EXHIBIT 10.4
AMENDMENT #1
TO
EMPLOYMENT AGREEMENT
     THIS AMENDMENT #1 TO EMPLOYMENT AGREEMENT (this “Amendment”) is made and
entered into as of the 23rd day of February, 2006 (the “Effective Date”) by and
between JAMES R. TALEVICH, an individual (“Employee”), and I-FLOW CORPORATION, a
Delaware corporation (“Company”).
Background
     A. The Company and Employee previously entered into that certain Employment
Agreement made and entered into as of June 21, 2000 (the “Agreement”).
Capitalized terms in this Amendment and not otherwise defined herein shall have
the meanings given them in the Agreement.
     B. The Company and Employee wish to amend and modify certain provisions in
the Agreement as provided herein and effective as of the Effective Date hereof,
while leaving unchanged all other provisions of the Agreement.
Agreement
          1. Severance Pay. The first sentence of Section 3(b) of the Agreement
is hereby deleted and is replaced in its entirety with the following:
The Employee shall be entitled to a severance package consisting of (i) a one
time payment equal to six months of his base salary at the time of termination
(ii) immediate and automatic vesting of all outstanding stock options,
restricted stock or other equity-based awards, with the exercise period (to the
extent relevant) being no less than one year from the date of termination (but
in no event later than the last day prior to the day that any extension would
cause such options or rights to become subject to Section 409A of the Code).
          2. Change in Control. Section 4(b) of the Agreement is hereby deleted
and is replaced in its entirety with the following:
In the event of a Change in Control, all of Employee’s unvested and outstanding
stock options, restricted stock or other equity-based awards shall immediately
and automatically become fully vested and (to the extent relevant) exercisable.
Any stock options and stock appreciation rights shall remain exercisable for
their remaining terms (but in no event later than the last day prior to the day
that any extension would cause such options or rights to become subject to
Section 409A of the Code).
          3. Section 409A Compliance. In recognition that Section 409A of the
Code may prohibit the payment of certain payments or benefits under the
Agreement in connection with

 

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Employee’s termination of employment earlier than six (6) months following
Employee’s termination of employment, a new Section 8 is added to the Agreement
as follows:
8. Compliance with Section 409A. Notwithstanding any provision of this Agreement
to the contrary, if, at the time of Employee’s termination of employment with
the Company, he is a “specified employee” as defined in Section 409A of the
Code, and one or more of the payments or benefits received or to be received by
Employee pursuant to this Agreement would constitute deferred compensation
subject to Section 409A, no such payment or benefit will be provided under this
Agreement until the earliest of (A) the date which is six (6) months after his
“separation from service” for any reason, other than death or “disability” (as
such terms are used in Section 409A(a)(2) of the Code), (B) the date of his
death or “disability” (as such term is used in Section 409A(a)(2)(C) of the
Code) or (C) the effective date of a “change in the ownership or effective
control” of the Company (as such term is used in Section 409A(a)(2)(A)(v) of the
Code). The provisions of this Section 8 shall only apply to the extent required
to avoid Employee’s incurrence of any penalty tax or interest under Section 409A
of the Code or any regulations or Treasury guidance promulgated thereunder. In
addition, if any provision of this Agreement would cause Employee to incur any
penalty tax or interest under Section 409A of the Code or any regulations or
Treasury guidance promulgated thereunder, the Company may reform such provision
to maintain to the maximum extent practicable the original intent of the
applicable provision without violating the provisions of Section 409A of the
Code.
          4. No Other Changes. Except as otherwise set forth in this Agreement,
all terms and provisions of the Agreement remain unchanged and in full force and
effect.
     IN WITNESS WHEREOF, the parties hereto have entered into this Amendment as
of the Effective Date.

                      I-FLOW CORPORATION       JAMES R. TALEVICH    
 
                   
By:
  /s/ Donald M. Earhart       By:   /s/ James R. Talevich    
 
 
 
   Donald M. Earhart          
 
   James R. Talevich    
 
     President & CEO                

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