Net

Other income totaled $80,000 for the three months ended March 31, 2008, down from $399,000 in 2007. In 2007, we benefited from a gain on the condemnation of .40 acres of our College Station, Texas property for the widening of an adjacent highway. In addition, our 2008 invested funds have been lower than last year due in part to the repurchase of shares in 2007 and lower investment rates of return.

Provision (Benefit) for Income Taxes

Our provision for income taxes totaled $80,000 during the first quarter of 2008, an effective rate of 25% based on our estimated tax rate after taking into consideration applicable tax credits such as the R&D tax credit and the Domestic Production Activity Deduction. Due to the loss recorded last year, we recorded a tax benefit in the first quarter of 2007.

Liquidity and Capital Resources

Net cash flow provided by operating activities for the quarter ended March 31, 2008 totaled $148,000 compared to an $810,000 use of cash during the comparable period of 2007. This improved cash flow from operating activities during 2008 was primarily attributable to higher net income and reduced working capital cash requirements.

Net cash flow used in investing activities totaled $2,238,000 for the three months ended March 31, 2008, compared to providing $1,585,000 in cash flow in the comparable period of 2007. Our use of cash in investing activities in the first quarter of 2008 has consisted primarily of purchasing short-term securities such as commercial paper and bank certificates of deposit during the first quarter. During 2007, we moved more funds into cash to cover anticipated cash requirements including the stock option investigation. Last year’s first quarter cash flow provided by investing activities also included the property condemnation at College Station noted above. During 2008, capital expenditures have been minimal and we anticipate such expenditures to continue to run well below last year due to completion of the ERP system implementation during 2007. We had no material commitments for the purchase of property, plant and equipment outstanding as of March 31, 2008.

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Net cash flow used in financing activities for the three months ended March 31, 2008 totaled $249,000, up $29,000 from 2007, due primarily to increased repurchases of our common stock. During 2008, we purchased approximately 12,000 shares of our stock on the open market. Because we had fewer shares outstanding in 2008, our cash dividends declined compared to 2007.

Cash, cash equivalents and short-term investments totaled $6,331,000 as of March 31, 2008, compared to $6,476,000 as of December 31, 2007. Though down slightly from year-end, we believe our liquidity and expected cash flows from operations are more than sufficient to meet expected working capital, capital expenditure and R&D requirements for both the short and long-term. In addition, we recently entered into a bank credit agreement that provides a revolving $6,000,000 line of credit to support working capital needs in the event we pursue an acquisition. We currently have no borrowings on this line of credit.

We invest a portion of our excess funds generated from operations in short-term securities, including money market funds, commercial paper, certificates of deposit, and a portion in preferred stocks. Continued volatility in the financial markets could potentially result in future losses on our portfolio of preferred stock. We are reducing our preferred stock holdings as market conditions allow us to do so.

The Company’s Board of Directors declared a cash dividend on January 19, 2008 of $0.05 per common share payable on February 29, 2008 to shareholders of record at the close of business on February 14, 2008. The quarterly dividend was declared in connection with the Board’s decision in 2006 to establish an annual cash dividend of $0.20 per share, payable at $0.05 per quarter. The payment of future cash dividends under the policy is subject to the approval of our Board of Directors.

Critical Accounting Policies

Please reference Part I-Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2007.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a variety of market risks, including changes in interest rates and the market value of our investments, which include certain auction-rate securities. In the normal course of business, we employ established policies and procedures to manage our exposure to changes in the market value of our investments.

The fair value of our investments in debt and equity securities at March 31, 2008 and December 31, 2007 totaled approximately $5,314,000 and $3,120,000, respectively. Our investment portfolio consists of short-term securities, with at least an investment grade rating to minimize credit risk, and preferred stock issued by various financial institutions and utilities. Our investment goal is to preserve principal and provide a favorable return on our investment portfolio. Due to unusual market conditions during the second half of 2007 and continuing into 2008, we have experienced a decline in the market value of our preferred stock holdings. We recorded a loss of $353,000 in 2007 to reduce our preferred stock holdings issued by financial brokerage firms to their current market value at December 31, 2007.

During the first quarter of 2008, the fair market value of our preferred stock holdings declined approximately $58,000. We have not recognized this unrealized loss and will continue to monitor market conditions to determine if this further decline in value is other than temporary in nature. We sold approximately $46,000 of preferred stock during the first quarter and plan to further reduce our preferred stock holdings as market conditions allow. Continued instability in the debt markets could further reduce the value of our preferred stock holdings and result in additional losses.

Item 4. Controls and Procedures

We maintain a set of disclosure controls and procedures designed to ensure that the information we are required to disclose in reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. During the period from

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January 1, 2008 to March 31, 2008, an evaluation under the supervision and with the participation of management, including the Chief Executive Officer/CFO (our principal executive officer and principal financial officer), of the effectiveness of our disclosure controls and procedures was conducted. Based on that evaluation, the Chief Executive Officer/CFO has concluded that, as of March 31, 2008, our disclosure controls and procedures are effective.

Subsequent to the date of his evaluation, there have been no changes in our internal controls that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Our management, including the Chief Executive Officer/CFO, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Part II- Other Information

Item 1. Legal Proceedings

In the normal course of our business, we are subject to legal proceedings brought against us. There have been no material developments to the legal proceedings described in Part I, Item 3, “Legal Proceedings” in our Annual Report on Form 10-K for the year-ended December 31, 2007, and there are no new reportable legal proceedings for the quarter ended March 31, 2008.

Item 1A. Risk Factors

There have been no material changes in the risk factors described in Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2007.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c) Issuer Repurchases of Equity Securities

The following table provides information about our repurchases of equity securities that are registered by us pursuant to Section 12 of the Exchange Act during the quarter ended March 31, 2008.

2008	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan (1)	Maximum Number of Shares that May Yet Be Purchased Under the Plan (1)
January 1—January 31	4,358	$	11.44	4,358	52,218
February 1—February 29	3,660	$	10.91	3,660	48,558
March 1—March 31	3,995	$	10.56	3,995	44,563
Total	12,013			12,013

(1) In August 2006, a plan was approved to repurchase up to 100,000 shares of OI common stock with no specified expiration date.

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Item 3. Defaults Upon Senior Securities

None.

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

None.

Item 5. Other Information

On May 1, 2008, we entered into a Three Year Credit Agreement (the “Credit Agreement”) by and among the Company, its primary subsidiary, and JPMorgan Chase Bank, N.A.

The Credit Agreement expires in 2011 and provides a revolving credit facility (the “Facility”) up to $6 million based on a formula that includes eligible accounts receivable and inventory. Interest is payable quarterly at the bank’s prime rate minus 0.5% or, at the Company’s option, LIBOR plus 2.0%. We incur no fee on the unused portion of the credit facility. Our accounts receivable and inventory secure the credit facility.

The Credit Agreement contains customary representations and warranties as well as customary affirmative and negative covenants. Negative covenants include, among others, limitations on our incurrence of liens and indebtedness. In addition, the Credit Agreement requires us to maintain: (1) a minimum tangible net worth of $18 million plus 75% of our annual net income, (2) a minimum of $2 million in cash and investments, and (3) a twelve month trailing EBITDA ranging from $1.25 million in the initial year to $2 million in the final year. The Agreement also requires us to refinance the Facility within one-hundred and eighty (180) days of an acquisition which causes borrowings on the Facility to exceed $3 million for ninety consecutive days.

We have no current plans to borrow under the Facility but will utilize amounts borrowed under the Facility to support working capital needs in the event of an acquisition.

The Credit Agreement contains customary events of default. Upon the occurrence and during the continuance of an event of default, the lender may declare the outstanding advances and all other obligations under the Credit Agreement immediately due and payable.

The description of the Credit Agreement contained herein is qualified in its entirety by reference to the Credit Agreement, a copy of which is filed herewith as Exhibit 10.11 and is incorporated herein by reference.

Item 6. Exhibits

3.1	Articles of Incorporation of the Company (filed as Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year-ended December 31, 2001 and incorporated herein by reference).
3.2	Amended and Restated Bylaws of the Company (filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K/A for the year-ended December 31, 2002 and incorporated herein by reference).
3.3	Amendment to Section 2 of Article III of the Amended and Restated Bylaws of the Company (filed as Exhibit 3.3 to the Company’s Annual Report on Form 10-K for the year-ended December 31, 2007 and incorporated herein by reference).
3.4	Amendment to Section 2 of Article III of the Amended and Restated Bylaws of the Company (filed as Exhibit 3.4 to the Company’s Annual Report on Form 10-K for the year-ended December 31, 2007 and incorporated herein by reference).

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3.5	Amendment to Section 1 of Article VI of the Amended and Restated Bylaws of the Company (filed as Exhibit 3.1 to the Company’s Report on Form 8-K on December 6, 2007 and incorporated herein by reference).
3.6	Amendment to Section 2 of Article III of the Amended and Restated Bylaws of the Company (filed as Exhibit 3.1 to the Company’s Report on form 8-K on January 22, 2008 and incorporated herein by reference).
10.11*	Three-Year Credit Agreement, dated May 1, 2008, by and among OI Corporation and JPMorgan Chase Bank, N.A.
31*	Principal Executive Officer and Principal Financial Officer certification pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 *	Principal Executive Officer and Principal Financial Officer certification pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith

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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.

		O. I. CORPORATION
		(Registrant)
Date:	May 9, 2008	BY:	/s/ J. Bruce Lancaster
			Chief Executive Officer and Chief Financial Officer (Principal Executive and Principal Financial Officer)

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EXHIBIT INDEX

EXHIBIT NUMBER	EXHIBIT TITLE
3.1	Articles of Incorporation of the Company (filed as Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year-ended December 31, 2001 and incorporated herein by reference).
3.2	Amended and Restated Bylaws of the Company (filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K/A for the year-ended December 31, 2002 and incorporated herein by reference).
3.3	Amendment to Section 2 of Article III of the Amended and Restated Bylaws of the Company (filed as Exhibit 3.3 to the Company’s Annual Report on Form 10-K for the year-ended December 31, 2007 and incorporated herein by reference).
3.4	Amendment to Section 2 of Article III of the Amended and Restated Bylaws of the Company (filed as Exhibit 3.4 to the Company’s Annual Report on Form 10-K for the year-ended December 31, 2007 and incorporated herein by reference).
3.5	Amendment to Section 1 of Article VI of the Amended and Restated Bylaws of the Company (filed as Exhibit 3.1 to the Company’s Report on Form 8-K on December 6, 2007 and incorporated herein by reference).
3.6	Amendment to Section 2 of Article III of the Amended and Restated Bylaws of the Company (filed as Exhibit 3.1 to the Company’s Report on form 8-K on January 22, 2008 and incorporated herein by reference).
10.11*	Three-Year Credit Agreement, dated May 1, 2008, by and among OI Corporation and JPMorgan Chase Bank, N.A.
31*	Principal Executive Officer and Principal Financial Officer certification pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*	Principal Executive Officer and Principal Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Filed herewith

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EX-10.11

Exhibit 10.11

    Credit Agreement

This agreement dated as of May 1, 2008 is between JPMorgan Chase Bank, N.A. (together with its successors and assigns, the “Bank”), whose address is 707 Travis, 7th Floor, Houston, TX 77002, and O.I. Corporation (individually, the “Borrower” and if more than one, collectively, the “Borrowers”), whose address is 151 Graham Road, College Station, TX 77842.

1. Credit Facilities.

1.1 Scope. This agreement governs Facility A, and, unless otherwise agreed to in writing by the Bank and the Borrower or prohibited by any Legal Requirement (as hereafter defined), governs the Credit Facilities as defined below. Advances under any Credit Facilities shall be subject to the procedures established from time to time by the Bank. Any procedures agreed to by the Bank with respect to obtaining advances, including automatic loan sweeps, shall not vary the terms or conditions of this agreement or the other Related Documents regarding the Credit Facilities.

1.2 Facility A (Line of Credit). The Bank has approved a credit facility to the Borrower in the principal sum not to exceed $6,000,000.00 in the aggregate at any one time outstanding (“Facility A”). Facility A shall be used only for the purpose of (a) acquisition financing (“Acquisition Advances”), and (b) working capital for Borrower’s regular business operations. Borrower shall provide advice to Bank of the purpose of each advance made under Facility A in form and substance reasonably satisfactory to Bank, and in the form of Exhibit A if Bank shall request.

A. Required Paydown and Reduction in Facility A after Acquisition Advances. If (i) Borrower shall have requested and received Acquisition Advances with an aggregate amount of $1,000,000.00 or more, and (ii) the Line of Credit Note shall have had an aggregate principal balance continuously exceeding $3,000,000.00 for more than 90 days (the 90^th day being a “Reduction Trigger Date”), then on the 180^th day after both such conditions first shall have occurred (a “Required Reduction Date”), the maximum face amount of Facility A shall be reduced by an amount equal to the total principal balance outstanding on the Required Reduction Date. To the extent the outstanding principal balance of the Line of Credit Note shall exceed maximum face amount of Facility A as so reduced on the Required Reduction Date, Borrower shall make a repayment of principal on the Required Reduction Date so as to comply with the reduction in face amount of Facility A. After the occurrence of any Required Reduction Date, if the conditions described in the first sentence shall again occur, there will be another Reduction Trigger Date and Required Reduction Date and the foregoing provisions concerning them shall be applicable.

B. Borrowing Base. The aggregate principal amount of advances outstanding at any one time under Facility A (the “Aggregate Outstanding Amount”) shall not exceed the Borrowing Base or the maximum principal amount then available under Facility A, whichever is less (the “Maximum Available Amount”). If at any time the Aggregate Outstanding Amount exceeds the Maximum Available Amount, the Borrower shall immediately pay the Bank an amount equal to such excess. “Borrowing Base” means the aggregate of:

1. 85% of the book value of all Eligible Accounts; plus

2. 40% of the lower of cost (determined using the first-in, first-out method of inventory accounting) or wholesale market value, as determined by the Bank, of all Eligible Inventory

C. Covenant to Provide Additional Security. In the event that total combined outstanding balance of all Notes under Facility A shall in the aggregate continuously exceed $4,000,000.00 for more than 90 days, Borrower shall promptly upon notice by Bank provide to Bank a first priority perfected security interest in all of its Equipment (as defined in the Uniform Commercial Code) excluding any Equipment subject to lien disclosed to Bank prior to the date of this agreement, on terms and conditions and otherwise acceptable to Bank in form and substance.

2. Definitions and Interpretations.

2.1 Definitions. As used in this agreement, the following terms have the following respective meanings:

A. “Account” means a trade account, account receivable, other receivable, or other right to payment for goods sold or leased or services rendered.

B. “Account Debtor” means the Person obligated on an Account.

C. “Affiliate” means any Person which, directly or indirectly Controls or is Controlled by or under common Control with, another Person, and any director or officer thereof. The Bank is under no circumstances to be deemed an Affiliate of the Borrower or any of its Subsidiaries.

D. “Authorizing Documents” means certificates of authority to transact business, certificates of good standing, borrowing resolutions, appointments, officer’s certificates, certificates of incumbency, and other documents which empower and authorize or evidence the power and authority of all Persons (other than the Bank) executing any Related Document or their representatives to execute and deliver the Related Documents and perform the Person’s obligations thereunder.

E. “Collateral” means all Property, now or in the future subject to any Lien in favor of the Bank, securing or intending to secure, any of the Liabilities.

F. “Control” as used with respect to any Person, means the power to direct or cause the direction of, the management and policies of that Person, directly or indirectly, whether through the ownership of Equity Interests, by contract, or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

G. “Credit Facilities” means all extensions of credit from the Bank to the Borrower, whether now existing or hereafter arising, including but not limited to those described in Section 1, if any, and those extended contemporaneously with this agreement.

H. “Distributions” means all dividends and other distributions made to any Equity Owners, other than salary, bonuses, and other compensation for services expended in the current accounting period.

I. “Eligible Accounts” means, at any time, all of the Borrower’s Accounts in which the Bank has a first priority continuing perfected Lien and which are earned and invoiced within thirty (30) days of being earned and which contain selling terms and conditions satisfactory to the Bank, are payable on ordinary trade terms, and are not evidenced by a promissory note, other instrument or chattel paper. The net amount of any Eligible Account against which the Borrower may borrow shall exclude all returns, discounts, credits, and offsets of any nature. Unless otherwise agreed to by the Bank in writing, Eligible Accounts do not include Accounts: (1) which are not owned by the Borrower

free and clear of all Liens, constructive trust, statutory priorities not in favor of the Bank, and claims of Persons other than the Bank; (2) with respect to which the Account Debtor is an Affiliate of the Borrower or otherwise affiliated with or related to the Borrower, including without limitation, any employee, officer, director, Equity Owner or agent of the Borrower; (3) with respect to which goods are placed on consignment, guaranteed sale, bill-and-hold, sale-and-return, sale on approval, cash-on-delivery or other terms by reason of which the payment by the Account Debtor may be conditional; (4) with respect to which the Account Debtor is not a resident of the United States, except to the extent such Accounts are otherwise Eligible Accounts and are supported by insurance, bonds or other assurances satisfactory to the Bank; (5) subject to the U.S. Office of Foreign Asset Control Special Designated Nationals and Blocked Person’s List, or with respect to which the Account Debtor is otherwise a Person with whom the Borrower or the Bank is prohibited from doing business by any applicable Legal Requirement; (6) which are not payable in U.S. Dollars; (7) with respect to which the Borrower is or may become liable to the Account Debtor for goods sold or services rendered by the Account Debtor to the Borrower; (8) which are subject to dispute, counterclaim, deduction, withholding, defense, or setoff; (9) with respect to which the goods have not been shipped or delivered, or the services have not been rendered, to the Account Debtor, or which otherwise constitute pre-billed Accounts; (10) which constitute retainage, or are bonded Accounts; (11) with respect to which the Bank determines the creditworthiness, financial or business condition of the Account Debtor to be unsatisfactory; (12) of any Account Debtor who is the subject of any state or federal bankruptcy, insolvency, or debtor-in-relief acts, or who has had appointed a trustee, custodian, or receiver for the assets of such Account Debtor, or who has made an assignment for the benefit of creditors or has become insolvent or fails generally to pay its debts (including its payrolls) as such debts become due; (13) [deleted and reserved]; (14) which have not been paid in full within ninety (90) days from due date; (15) due from any one Account Debtor to the extent such Accounts constitute more than 20% of all Eligible Accounts; and (16) otherwise determined to be ineligible by the Bank. In no event will the balance of any Account of any single Account Debtor be eligible whenever the portion of the Accounts of such Account Debtor which have not been paid within ninety (90) days from due date is in excess of 20% of the total amount outstanding on all Accounts of such Account Debtor.

J. “Eligible Inventory” means, at any time, all of the Borrower’s Inventory in which the Bank has a first priority continuing perfected Lien except Inventory which is: (1) not owned by it free and clear of all Liens except in favor of the Bank, and claims of Persons other than the Bank; (2) slow moving, obsolete, unsalable, damaged, defective, perishable, or unfit for further processing; (3) work in process; (4) subject to consignment or otherwise in the possession of another Person, unless otherwise agreed to by the Bank in writing; (5) in transit or located outside of the United States; (6) identified to be purchased under a contract under which it has received, or is entitled to receive, an advance payment; (7) determined by the Bank to be ineligible due to licensing, intellectual property, or any Legal Requirements that would make it difficult to sell, lease or use such Inventory; (8) comprised of samples, returns, rejected items, re-work items, non-standard items, odd-lots, or repossessed goods, provided however, that analytical systems obtained as trade-in for upgrades and held for sale shall be eligible up to a gross limit of $500,000 book value; (9) produced in violation of applicable Legal Requirements, including the Fair Labor Standards Act and the regulations and orders of the Department of Labor; or (10) otherwise determined ineligible by the Bank; provided, however, that transportation and storage charges shall be excluded from amounts otherwise included in Eligible Inventory.

K. “Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.

L. “Equity Owner” means a shareholder, partner, member, holder of a beneficial interest in a trust or other owner of any Equity Interests.

M. “GAAP” means generally accepted accounting principles in effect from time to time in the United States of America, consistently applied.

N. “Inventory” means raw materials, work in process, finished goods, merchandise, parts and supplies, of every kind and goods held for sale or lease or furnished under contracts of service and all documents of title, warehouse receipts, bills of lading, and all other documents of every type covering all or any part of the foregoing.

O. “Intangible Assets” means the aggregate amount of: (1) all assets classified as intangible assets under GAAP, including, without limitation, goodwill, trademarks, patents, copyrights, organization expenses, franchises, licenses, trade names, brand names, mailing lists, catalogs, excess of cost over book value of assets acquired, and bond discount and underwriting expenses; and (2) loans or advances to, investments in, or receivables from (i) any Affiliate, officer, director, employee, Equity Owner or agent of the Borrower or (ii) any Person if such loan, advance, investment or receivable is outside the Borrower’s ordinary course of business.

P. “Legal Requirement” means any law, ordinance, decree, requirement, order, judgment, rule, regulation (or interpretation of any of the foregoing) of any foreign governmental authority, the United States of America, any state thereof, any political subdivision of any of the foregoing or any agency, department, commission, board, bureau, court or other tribunal having jurisdiction over the Bank, any Pledgor or any Obligor or any of its Subsidiaries or their respective Properties or any agreement by which any of them is bound.

Q. “Liabilities” means all indebtedness, liabilities and obligations of every kind and character of the Borrower to the Bank, whether the obligations, indebtedness and liabilities are individual, joint and several, contingent or otherwise, now or hereafter existing, including, without limitation, all liabilities, interest, costs and fees, arising under or from any note, open account, overdraft, credit card, lease, Rate Management Transaction, letter of credit application, endorsement, surety agreement, guaranty, acceptance, foreign exchange contract or depository service contract, whether payable to the Bank or to a third party and subsequently acquired by the Bank, any monetary obligations (including interest) incurred or accrued during the pendency of any bankruptcy, insolvency, receivership or other similar proceedings, regardless of whether allowed or allowable in such proceeding, and all renewals, extensions, modifications, consolidations, rearrangements, restatements, replacements or substitutions of any of the foregoing.

R. “Lien” means any mortgage, deed of trust, pledge, charge, encumbrance, security interest, collateral assignment or other lien or restriction of any kind.

S. “Notes” means all promissory notes, instruments and/or contracts now or hereafter evidencing the Credit Facilities.

T. “Obligor” means any Borrower, guarantor, surety, co-signer, endorser, general partner or other Person who may now or in the future be obligated to pay any of the Liabilities.

U. “Organizational Documents” means, with respect to any Person, certificates of existence or formation, documents establishing or governing the Person or evidencing or certifying that the Person is duly organized and validly existing in accordance with all applicable Legal Requirements, including all amendments, restatements, supplements or modifications to such certificates and documents as of the date of the Related Document referring to the Organizational Document and any and all future modifications thereto approved by the Bank.

V. “Permitted Investments” means (1) readily marketable direct obligations of the United States of America or any agency thereof with maturities of one year or less from the date of acquisition; (2) fully insured (if issued by a bank other than the Bank) certificates of deposit with maturities of one year or less from the date of acquisition issued by any commercial bank operating in the United States of America having capital and surplus in excess of $500,000,000.00; (3) commercial paper of a domestic issuer if at the time of purchase such paper is rated in one of the two highest rating categories of Standard and Poor’s Corporation or Moody’s Investors Service; and (4) Borrower’s holdings of preferred stock existing as of the date of this agreement.

W. “Person” means any individual, corporation, partnership, limited liability company, joint venture, joint stock association, association, bank, business trust, trust, unincorporated organization, any foreign governmental authority, the United States of America, any state of the United States and any political subdivision of any of the foregoing or any other form of entity.

X. “Pledgor” means any Person providing Collateral.

Y. “Property” means any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible.

Z. “Rate Management Transaction” means any transaction (including an agreement with respect thereto) that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option, derivative transaction or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.

AA. “Related Documents” means this agreement, the Notes, applications for letters of credit, all loan agreements, credit agreements, reimbursement agreements, security agreements, mortgages, deeds of trust, pledge agreements, assignments, guaranties, and any other instrument or document executed in connection with this agreement or with any of the Liabilities.

BB. “Subsidiary” means, as to any particular Person (the “parent”), a Person the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of the date of determination, as well as any other Person of which fifty percent (50%) or more of the Equity Interests is at the time of determination directly or indirectly owned, Controlled or held, by the parent or by any Person or Persons Controlled by the parent, either alone or together with the parent.

CC. “Tangible Net Worth” means total assets less the sum of Intangible Assets and total liabilities.

2.2 Interpretations. Whenever possible, each provision of the Related Documents shall be interpreted in such manner as to be effective and valid under applicable Legal Requirements. If any provision of this agreement cannot be enforced, the remaining portions of this agreement shall continue in effect. In the event of any conflict or inconsistency between this agreement and the provisions of any other Related

Documents, the provisions of this agreement shall control. Use of the term “including” does not imply any limitation on (but may expand) the antecedent reference. Any reference to a particular document includes all modifications, supplements, replacements, renewals or extensions of that document, but this rule of construction does not authorize amendment of any document without the Bank’s consent. Section headings are for convenience of reference only and do not affect the interpretation of this agreement. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP. Whenever the Bank’s determination, consent, approval or satisfaction is required under this agreement or the other Related Documents or whenever the Bank may at its option take or refrain from taking any action under this agreement or the other Related Documents, the decision as to whether or not the Bank makes the determination, consents, approves, is satisfied or takes or refrains from taking any action, shall be in the sole and exclusive discretion of the Bank, and the Bank’s decision shall be final and conclusive.

3. Conditions Precedent to Extensions of Credit.

3.1 Conditions Precedent to Initial Extension of Credit under each of the Credit Facilities. Before the first extension of credit governed by this agreement and any initial advance under any of the Credit Facilities, whether by disbursement of a loan, issuance of a letter of credit, or otherwise, the Borrower shall deliver to the Bank, in form and substance satisfactory to the Bank:

A. Loan Documents. The Notes, and as applicable, the letter of credit applications, reimbursement agreements, the security agreements, the pledge agreements, financing statements, mortgages or deeds of trust, the guaranties, the subordination agreements, and any other documents which the Bank may reasonably require to give effect to the transactions described in this agreement or the other Related Documents;

B. Organizational and Authorizing Documents. The Organizational Documents and Authorizing Documents of the Borrower and any other Persons (other than the Bank) executing the Related Documents in form and substance satisfactory to the Bank that at a minimum: (i) document the due organization, valid existence and good standing of the Borrower and every other Person (other than the Bank) that is a party to this agreement or any other Related Document; (ii) evidence that each Person (other than the Bank) which is a party to this agreement or any other Related Document has the power and authority to enter into the transactions described therein; and (iii) evidence that the Person signing on behalf of each Person that is a party to the Related Documents (other than the Bank) is duly authorized to do so; and

C. Liens. The termination, assignment or subordination, as determined by the Bank, of all Liens on the Collateral in favor of any secured party (other than the Bank).

3.2 Conditions Precedent to Each Extension of Credit. Before any extension of credit governed by this agreement, whether by disbursement of a loan, issuance of a letter of credit or otherwise, the following conditions must be satisfied:

A. Representations. The representations of the Borrower and any other parties, other than the Bank, in the Related Documents are true on and as of the date of the request for and funding of the extension of credit;

B. No Event of Default. No default, event of default or event that would constitute a default or event of default but for the giving of notice, the lapse of time or both, has occurred in any provision of this agreement, the Notes or any other Related Documents and is continuing or would result from the extension of credit;

C. Additional Approvals, Opinions, and Documents. The Bank has received any other approvals, opinions and documents as it may reasonably request; and

D. No Prohibition or Onerous Conditions. The making of the extension of credit is not prohibited by and does not subject the Bank, any Obligor, or any Subsidiary of the Borrower to any penalty or onerous condition under, any Legal Requirement.

4. Affirmative Covenants. The Borrower agrees to do, and cause each of its Subsidiaries to do, each of the following:

4.1 Insurance. Maintain insurance with financially sound and reputable insurers, with such insurance and insurers to be satisfactory to the Bank, covering its Property and business against those casualties and contingencies and in the types and amounts as are in accordance with sound business and industry practices, and furnish to the Bank, upon request of the Bank, reports on each existing insurance policy showing such information as the Bank may reasonably request.

4.2 Existence. Maintain its existence and business operations as presently in effect in accordance with all applicable Legal Requirements, pay its debts and obligations when due under normal terms, and pay on or before their due date, all taxes, assessments, fees and other governmental monetary obligations, except as they may be contested in good faith if they have been properly reflected on its books and, at the Bank’s request, adequate funds or security has been pledged or reserved to insure payment.

4.3 Financial Records. Maintain proper books and records of account, in accordance with GAAP, and consistent with financial statements previously submitted to the Bank.

4.4 Inspection. Permit the Bank, its agents and designees to: (a) inspect and photograph its Property, to examine and copy files, books and records, and to discuss its business, operations, prospects, assets, affairs and financial condition with the Borrower’s or its Subsidiaries’ officers and accountants, at times and intervals as the Bank reasonably determines; (b) perform audits or other inspections of the Collateral, including the records and documents related to the Collateral; and (c) confirm with any Person any obligations and liabilities of the Person to the Borrower or its Subsidiaries. The Borrower will, and will cause its Subsidiaries to cooperate with any inspection or audit. The Borrower will pay the Bank the reasonable costs and expenses of any audit or inspection of the Collateral (including fees and expenses charged internally by the Bank for asset reviews) promptly after receiving the invoice.

4.5 Financial Reports. Furnish to the Bank whatever information, statements, books and records the Bank may from time to time reasonably request, including at a minimum:

A. Within forty-five (45) days after each quarterly period, the consolidated financial statements of the Borrower and its Subsidiaries prepared and presented in accordance with GAAP, including a balance sheet as of the end of that period, and income statement for that period, and, if requested at any time by the Bank, statements of cash flow and retained earnings for that period, all certified as correct by one of its authorized agents.

B. Within one hundred and twenty (120) days after and as of the end of each of its fiscal years, the consolidated financial statements of the Borrower and its Subsidiaries prepared and presented in accordance with GAAP, including a balance sheet and statements of income, cash flow and retained earnings, such financial statements to be audited by an independent certified public accountant of recognized standing satisfactory to the Bank.

C. Within thirty (30) days after and as of the end of each calendar month in which there was an outstanding principal balance under Facility A on the last day of such calendar month, and if none of the following lists have been provided or are otherwise due as of

the end of the immediately preceding calendar month, with any request for an advance under the Credit Facilities, a list of Accounts, aged from date of invoice and certified as correct by one of its authorized agents.

D. A borrowing base certificate, in form and detail satisfactory to the Bank, along with such supporting documentation as the Bank may request, at the following times: (A) within thirty (30) days after and as of the end of each calendar month in which there was an outstanding principal balance under Facility A on the last day of such calendar month, and (B) if no borrowing base certificate has been provided or is otherwise due as of the end of the immediately preceding calendar month, with any request for an advance under the Credit Facilities.

4.6 Notices of Claims, Litigation, Defaults, etc. Promptly inform the Bank in writing of: (1)all existing and all threatened litigation, claims, investigations, administrative proceedings and similar actions or changes in Legal Requirements affecting it which could materially affect its business, assets, affairs, prospects or financial condition; (2) the occurrence of any event which gives rise to the Bank’s option to terminate the Credit Facilities; (3) the institution of steps by it to withdraw from, or the institution of any steps to terminate, any employee benefit plan as to which it may have liability; (4) any reportable event or any prohibited transaction in connection with any employee benefit plan; (5) any additions to or changes in the locations of its businesses; and (6) any alleged breach by the Bank of any provision of this agreement or of any other Related Document.

4.7 Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between it and any other Person.

4.8 Title to Assets and Property. Maintain good and marketable title to all of its Properties, and defend them against all claims and demands of all Persons at any time claiming any interest in them.

4.9 Additional Assurances. Promptly make, execute and deliver any and all agreements, documents, instruments and other records that the Bank may request to evidence any of the Credit Facilities, cure any defect in the execution and delivery of any of the Related Documents, perfect any Lien, comply with any Legal Requirement applicable to the Bank or the Credit Facilities or describe more fully particular aspects of the agreements set forth or intended to be set forth in any of the Related Documents.

4.10 Employee Benefit Plans. Maintain each employee benefit plan as to which it may have any liability, in compliance with all Legal Requirements.

4.11 Banking Relationship. Establish and maintain its primary banking depository and disbursement relationship with the Bank.

4.12 Compliance Certificates. Provide the Bank, within forty-five (45) days after the end of each fiscal quarter, with a certificate executed by its chief financial officer, or other officer or an individual satisfactory to the Bank, certifying that, as of the date of the certificate, no default exists under any provision of this agreement or the other Related Documents.

4.13 Organizational Documents. Provide the Bank, within 10 days in each case, notice of any action or proposal adopted by its board of directors to alter, amend or modify any of its Organizational Documents.

5. Negative Covenants.

5.1 Unless otherwise noted, the financial requirements set forth in this section will be computed in accordance with GAAP applied on a basis consistent with financial statements previously submitted by the Borrower to the Bank.

5.2 Without the written consent of the Bank, the Borrower will not and no Subsidiary of the Borrower will:

A. Dividends. Declare or pay any dividend other than in compliance with its dividend policy as existing on the date of this agreement, or change its dividend policy of $0.20/share total declared and paid annually, at $0.05 paid quarterly.

B. Distributions. Redeem, retire, purchase or otherwise acquire, directly or indirectly, any of its Equity Interests, or return any contribution to an Equity Owner; provided however that repurchases of shares in a total aggregate amount not to exceed $500,000 in any period of 12 consecutive months shall be permitted under this subsection so long as no other default results from such repurchases.

C. Debt. Incur, contract for, assume, or permit to remain outstanding, indebtedness for borrowed money, installment obligations, or obligations under capital leases or operating leases, other than (1) unsecured trade debt incurred in the ordinary course of business, (2) indebtedness owing to the Bank, (3) indebtedness reflected in its latest financial statement furnished to the Bank prior to execution of this agreement and that is not to be paid with proceeds of borrowings under the Credit Facilities, (4) indebtedness outstanding as of the date hereof that has been disclosed to the Bank in writing and that is not to be paid with proceeds of borrowings under the Credit Facilities; and (5) obligations under capital leases or operating leases not to exceed $100,000 in aggregate amount owing at any one time.

D. Guaranties. Guarantee or otherwise become or remain secondarily liable on the undertaking of another, except for endorsement of drafts for deposit and collection in the ordinary course of business.

E. Liens. Create or permit to exist any Lien on any of its Property except: existing Liens known to and approved by the Bank; Liens to the Bank; Liens incurred in the ordinary course of business securing current nondelinquent liabilities for taxes, worker’s compensation, unemployment insurance, social security and pension liabilities.

F. Limitation on Negative Pledge Clauses. Enter into any agreement with any Person other than the Bank which prohibits or limits its ability to create or permit to exist any Lien on any of its Property, whether now owned or hereafter acquired.

G. Continuity of Operations. (1) Engage in any business activities substantially different from those in which it is presently engaged; (2) cease operations, liquidate, merge, transfer, acquire or consolidate with any other Person, change its name, dissolve, or sell any assets out of the ordinary course of business; (3) enter into any arrangement with any Person providing for the leasing by it of Property which has been sold or transferred by it to such Person; or (4) change its business organization, the jurisdiction under which its business organization is formed or organized, or its chief executive office, or any places of its businesses; provided however, notwithstanding the foregoing, Borrower shall be permitted to acquire other firm(s) or business(es) (by asset acquisition and debt assumption or merger where Borrower is the surviving entity) so long as the acquired firm or business in each case is in a line of business substantially similar to Borrower’s, as determined by Bank in its sole good faith discretion, and the total aggregate consideration for all acquisitions made under this proviso shall together be not

more than $6,000,000 (cash or market value of other consideration of all kinds (including Borrower’s stock and debt assumed) as determined by Bank in its sole good faith discretion).

H. Subsidiaries. Form, create or acquire any Subsidiary, provided however, that Borrower shall be entitled to receive Bank’s consent in the case of any Subsidiary subject to the condition that prior to formation, creation or acquisition the Subsidiary shall be bound to guaranty all Liabilities and pledge all of its assets as security for the Liabilities, in form and substance on Bank’s usual terms and conditions and otherwise reasonably acceptable to Bank.

I. Conflicting Agreements. Enter into any agreement containing any provision which would be violated or breached by the performance of its obligations under this agreement or any of the other Related Documents.

J. Limitation on Loans, Advances to and Investments in Others and Receivables from Others. Purchase, hold or acquire any Equity Interest or evidence of indebtedness of, make or permit to exist any loans or advances to, permit to exist any receivable from, or make or permit to exist any investment or acquire any interest whatsoever in, any Person, except: (1) extensions of trade credit to customers in the ordinary course of business on ordinary terms; (2) Permitted Investments; and (3) loans, advances, investments and receivables existing as of the date of this agreement that have been disclosed to and approved by the Bank in writing and that are not to be paid with proceeds of borrowings under the Credit Facilities.

K. Tangible Net Worth. Permit at any time, its Tangible Net Worth to be less than $18,000,000.00 plus an amount equal to 75% of annual net income (if positive) added cumulatively each fiscal year beginning the first fiscal year end occurring after the date of this agreement.

L. Liquidity. Permit at any time its total market value, as determined by Bank, of unencumbered cash and other unencumbered Permitted Investments to be less than $2,000,000.00.

M. EBITDA. Permit its net income plus interest expense, plus depreciation expense, plus amortization expense, plus income tax expense, plus non-cash non-recurring expense, plus non-cash expenses related to FASB 123 “Accounting for Stock-Based Compensation”, minus non-cash non-recurring income, minus interest income and minus extraordinary gains, all computed for each Test Period, to be less than the Target Amount. As used in this subsection, the term “Test Period” means each rolling period of four consecutive fiscal quarters. The Target Amount shall be the following amounts for the Test Periods ending as follows:

$1,250,000.00 for Test Periods with ending dates through and including September 30, 2008,

$1,500,000.00 for Test Periods ending October 30, 2008 through and including September 30, 2009,

$1,750,000.00 for Test Periods ending October 30, 2009 through and including September 30, 2010,

$2,000,000.00 for all Test Periods thereafter;

provided, however, that for any Test Period ending on a date when the aggregate outstanding amount of Acquisition Advances is more than $3,000,000.00, then the Target Amount shall be $2,000,000.00 EBITDA on a pro forma basis inclusive of acquisition(s).

N. Government Regulation. (1) Be or become subject at any time to any Legal Requirement or list of any government agency (including, without limitation, the U.S. Office of Foreign Asset Control list) that prohibits or limits the Bank from making any advance or extension of credit to it or from otherwise conducting business with it, or (2) fail to provide documentary and other evidence of its identity as may be requested by the Bank at any time to enable the Bank to verify its identity or to comply with any applicable Legal Requirement, including, without limitation, Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.

O. Use of Proceeds. Use, or permit any proceeds of the Credit Facilities to be used, directly or indirectly, for: (1) any personal, family or household purpose; or (2) the purpose of “purchasing or carrying any margin stock” within the meaning of Federal Reserve Board Regulation U. At the Bank’s request, it will furnish a completed Federal Reserve Board Form U-1.

5.3 Financial Statement Calculations. The financial covenant(s) set forth in the Section entitled “Negative Covenants” or in any subsection thereof shall, except as may be otherwise expressly provided with respect to any particular financial covenant, be calculated on the basis of the Borrower’s financial statements prepared on a consolidated basis with its Subsidiaries in accordance with GAAP. Except as may be otherwise expressly provided with respect to any particular financial covenant, if any financial covenant states that it is to be tested with respect to any particular period of time (which may be referred to therein as a “Test Period”) ending on any test date (e.g., a fiscal month end, fiscal quarter end, or fiscal year end), then compliance with that covenant shall be required commencing with the period of time ending on the first test date that occurs after the date of this agreement (or, if applicable, of the amendment to this agreement which added or amended such financial covenant).

6. Representations.

6.1 Representations and Warranties by the Borrower. To induce the Bank to enter into this agreement and to extend credit or other financial accommodations under the Credit Facilities, the Borrower represents and warrants as of the date of this agreement and as of the date of each request for credit under the Credit Facilities that each of the following statements is and shall remain true and correct throughout the term of this agreement and until all Credit Facilities and all Liabilities under the Notes and other Related Documents are paid in full: (a) its principal residence or chief executive office is at the address shown above, (b) its name as it appears in this agreement is its exact name as it appears in its Organizational Documents, (c) the execution and delivery of this agreement and the other Related Documents to which it is a party, and the performance of the obligations they impose, do not violate any Legal Requirement, conflict with any agreement by which it is bound, or require the consent or approval of any other Person, (d) this agreement and the other Related Documents have been duly authorized, executed and delivered by all parties (other than the Bank) and are valid and binding agreements of those Persons, enforceable according to their terms, except as may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors’ rights generally and by general principles of equity, (e) all balance sheets, profit and loss statements, and other financial statements and other information furnished to the Bank in connection with the Liabilities are accurate and fairly reflect the financial condition of the Persons to which they apply on their effective dates, including contingent liabilities of every type, which financial condition has not changed materially and adversely since those dates, (f) no litigation, claim, investigation, administrative proceeding or similar action (including those for

unpaid taxes) is pending or threatened against it, and no other event has occurred which may in any one case or in the aggregate materially adversely affect it or any of its Subsidiaries’ financial condition, properties, business, affairs or operations, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by the Bank in writing, (g) all of its tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being contested by it in good faith and for which adequate reserves have been provided, (h) it is not an “investment company” or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended, (i) it is not a “holding company”, or a “subsidiary company” of a “holding company” or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended, (j) there are no defenses or counterclaims, offsets or adverse claims, demands or actions of any kind, personal or otherwise, that it could assert with respect to this agreement or the Credit Facilities, (k) it owns, or is licensed to use, all trademarks, trade names, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted, (l) the execution and delivery of this agreement and the Notes and the performance of the obligations they impose, if the Borrower is other than a natural Person (i) are within its powers, (ii) have been duly authorized by all necessary action of its governing body, and (iii) do not contravene the terms of its Organizational Documents or other agreement or document governing its affairs; and (m) with respect to the Borrowing Base, (i) each asset represented by it to be eligible for Borrowing Base purposes of this agreement conforms to the eligibility definitions set forth in this agreement (ii) all asset values delivered to the Bank will be true and correct, subject to immaterial variance; and be determined on a consistent accounting basis; (iii) except as agreed to the contrary by the Bank in writing, each asset is now and at all times hereafter will be in its physical possession and shall not be held by others on consignment, sale or approval, or sale or return; (iv) except as reflected in schedules delivered to the Bank, each asset is now and at all times hereafter will be of good and merchantable quality, free from defects; and (v) each asset is not now and will not at any time hereafter be stored with a bailee, warehouseman, or similar Person without the Bank’s prior written consent, and in such event, it will concurrently at the time of bailment cause any such bailee, warehouseman, or similar Person to issue and deliver to the Bank, warehouseman receipts in the Bank’s name evidencing the storage of the assets.

7. Default/Remedies.

7.1 Events of Default/Acceleration. If any of the following events occurs, the Notes shall become due immediately, without notice, at the Bank’s option, and the Borrower hereby waives notice of intent to accelerate the maturity of the Notes and notice of acceleration of the Notes upon the occurrence of any of the following events:

A. Any Obligor fails to pay when due any of the Liabilities or any amount payable with respect to any of the Liabilities, or any other debt to any Person with a total principal amount of greater than $25,000 or amount payable thereunder, or under any Note, any other Related Document, or any agreement or instrument evidencing other debt to any Person.

B. Any Obligor or any Pledgor: (i) fails to observe or perform or otherwise violates any other term, covenant, condition or agreement of any of the Related Documents; (ii) makes any materially incorrect or misleading representation, warranty, or certificate to the Bank; (iii) makes any materially incorrect or misleading representation in any financial statement or other information delivered to the Bank; or (iv) defaults under the terms of any agreement or instrument relating to any debt for borrowed money (other than the debt evidenced by the Related Documents) and the effect of such default will allow the creditor to declare the debt due before its stated maturity.

C. In the event (i) there is a default under the terms of any Related Document, (ii) any Obligor terminates or revokes or purports to terminate or revoke its guaranty or any Obligor’s guaranty becomes unenforceable in whole or in part, (iii) any Obligor fails to perform promptly under its guaranty, or (iv) any Obligor fails to comply with, or perform under any agreement, now or hereafter in effect, between the Obligor and the Bank, or any Affiliate of the Bank or their respective successors and assigns.

D. There is any loss, theft, damage, or destruction of any Collateral with an aggregate value exceeding $10,000.00, not covered by insurance.

E. Any event occurs that would permit the Pension Benefit Guaranty Corporation to terminate any employee benefit plan of any Obligor or any Subsidiary of any Obligor.

F. Any Obligor or any of its Subsidiaries or any Pledgor: (i) becomes insolvent or unable to pay its debts as they become due; (ii) makes an assignment for the benefit of creditors; (iii) consents to the appointment of a custodian, receiver, or trustee for itself or for a substantial part of its Property; (iv) commences any proceeding under any bankruptcy, reorganization, liquidation, insolvency or similar laws; (v) conceals or removes any of its Property, with intent to hinder, delay or defraud any of its creditors; (vi) makes or permits a transfer of any of its Property, which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or (vii) makes a transfer of any of its Property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid.

G. A custodian, receiver, or trustee is appointed for any Obligor or any of its Subsidiaries or any Pledgor or for a substantial part of their respective Property.

H. Any Obligor or any of its Subsidiaries, without the Bank’s written consent: (i) liquidates or is dissolved; (ii) merges or consolidates with any other Person other than as expressly permitted in this agreement; (iii) leases, sells or otherwise conveys a material part of its assets or business outside the ordinary course of its business; (iv) leases, purchases, or otherwise acquires a material part of the assets of any other Person, except in the ordinary course of its business; or (v) agrees to do any of the foregoing; provided, however, that any Subsidiary of an Obligor may merge or consolidate with any other Subsidiary of that Obligor, or with the Obligor, so long as the Obligor is the survivor.

I. Proceedings are commenced under any bankruptcy, reorganization, liquidation, or similar laws against any Obligor or any of its Subsidiaries or any Pledgor and remain undismissed for thirty (30) days after commencement; or any Obligor or any of its Subsidiaries or any Pledgor consents to the commencement of those proceedings.

J. Any judgment is entered against any Obligor or any of its Subsidiaries, or any attachment, seizure, sequestration, levy, or garnishment is issued against any Property of any Obligor or any of its Subsidiaries or of any Pledgor or any Collateral, involving an aggregate amount or value in any case exceeding $500,000.

K. Any material adverse change occurs in: (i) the reputation, Property, financial condition, business, assets, affairs, prospects, liabilities, or operations of any Obligor or any of its Subsidiaries; (ii) any Obligor’s or Pledgor’s ability to perform its obligations under the Related Documents; or (iii) the Collateral.

L. There shall occur any change in ownership such that any Person or group of Persons acting in concert (including without limitation any “group” of Persons deemed to be

formed for the purpose of acquiring, holding, voting or disposing of Borrower’s voting securities for purposes of the requirement under Section 13(d) of the Securities Exchange Act of 1934, and the rules and regulations thereunder, to file a statement on Schedule 13D with the Securities and Exchange Commission as a “person” within the meaning of Section 13(d)(3) of that Act) shall own or control more than 35% of equity ownership voting power.

7.2 Remedies; Cure Periods. Subject to the cure periods provided for hereinafter, at any time after the occurrence of a default, the Bank may do one or more of the following: (a) cease permitting the Borrower to incur any Liabilities; (b) terminate any commitment of the Bank evidenced by any of the Notes; (c) declare any of the Notes to be immediately due and payable, without notice of acceleration, intention to accelerate, presentment and demand or protest or notice of any kind, all of which are hereby expressly waived; (d) exercise all rights of setoff that the Bank may have contractually, by law, in equity or otherwise; and (e) exercise any and all other rights pursuant to any of the Related Documents, at law, in equity or otherwise.

A. Cure Periods. Notwithstanding anything to the contrary contained in this agreement or any of the other Related Documents, the Bank shall not exercise its option to accelerate the maturity of the Notes upon the occurrence of (i) a default in payment of money included in the Liabilities, unless the default has not been fully cured within five (5) days after its occurrence, or (ii) a default in timely delivery of any report of financial information provided for in Section 4.5 , unless the default has not been fully cured within ten (10) days after its occurrence. Notwithstanding the existence of any cure period, the Bank shall have no obligation to extend credit governed by this agreement, whether by advance, disbursement of a loan, issuance of a letter of credit or otherwise after the occurrence of any default or event which with the giving of notice or the passage of time or both could become a default or during any cure period. The inclusion of any cure period in this agreement shall have no bearing on the due dates for payments under any of the Related Documents, whether for purposes of calculating late payment charges or otherwise.

B. Remedies Generally. The rights of the Bank under this agreement and the other Related Documents are in addition to other rights (including without limitation, other rights of setoff) the Bank may have contractually, by law, in equity or otherwise, all of which are cumulative and hereby retained by the Bank. Each Obligor agrees to stand still with regard to the Bank’s enforcement of its rights, including taking no action to delay, impede or otherwise interfere with the Bank’s rights to realize on any Collateral.

C. Bank’s Right of Setoff. The Borrower grants to the Bank a security interest in the Deposits, and the Bank is authorized to setoff and apply, all Deposits, Securities and Other Property, and Bank Debt against any and all Liabilities. This right of setoff may be exercised at any time from time to time after the occurrence of any default, without prior notice to or demand on the Borrower and regardless of whether any Liabilities are contingent, unmatured or unliquidated. In this paragraph: (a) the term “Deposits” means any and all accounts and deposits of the Borrower (whether general, special, time, demand, provisional or final) at any time held by the Bank (including all Deposits held jointly with another, but excluding any IRA or Keogh Deposits, or any trust Deposits in which a security interest would be prohibited by any Legal Requirement); (b) the term “Securities and Other Property” means any and all securities and other personal Property of the Borrower in the custody, possession or control of the Bank, JPMorgan Chase & Co. or their respective Subsidiaries and Affiliates (other than Property held by the Bank in a fiduciary capacity); and (c) the term “Bank Debt” means all indebtedness at any time owing by the Bank, to or for the credit or account of the Borrower and any claim of the Borrower (whether individual, joint and several or otherwise) against the Bank now or hereafter existing.

8. Miscellaneous.

8.1 Notice. Any notices and demands under or related to this agreement shall be in writing and delivered to the intended party at its address stated in this agreement, and if to the Bank, at its main office if no other address of the Bank is specified in this agreement, by one of the following means: (a) by hand; (b) by a nationally recognized overnight courier service; or (c) by certified mail, postage prepaid, with return receipt requested. Notice shall be deemed given: (a) upon receipt if delivered by hand; (b) on the Delivery Day after the day of deposit with a nationally recognized courier service; or (c) on the third Delivery Day after the notice is deposited in the mail. “Delivery Day” means a day other than a Saturday, a Sunday or any other day on which national banking associations are authorized to be closed. Any party may change its address for purposes of the receipt of notices and demands by giving notice of the change in the manner provided in this provision.

8.2 No Waiver. No delay on the part of the Bank in the exercise of any right or remedy waives that right or remedy. No single or partial exercise by the Bank of any right or remedy precludes any other future exercise of it or the exercise of any other right or remedy. The making of an advance during the existence of any default or subsequent to the occurrence of a default or when all conditions precedent have not been met shall not constitute a waiver of the default or condition precedent. No waiver or indulgence by the Bank of any default is effective unless it is in writing and signed by the Bank, nor shall a waiver on one occasion bar or waive that right on any future occasion.

8.3 Integration. This agreement, the Notes, and the other Related Documents embody the entire agreement and understanding between the Borrower and the Bank and supersede all prior agreements and understandings relating to their subject matter. If any one or more of the obligations of the Borrower under this agreement or the Notes is invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining obligations of the Borrower shall not in any way be affected or impaired, and the invalidity, illegality or unenforceability in one jurisdiction shall not affect the validity, legality or enforceability of the obligations of the Borrower under this agreement, the Notes and the other Related Documents in any other jurisdiction.

8.4 Joint and Several Liability. Each party executing this agreement as the Borrower is individually, jointly and severally liable under this agreement.

8.5 Governing Law and Venue. This agreement shall be governed by and construed in accordance with the laws of the State of Texas (without giving effect to its laws of conflicts). The Borrower agrees that any legal action or proceeding with respect to any of its obligations under this agreement may be brought by the Bank in any state or federal court located in the State of Texas, as the Bank in its sole discretion may elect. By the execution and delivery of this agreement, the Borrower submits to and accepts, for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of those courts. The Borrower waives any claim that the State of Texas is not a convenient forum or the proper venue for any such suit, action or proceeding.

8.6 Survival of Representations and Warranties. The Borrower understands and agrees that in extending the Credit Facilities, the Bank is relying on all representations, warranties, and covenants made by the Borrower in this agreement or in any certificate or other instrument delivered by the Borrower to the Bank under this agreement or in any of the other Related Documents. The Borrower further agrees that regardless of any investigation made by the Bank, all such representations, warranties and covenants will survive the making of the Credit Facilities and delivery to the Bank of this agreement, shall be continuing in nature, and shall remain in full force and effect until such time as the Liabilities shall be paid in full.

8.7 Non-Liability of the Bank. The relationship between the Borrower on one hand and the Bank on the other hand shall be solely that of borrower and lender. The Bank shall have no fiduciary responsibilities to the Borrower. The Bank undertakes no responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower’s business or operations.

8.8 Indemnification of the Bank. The Borrower agrees to indemnify, defend and hold the Bank, its parent companies, Subsidiaries, Affiliates, their respective successors and assigns and each of their respective shareholders, directors, officers, employees and agents (collectively, the “Indemnified Persons”) harmless from any and against any and all loss, liability, obligation, damage, penalty, judgment, claim, deficiency, expense, interest, penalties, attorneys’ fees (including the fees and expenses of any attorneys engaged by the Indemnified Person) and amounts paid in settlement (“Claims”) to which any Indemnified Person may become subject arising out of or relating to the Credit Facilities, the Liabilities under this agreement or any other Related Documents or the Collateral, including any Claims resulting from any Indemnified Person’s own negligence, except to the limited extent that the Claims are proximately caused by the Indemnified Person’s gross negligence or willful misconduct. The indemnification provided for in this paragraph shall survive the termination of this agreement and shall not be affected by the presence, absence or amount of or the payment or nonpayment of any claim under, any insurance.

8.9 Counterparts. This agreement may be executed in multiple counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts, taken together, shall constitute one and the same agreement.

8.10 Advice of Counsel. The Borrower acknowledges that it has been advised by counsel, or had the opportunity to be advised by counsel, in the negotiation, execution and delivery of this agreement and any other Related Documents.

8.11 Expenses. To the extent not prohibited by applicable Legal Requirements and whether or not the transactions contemplated by this agreement are consummated, the Borrower agrees to pay or reimburse the Bank on demand all reasonable costs and expenses of every kind incurred (or charged by internal allocation) in connection with the negotiation, preparation, execution, filing, recording, modification, supplementing and waiver of this agreement and/or any Related Document(s), the making, servicing and collection of the Credit Facilities and the realization on any Collateral and any other amounts owed under the Related Documents, including without limitation reasonable attorneys’ fees (including counsel for the Bank that are employees of the Bank or its Affiliates) and court costs. These costs and expenses include without limitation any costs or expenses incurred by the Bank in any bankruptcy, reorganization, insolvency or other similar proceeding involving any Obligor, Pledgor, or Property of any Obligor, Pledgor, or Collateral. The obligations of the Borrower under this section shall survive the termination of this agreement. Provided however, notwithstanding the foregoing, the initial preparation of this agreement and the Related Documents presented in connection therewith, each in Bank’s standard form, shall be without charge to Borrower.

8.12 Reinstatement. The Borrower agrees that to the extent any payment or transfer is received by the Bank in connection with the Liabilities, and all or any part of the payment or transfer is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid or transferred by the Bank or paid or transferred over to a trustee, receiver or any other entity, whether under any proceeding or otherwise (any of those payments or transfers is hereinafter referred to as a “Preferential Payment”), then this agreement and the Notes shall continue to be effective or shall be reinstated, as the case may be, even if all those Liabilities have been paid in full and whether or not the Bank is

in possession of the Notes and whether any of the Notes has been marked, paid, released or cancelled, or returned to the Borrower and, to the extent of the payment, repayment or other transfer by the Bank, the Liabilities or part intended to be satisfied by the Preferential Payment shall be revived and continued in full force and effect as if the Preferential Payment had not been made. The obligations of the Borrower under this section shall survive the termination of this agreement.

8.13 Assignments. The Borrower agrees that the Bank may provide any information or knowledge the Bank may have about the Borrower or about any matter relating to the Notes or the other Related Documents to JPMorgan Chase & Co., or any of its Subsidiaries or Affiliates or their successors, or to any one or more purchasers or potential purchasers of the Notes or the Related Documents. The Borrower agrees that the Bank may at any time sell, assign or transfer one or more interests or participations in all or any part of its rights and obligations in the Notes to one or more purchasers whether or not related to the Bank.

8.14 Waivers. Each Obligor waives (a) any right to receive notice of the following matters before the Bank enforces any of its rights: (i) any demand, diligence, presentment, dishonor and protest, or (ii) any action that the Bank takes regarding any Person, any Collateral, or any of the Liabilities, that it might be entitled to by law or under any other agreement; (b) any right to require the Bank to proceed against the Borrower, any other Obligor or any Collateral, or pursue any remedy in the Bank’s power to pursue; (c) any defense based on any claim that any Obligor’s obligations exceed or are more burdensome than those of the Borrower; (d) the benefit of any statute of limitations affecting liability of any Obligor or the enforcement hereof; (e) any defense arising by reason of any disability or other defense of the Borrower or by reason of the cessation from any cause whatsoever (other than payment in full) of the obligation of the Borrower for the Liabilities; and (f) any defense based on or arising out of any defense that the Borrower may have to the payment or performance of the Liabilities or any portion thereof. Each Obligor consents to any extension or postponement of time of its payment without limit as to the number or period, to any substitution, exchange or release of all or any part of any Collateral, to the addition of any other party, and to the release or discharge of, or suspension of any rights and remedies against, any Obligor. The Bank may waive or delay enforcing any of its rights without losing them. Any waiver affects only the specific terms and time period stated in the waiver. No modification or waiver of any provision of the Notes is effective unless it is in writing and signed by the Person against whom it is being enforced. To the extent not prohibited by any Legal Requirement, each Obligor waives (a) all of its rights under Rule 31, Texas Rules of Civil Procedure, chapter 34 of the Texas Business and Commerce Code, and Section 17.001 of the Texas Civil Practice and Remedies Code; (b) to the extent it is subject to the Texas Revised Partnership Act (“TRPA”) or Section 152.306 of the Texas Business Organizations Code (“BOC”), compliance by the Bank with Section 3.05(d) of TRPA and Section 152.306(b) of BOC; and (c) if the Liabilities are secured by an interest in real Property, all of its rights under Sections 51.003, 51.004, and 51.005 of the Texas Property Code (as amended from time to time).

8.15 Confidentiality. Bank agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to Bank’s and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement or any Related Document, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any Related Document, or the enforcement of rights

hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement or any Related Document, or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower; or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Bank on a nonconfidential basis from a source other than the Borrower. For the purposes of this Section, “Information” means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Bank on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such person has exercised the same degree of care to maintain the confidentiality of such Information as such person would accord to its own confidential information. If any portion of the Confidential Information is required to be disclosed by Bank pursuant to judicial action, governmental regulations, or other legal requirements other than to a regulatory agency with supervisory authority over the Bank or any of its affiliates, then to the extent permitted by law, the Bank will promptly (and if reasonably possible before any such disclosure is required) inform Borrower of the existence, terms, and circumstances surrounding such request. Bank will reasonably cooperate with Borrower in Borrower’s efforts to protect the Confidential Information as Borrower may request, and Bank shall be entitled to advance payment and/or advance assurance of reimbursement of any costs and expenses (including costs of counsel) to Bank associated with such cooperation. If, in the absence of a protective order, Bank is compelled as a matter of law to disclose any Confidential Information, it may disclose only that portion of the Confidential Information as Bank reasonably believes is required by law to be disclosed and will use reasonable efforts to obtain confidential treatment for the information.

9. USA PATRIOT ACT NOTIFICATION. The following notification is provided to the Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each Person that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. What this means for the Borrower: When the Borrower opens an account, if it is an individual the Bank will ask for its name, taxpayer identification number, residential address, date of birth, and other information that will allow the Bank to identify it, and, if it is not an individual the Bank will ask for its name, taxpayer identification number, business address, and other information that will allow the Bank to identify it. The Bank may also ask, if the Borrower is an individual, to see its driver’s license or other identifying documents, and if it is not an individual, to see its Organizational Documents or other identifying documents.

10. WAIVER OF SPECIAL DAMAGES. THE BORROWER WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER FROM THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.

11. JURY WAIVER. THE BORROWER AND THE BANK HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) BETWEEN THE BORROWER AND THE BANK ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO PROVIDE THE FINANCING DESCRIBED HEREIN.

THIS AGREEMENT AND THE OTHER WRITTEN RELATED DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

Address(es) for Notices: 151 Graham Road College Station, TX 77842 Attn: Laura Samuelson	Borrower: O.I. Corporation
	By: /s/ J. Bruce Lancaster, CEO Printed Name/Title Date Signed: April 30, 2008
Address for Notices: 707 Travis, 7th Floor Houston, TX 77002 Attn:	Bank: JPMorgan Chase Bank, N.A. By: /s/ Tommie Grant Printed Name/ Title Date Signed: May 1, 2008

EXHIBIT A

REQUEST FOR LOAN Letterhead of Borrower

JPMorgan Chase Bank, N.A.

PO Box 2558

Houston TX

Re: Request for advance under Credit Agreement, Facility A

Attention: Mike Pickerd

Dear                         :

This letter confirms our oral or telephonic request of                         , 20         , for an advance under Facility A and the Line of Credit Note in accordance with that certain Credit Agreement (as amended, restated and supplemented from time to time, the “Agreement”) dated as of                         , 200     between you and us. Any term defined in the Agreement and used in this letter has the same meaning as in the Agreement and/or Line of Credit Note, as the case may be.

The proposed advance is to be in the amount of $                 and is to be made on                         , 20        .

The advance will be:

¨ an Acquisition Advance

¨ an advance for working capital for regular business operations

The proceeds of the proposed advance should be (check one:)

¨ deposited into account number              with the Bank.

¨ [other disbursement instruction}                         .

The proposed Loan shall be:

¨ a Prime Rate Advance.

¨ a LIBOR Rate Advance with an Interest Period of                          months.

The undersigned hereby certifies that:

(1) The representations and warranties made by the Borrower in the Agreement and the other Related Documents are true and correct on and as of this date as though made on this date.

(2) The proposed advance complies with all applicable provisions of the Agreement.

(3) No Event of Default has occurred and is continuing.

(4) [if required by the Agreement] A Borrowing Base Report is attached.

Sincerely,

BORROWER

By:

Name:

Title:

EX-31

Exhibit 31

CERTIFICATIONS

I, J. Bruce Lancaster, certify that:

1. I have reviewed this quarterly report on Form 10-Q of O.I. 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 quarterly 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. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and I have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to me 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 my 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 principals.

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my 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 financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants’ internal control over financial reporting.

5. I have disclosed, based on my 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:

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:	May 9, 2008	/s/ J. Bruce Lancaster
		J. Bruce Lancaster
		Chief Executive Officer and Chief Financial Officer
		(Principal Executive and Principal Financial Officer)

EX-32

Exhibit 32

Certification Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of O.I. Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Bruce Lancaster, Chief Executive Officer/CFO certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ J. Bruce Lancaster
Name:	J. Bruce Lancaster
Title:	Chief Executive Officer and Principal Financial Officer
Date:	May 9, 2008

This certification is made solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and not for any other purpose.

A signed original of this written statement required by Section 906 has been provided to O.I. Corporation and will be retained by O.I. Corporation and furnished to the Securities and Exchange Commission or its staff upon request.