EXHIBIT 10.2
NONCOMPETITION AGREEMENT
     THIS NONCOMPETITION AGREEMENT, dated as of February 15, 2008 (this
“Agreement”), is by and among I-Flow Corporation, a Delaware corporation (the
“Parent”), AcryMed Incorporated, an Oregon corporation and wholly owned
subsidiary of the Parent (the “Company”), and Jack D. McMaken, a natural person
(“Stockholder”).
RECITALS
     WHEREAS, the Parent, the Company and Stockholder are parties to an
Agreement and Plan of Merger dated as of February 2, 2008 (the “Merger
Agreement”); and
     WHEREAS, in accordance with the Merger Agreement and as a material part of
the consideration to be given by Stockholder in connection with the Merger,
Stockholder is entering into this Agreement with the Parent and the Company
wherein Stockholder agrees not to compete with the Parent or the Company as
described herein.
     NOW, THEREFORE, in consideration of the recitals set forth above and the
covenants, representations and warranties contained in this Agreement, and for
good and valuable consideration, the receipt and adequacy of which are
acknowledged by the parties, the parties agree as follows.
AGREEMENT
     1. DEFINITIONS.
     Capitalized terms used but not defined herein shall have the respective
meanings ascribed to them in the Merger Agreement. For the purposes of this
Agreement, the following terms shall have the meanings ascribed to them below:
          (a) “Business” shall mean the business or pursuit of developing,
licensing, manufacturing or distribution of technologies or products in the
Company’s current fields of technology development or exploitation except for
the benefit of the Parent, the Company and their respective affiliates,
successors and assigns.
          (b) “Covenant Term” shall mean a period beginning on the Closing Date
(as defined in the Merger Agreement) and ending four (4) years thereafter.
          (c) “Control” shall mean ownership of 5% or more of the equity
securities of any corporation, partnership or joint venture, or such other
instances when control in fact exists.
          (d) “Covenant Territory” shall mean the entire world due to the global
nature of the Business.
     2. CONSIDERATION. In consideration of compliance with the covenants set
forth herein, the Parent shall, at the Closing, deposit the sum of One Million
Dollars ($1,000,000) in an interest-bearing escrow account. Provided Stockholder
complies with the covenants set forth in this Agreement, and subject to
Section 7.3(d) of the Merger

 

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Agreement, Stockholder shall be entitled to receive from the escrow account, the
following amounts on the designated dates: (i) Five Hundred Thousand Dollars
($500,000) plus all interest then accrued in the escrow account (less any loss
with respect thereto and the Stockholder’s portion of the escrow agent’s fees)
on the second anniversary of the Closing Date, (ii) Two Hundred Fifty Thousand
Dollars ($250,000) plus all interest then accrued in the escrow account (less
any loss with respect thereto and the Stockholder’s portion of the escrow
agent’s fees) on the third anniversary of the Closing Date and (iii) the entire
balance then remaining in the escrow account (less any loss with respect thereto
and the Stockholder’s portion of the escrow agent’s fees) (i.e., Two Hundred
Fifty Thousand Dollars ($250,000) plus all interest then accrued in the escrow
account (less any loss with respect thereto and the Stockholder’s portion of the
escrow agent’s fees) ) on the fourth anniversary of the Closing Date.
Disbursements from the escrow account shall be made pursuant to the Escrow
Agreement of even date herewith entered into among the Parent, Stockholder and
Citibank, N.A., as escrow agent, substantially in the form attached hereto as
Exhibit A (and including revisions thereto requested by the escrow agent and
agreed to by the Stockholder and the Parent).
     3. NONCOMPETITION.
          (a) Stockholder shall not, at any time during the Covenant Term,
directly or indirectly, invest in (other than as a passive investor holding less
than five percent (5%) of the outstanding voting or nonvoting securities of a
publicly traded entity), engage in or be associated with, as an employee,
consultant, agent, director, stockholder, partner, financial backer or
otherwise, the ownership or operation of any enterprise operating or proposing
to operate in the Business (excluding any ownership interest Stockholder has or
may have in the Parent).
          (b) Stockholder shall not, at any time during the Covenant Term,
directly or indirectly, nor will any person, corporation, firm, partnership or
other entity over which Stockholder exercises Control (whether as an officer,
director, individual proprietor, control stockholder, consultant, partner or
otherwise), (i) solicit, recruit or hire away from employment by the Parent or
the Company, any person who is employed on the date hereof or during the
Covenant Term by any of them, or (ii) solicit any person or entity to terminate
or modify such person’s contractual and/or business relationship with the Parent
or the Company.
          (c) Stockholder shall not, at any time during the Covenant Term,
directly or indirectly, nor will any person, corporation, firm, partnership or
other entity over which Stockholder exercises Control (whether as an officer,
director, individual proprietor, control stockholder, consultant, partner or
otherwise), solicit, recruit or encourage any current or future customer
(including any distributor, sales agent or sales representative) or licensee of
the Parent or the Company to cease doing business in whole or in part with the
Parent or the Company with respect to the Business, or to reduce, modify, divert
or otherwise interfere with or impair the business relating to the Business
between such customer or licensee and the Parent or the Company.
     4. REASONABLENESS OF COVENANTS. Stockholder acknowledges that the Parent
and the Company are involved in the Business in the Covenant Territory.
Stockholder further recognizes and acknowledges that these covenants not to
compete are necessary in order to protect and maintain the proprietary interests
and other legitimate business interests of the

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Parent and the Company in the Business acquired under the Merger Agreement and
are reasonable in all respects. The noncompetition obligations set forth herein
constitute a covenant not to compete under the internal laws of the State of
California.
     5. SEPARATE COVENANTS. This Agreement shall be deemed to consist of a
series of separate covenants, one for each line of business activity included
within the Business as it may be conducted by the Parent or the Company on or
after the date hereof, and each city, county, state, country, market area,
business area or other region included within the Covenant Territory, for each
year. The parties expressly agree that the character, duration and geographical
scope of this Agreement are reasonable in light of the circumstances as they
exist on the date upon which this Agreement has been executed.
     6. PARTIAL INVALIDITY. It is the intention of the parties hereto that the
covenants contained herein shall be fully enforceable as set forth herein. If,
in any judicial proceeding, a court or other tribunal of competent jurisdiction
shall refuse to enforce or declare void or invalid any of the provisions or
covenants, or any part thereof, of this Agreement, as applied to any party or to
any circumstances, such invalid or unenforceable provision or covenant shall in
no way affect any other provision or covenant of this Agreement, the application
of such provision or covenant in other circumstances, or the validity or
enforceability of this Agreement. If any provision or covenant, or any part
thereof, is held to be unenforceable because of the duration of such provision
or the area covered thereby or for any other reason, the parties agree that the
court making such determination shall have the power and is hereby asked to
reduce the duration and/or area of such provision, and/or to delete specific
words or phrases in order to render this Agreement and its scope valid and
enforceable to the fullest extent permitted by law.
     7. EQUITABLE RELIEF. The parties hereto agree that Stockholder’s
obligations contained in this Agreement are of a unique character which gives
them a special value and that damages in an action at law for Stockholder’s
breach of these obligations may not reasonably or adequately compensate the
Parent or the Company. The Parent or the Company shall be entitled to injunctive
and other equitable relief, without bond, to prevent a breach of said
obligations, in addition to any other remedies such parties may have.
     8. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the
parties and supersedes all prior written or oral and all contemporaneous oral
agreements, understandings and negotiations between or among the parties with
respect to the subject matter of this Agreement.
     9. MODIFICATIONS AND AMENDMENTS. This Agreement may not be modified,
changed or supplemented, nor may any obligations hereunder be waived, except by
written instrument signed by all of the parties hereto.
     10. GOVERNING LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the internal laws of the State
of California.
     11. SUBMISSION TO JURISDICTION. Each of the parties irrevocably agrees that
any legal action or proceeding arising out of or relating to this Agreement
shall be brought

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and determined in any state or federal court in San Francisco, California, and
each of the parties hereby irrevocably submits to the exclusive jurisdiction of
the aforesaid courts with regard to any such action or proceeding arising out of
or relating to this Agreement. Each of the parties agrees not to commence any
action, suit or proceeding relating thereto except in the courts described above
in San Francisco, California, other than actions in any court of competent
jurisdiction to enforce any judgment, decree or award rendered by any such court
in San Francisco, California. Each of the parties hereby irrevocably and
unconditionally waives, and agrees not to assert, by way of motion or as a
defense, counterclaim or otherwise, in any action or proceeding arising out of
or relating to this Agreement, (a) any claim that it is not personally subject
to the jurisdiction of the courts in San Francisco, California as described
herein for any reason, (b) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise)
and (c) that (i) the suit, action or proceeding in any such court is brought in
an inconvenient forum, (ii) the venue of such suit, action or proceeding is
improper or (iii) this Agreement, or the subject matter hereof, may not be
enforced in or by such courts.
     12. WAIVER OF TRIAL BY JURY. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
     13. TITLES AND HEADINGS. Titles and headings of sections of this Agreement
are for convenience of reference only and shall not affect the construction of
any provision of this Agreement.
     14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, inure to
the benefit of, and may be enforced by, each of the parties to this Agreement
and its successors and assigns. Notwithstanding the foregoing, Stockholder may
not assign his obligations under this Agreement, except that in the event of the
Stockholder’s death, this Agreement shall be assignable to his estate or other
successor, and the payments provided for in Section 2 shall still be made to
such estate or other successor, as applicable.
     15. ATTORNEYS’ FEES. Should any party institute any action or proceeding to
enforce this Agreement or any provision hereof, or for damages by reason of any
alleged breach of this Agreement or of any provision hereof, or for a
declaration of rights hereunder, the prevailing party in any such action or
proceeding shall be entitled to receive from the other party all costs and
expenses, including actual attorneys’ fees, incurred by the prevailing party in
connection with such action or proceeding.
     16. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original but all of which shall constitute one and the same
instrument.
[Signature Page Follows]

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     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.

            I-FLOW CORPORATION
      By:   /s/ Donald M. Earhart         Name:   Donald M. Earhart       
Title:   Chairman, Chief Executive Officer and President     

            ACRYMED INCORPORATED
      By:   /s/ James J. Dal Porto         Name:   James J. Dal Porto       
Title:   Secretary     

            STOCKHOLDER:
      By:   /s/ Jack D. McMaken         Name:   Jack D. McMaken             

Signature Page to
McMaken Noncompetition Agreement

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EXHIBIT A
NONCOMPETITION
ESCROW AGREEMENT

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ESCROW AGREEMENT
     THIS ESCROW AGREEMENT, dated as of ___, 2008 (this “Agreement”), is among
I-Flow Corporation, a Delaware corporation (the “Acquiror”), ______, an
individual (the “Stockholder”), and [______], a [______] (the “Escrow Agent”).
RECITALS
     A. The Acquiror and the Stockholder are, among others, parties to an
Agreement and Plan of Merger dated as of February 2, 2008 (the “Merger
Agreement”).
     B. In connection with the Merger Agreement, the Acquiror, AcryMed
Incorporated, a wholly owned subsidiary of the Acquiror, and the Stockholder
have entered into that certain Noncompetition Agreement dated as of [___], 2008
(the “Noncompetition Agreement”).
     C. Pursuant to the Noncompetition Agreement and in consideration of
compliance with the covenants set forth therein, the Acquiror has agreed to pay
into the escrow created hereby the sum of One Million Dollars ($1,000,000) (the
“Escrow Amount”), to be disbursed as provided in this Agreement. Capitalized
terms used herein but not otherwise defined have the meanings ascribed to such
terms in the Noncompetition Agreement.
     D. The Acquiror and the Stockholder desire the Escrow Agent to act as
escrow agent with respect to the Escrow Fund and income earned thereon as
provided herein, and the Escrow Agent has agreed so to act.
AGREEMENT
     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
     1. Appointment. The Escrow Agent is hereby appointed as escrow agent to
hold and distribute the Escrow Fund in accordance with the terms hereof, and the
Escrow Agent hereby accepts such appointment and agrees to act in such capacity
in accordance with the terms hereof.
     2. Creation of Escrow Account. Pursuant to the provisions of the
Noncompetition Agreement, on the Closing Date, the Acquiror will deposit with
the Escrow Agent, and the Escrow Agent hereby agrees to accept in its capacity
as such, the Escrow Amount, to be held in a separate account established by the
Escrow Agent. As used herein, the “Escrow Fund” means the Escrow Amount,
together with all net income or net gain or loss resulting from investment of
such amount that has not previously been disbursed, as such amount may be
decreased as provided herein.
     3. Disbursements to Stockholder from Escrow Fund. Subject to Section 4
hereof, the Escrow Agent shall pay to the Stockholder from the Escrow Fund the
following amounts on the designated dates: (i) Five Hundred Thousand Dollars
($500,000) plus all interest then accrued in the Escrow Fund (less any loss with
respect thereto and amounts debited by the

 

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Escrow Agent pursuant to Section 10 hereof) on the second anniversary of the
Closing Date, (ii) Two Hundred Fifty Thousand Dollars ($250,000) plus all
interest then accrued in the Escrow Fund (less any loss with respect thereto and
amounts debited by the Escrow Agent pursuant to Section 10 hereof) on the third
anniversary of the Closing Date and (iii) the entire balance then remaining in
the Escrow Fund (less amounts debited by the Escrow Agent pursuant to Section 10
hereof) (i.e., Two Hundred Fifty Thousand Dollars ($250,000) plus all interest
then accrued in the Escrow Fund (less any loss with respect thereto and amounts
debited by the Escrow Agent pursuant to Section 10 hereof)) on the fourth
anniversary of the Closing Date.
     4. Breach of Noncompetition Agreement or Core Representations.
          (a) If the Acquiror determines in good faith that the Stockholder has
breached the Noncompetition Agreement or that any of the Core Representations
(as defined in the Merger Agreement) have been breached, the Acquiror may
deliver to the Escrow Agent and the Stockholder a written notice of such breach
(a “Breach Notice”), which notice shall identify in reasonable detail the facts
and circumstances with respect to the subject matter of such Breach Notice.
After receipt of a Breach Notice, the Escrow Agent shall not make any
disbursements pursuant to Section 3 and all subsequent disbursements shall be
made pursuant to this Section 4.
          (b) If within 10 calendar days after the Acquiror’s delivery of a
Breach Notice pursuant to Section 4(a) hereof, the Stockholder does not notify
the Escrow Agent in writing (with a concurrent copy to the Acquiror) that the
Stockholder objects in good faith to the Breach Notice (an “Objection”), which
objection shall identify in reasonable detail the reasons for, and include any
relevant documentation in support of, the objection, the Escrow Agent shall
promptly disburse from the Escrow Fund to the Acquiror the then-outstanding
amount of the Escrow Fund. The failure of the Stockholder to provide an
Objection as set forth in this Section 4(b) shall be deemed an irrevocable
waiver of any rights to the amount of the Escrow Fund and any consideration
otherwise payable pursuant to the Noncompetition Agreement. With respect to any
Breach Notice solely for a breach of the Core Representations (i.e., not
involving a breach of the Noncompetition Agreement), to the extent Losses
related to such breach are less than the amount of the Escrow Fund distributed
to the Acquiror (such difference, the “Remaining Amount”), the Acquiror shall
hold and pay portions of the Remaining Amount to the Stockholder on the
remaining payment dates set forth in the Noncompetition Agreement (on a pro rata
basis, in the same relative proportions as provided in the payment schedule set
forth in the Noncompetition Agreement); provided that the Remaining Amount shall
be subject to further elimination or reduction for any subsequent breaches of
the Noncompetition Agreement or Core Representations, respectively.
          (c) If within 10 calendar days after the Acquiror’s delivery of a
Breach Notice pursuant to Section 4(a) hereof, the Stockholder delivers to the
Escrow Agent an Objection, the Escrow Agent shall not disburse any amounts from
the Escrow Fund, pending either (i) joint written instructions from the Acquiror
and the Stockholder specifying the agreement of the parties as to the action to
be taken with respect to such Breach Notice (“Payment Instructions”) or
(ii) receipt by the Escrow Agent of a notice from the Acquiror or the
Stockholder stating that such dispute has been submitted to a court of competent
jurisdiction or to binding arbitration for judgment, and that a final judgment
or arbitral decision with respect to such matter has been rendered, which notice
shall be accompanied by a copy of a final, non-appealable order of the

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court or binding arbitral award pursuant to which such court or arbitral body
has determined whether and to what extent the Stockholder is entitled to any
amount of the Escrow Fund, and a statement by the submitting party that such
decision is final and non-appealable (such notice, decision and statement
collectively, a “Determination Order”). A copy of such Determination Order shall
also be sent by the Acquiror or the Stockholder, as the case may be, to the
other party concurrently with the delivery thereof to the Escrow Agent. Promptly
following receipt of Payment Instructions or a Determination Order, the Escrow
Agent shall act in accordance with Section 4(d) hereof.
          (d) If the Escrow Agent has received Payment Instructions or a
Determination Order, and if such Payment Instructions or Determination Order
indicates that the Stockholder is entitled to any amount of the Escrow Fund,
then the Escrow Agent shall promptly disburse from the Escrow Fund to the
Stockholder the amount due to the Stockholder on the date or dates indicated in
such Payment Instructions or Determination Order. If such Payment Instructions
or Determination Order indicates that the Stockholder is not entitled to all or
any portion of the amount of the Escrow Fund, then the Escrow Agent shall
promptly disburse from the Escrow Fund to the Acquiror the amount due to the
Acquiror as indicated in such Payment Instructions or Determination Order.
     5. Termination. This Escrow Agreement shall terminate on the date on which
the entire Escrow Fund shall have been disbursed in accordance with Sections 3
and 4 hereof.
     6. Investments. The Escrow Agent shall invest and reinvest any cash in the
Escrow Fund in any one of the following investments: (a) direct obligations of
or obligations guaranteed by the United States of America with a maturity date
of less than one (1) year; (b) certificates of deposit with a maturity date of
less than one (1) year issued by commercial banks of the United States having
assets in excess of $500,000,000; or (c) such other investments as may be
mutually agreed upon by the Acquiror and the Stockholder (“Permitted
Investments”). The Escrow Agent acknowledges that it has no interest in any cash
or investments held in the Escrow Fund, and further acknowledges that the Escrow
Fund is to be held for the benefit of the Acquiror and the Stockholder. The
Escrow Agent shall have no responsibility or liability for any diminution in
value of any assets held hereunder which may result from any investments or
reinvestments made in accordance with any provision hereby. Income earned by the
Escrow Fund shall accrue and become part of the Escrow Fund to be paid out as
provided herein. In connection with making any payment pursuant to this
Agreement, the Escrow Agent shall have the absolute right to sell or divest any
Permitted Investments.
     7. Income and Taxes.
          (a) All net income or net gain from investments of the Escrow Fund
(other than income in respect of any payment out of the Escrow Fund to the
Acquiror, which shall be paid to the Acquiror) will, for income tax purposes, be
for the account of the Stockholder. All such income shall be paid at such times
as specified in Section 3 or 4 with respect to payment of amounts in the Escrow
Fund, in the same proportion as the aggregate amount of payments from such
Escrow Fund to the Stockholder or the Acquiror, as the case may be, bears to the
total amount initially deposited in such Escrow Fund by the Acquiror. The Escrow
Agent shall provide to the Stockholder and the Acquiror its standard monthly
statement concerning the

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Escrow Fund, which shall include information with respect to any earnings,
disbursements and losses during the period covered by the statement. The Escrow
Agent shall also provide such additional information to the Stockholder and/or
the Acquiror as reasonably requested by such parties from time to time.
          (b) The Stockholder shall provide to the Escrow Agent, upon execution
of this Agreement, his taxpayer identification number documented by the
appropriate Form W-9, or the appropriate Form W-8 for non-resident alien
certification. In addition, the Stockholder shall provide the Escrow Agent with
any other information reasonably requested by the Escrow Agent in connection
with any required reporting to any taxing authority. The parties acknowledge
that the failure to so provide such forms or information may prevent or delay
disbursements from the Escrow Fund and may also result in the assessment of a
penalty and the Escrow Agent’s being required to withhold tax on any interest or
other income earned on the Escrow Fund. Any payments of income shall be subject
to applicable withholding regulations then in force in the United States or any
other jurisdiction, as applicable.
     8. Duties of the Escrow Agent.
          (a) The duties of the Escrow Agent hereunder are only such as are
specifically set forth in this Agreement, such duties being purely ministerial
in nature, and no other duties or obligations shall be read into this Agreement
against the Escrow Agent. The Escrow Agent shall not be responsible for any
other agreement referred to herein, or for determining or compelling compliance
therewith, and shall not otherwise by bound thereby.
          (b) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing delivered
to the Escrow Agent hereunder without being required to determine the
authenticity or the correctness of any fact stated therein or the propriety or
validity thereof. The Escrow Agent may act in reliance upon any instrument or
signature believed in good faith by the Escrow Agent to be genuine and may
assume in good faith that any person purporting to give receipt or advice or
make any statement or execute any document in connection with the provisions
hereof has been duly authorized to do so.
          (c) The Escrow Agent may act pursuant to the advice of counsel of its
own choice with respect to any matter relating to this Agreement and shall not
be liable and shall have full and complete authorization and protection for any
action taken or suffered by it hereunder in good faith and in accordance with
such written advice.
          (d) In the event of any disagreement between the Acquiror and the
Stockholder resulting in adverse claims or demands being made in connection with
the Escrow Fund, or in the event that the Escrow Agent in good faith is in doubt
as to what action the Escrow Agent should take hereunder, the Escrow Agent shall
retain the Escrow Fund until the Escrow Agent shall have received Payment
Instructions or a Determination Order, as applicable, directing delivery of the
Escrow Fund, in which event the Escrow Agent shall disburse the Escrow Fund in
accordance therewith. The Escrow Agent shall have the option, after 30 calendar
days’ written notice to the other parties of its intention to do so, to file an
action in

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interpleader requiring the parties to answer and litigate any claims and rights
between themselves.
     9. Resignation and Removal of the Escrow Agent. The Escrow Agent, and any
successor Escrow Agent, may resign at any time as Escrow Agent hereunder by
giving at least 60 calendar days’ prior written notice to the Acquiror and the
Stockholder. Upon such resignation and the appointment of a successor Escrow
Agent, the obligations and duties of the resigning Escrow Agent shall terminate.
Upon their receipt of notice of resignation from the Escrow Agent, the Acquiror
and the Stockholder shall use reasonable efforts jointly to designate a
successor Escrow Agent. In the event the Acquiror and the Stockholder do not
agree upon a successor Escrow Agent within 60 calendar days after the receipt of
such notice, the Escrow Agent so resigning may petition any court of competent
jurisdiction for the appointment of a successor Escrow Agent or other
appropriate relief and any such resulting appointment shall be binding upon the
parties hereto. The Escrow Agent may be removed, with or without cause, by 10
calendar days’ written notice to the Escrow Agent from the Acquiror and the
Stockholder. The Escrow Agent or successor Escrow Agent shall continue to act as
Escrow Agent until a successor is appointed and qualified to act as Escrow Agent
in accordance with this Section.
     10. Compensation. The Escrow Agent shall receive as compensation for the
performance of its duties as such hereunder the fees set forth on Schedule A, to
be paid one-half by the Acquiror and one-half by the Stockholder; provided, that
amounts owed by the Stockholder shall be debited from the Escrow Fund.
     11. Indemnification. The Acquiror and the Stockholder, jointly and
severally, agree to indemnify and hold harmless the Escrow Agent from and
against all losses, liabilities, damages and expenses (including, without
limitation, reasonable attorneys’ fees and expenses) that the Escrow Agent may
incur after the date hereof by reason of its acting as escrow agent under this
Agreement, except to the extent such loss, liability, damage or expense arises
from the gross negligence or willful misconduct of the Escrow Agent as
adjudicated by a court of competent jurisdiction.
     12. Amendment and Modification. This Agreement may not be amended, modified
or supplemented in any manner, whether by course of conduct or otherwise, except
by an instrument in writing signed on behalf of each party and otherwise as
expressly set forth herein.
     13. Waiver. No failure or delay of any party in exercising any right or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such right or power, or any course of
conduct, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the parties hereunder are
cumulative and are not exclusive of any rights or remedies which they would
otherwise have hereunder or under the Noncompetition Agreement. Any agreement on
the part of any party to any such waiver shall be valid only if set forth in a
written instrument executed and delivered by a party or duly authorized officer
on behalf of such party.
     14. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, or if by facsimile,

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upon written confirmation of receipt by facsimile, (b) on the first Business Day
following the date of dispatch if delivered utilizing a next-day service by a
recognized next-day courier or (c) on the earlier of confirmed receipt or the
fifth Business Day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid. All notices hereunder
shall be delivered to the addresses set forth below, or pursuant to such other
instructions as may be designated in writing by the party to receive such
notice:

  (a)   if to the Acquiror, to:

I-Flow Corporation
20202 Windrow Drive
Lake Forest, CA 92630
Attention: Chief Executive Officer
Facsimile: (949) 206-2603

with a copy (which shall not constitute notice) to:

Gibson, Dunn & Crutcher LLP
3161 Michelson Drive
Irvine, California 92612
Attention: Mark W. Shurtleff, Esq.
Facsimile: (949) 451-4220     (b)   if to the Stockholder, to:

                              
c/o AcryMed Incorporated
9560 SW Nimbus Avenue
Beaverton, Oregon 97008
Facsimile: (503) 639-0846

with a copy (which shall not constitute notice) to:

Bullivant Houser Bailey PC
888 S.W. Fifth Avenue, Suite 300
Portland, Oregon 97204
Attention: Stephen F. Cook, Esq.
Facsimile: (503) 295-0915     (c)   if to the Escrow Agent, to:

[______]
                              

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      Attention:                     
Facsimile:                     

with a copy (which shall not constitute notice) to:

                              
                              
Attention:                     
Facsimile:                     

     15. Governing Law. This Agreement and all disputes or controversies arising
out of or relating to this Agreement or the transactions contemplated hereby
shall be governed by, and construed in accordance with, the internal laws of the
State of California, without regard to the laws of any other jurisdiction that
might be applied because of the conflicts of laws principles of the State of
California.
     16. WAIVER OF TRIAL BY JURY. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
     17. Submission to Jurisdiction. Each of the parties irrevocably agrees that
any legal action or proceeding arising out of or relating to this Agreement
brought by any other party or its successors or assigns shall be brought and
determined in any state or federal court in San Francisco, California, and each
of the parties hereby irrevocably submits to the exclusive jurisdiction of the
aforesaid courts for itself and with respect to its property, generally and
unconditionally, with regard to any such action or proceeding arising out of or
relating to this Agreement and the transactions contemplated hereby. Each of the
parties agrees not to commence any action, suit or proceeding relating thereto
except in the courts described above in San Francisco, California, other than
actions in any court of competent jurisdiction to enforce any judgment, decree
or award rendered by any such court in San Francisco, California. Each of the
parties further agrees that notice as provided herein shall constitute
sufficient service of process and the parties further waive any argument that
such service is insufficient. Each of the parties hereby irrevocably and
unconditionally waives, and agrees not to assert, by way of motion or as a
defense, counterclaim or otherwise, in any action or proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby, (a) any
claim that it is not personally subject to the jurisdiction of the courts in San
Francisco, California as described herein for any reason, (b) that it or its
property is exempt or immune from jurisdiction of any such court or from any
legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise) and (c) that (i) the suit, action or
proceeding in any such court is brought in an inconvenient forum, (ii) the venue
of such suit, action or proceeding is improper or (iii) this Agreement, or the
subject matter hereof, may not be enforced in or by such courts.
     18. Assignment; Successors. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise, by any party without the
prior written consent of the other parties,

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and any such assignment without such prior written consent shall be null and
void; provided, however, that the Acquiror may assign this Agreement to any
Affiliate of the Acquiror without the prior consent of the other parties;
provided further, that no assignment shall limit the assignor’s obligations
hereunder; provided, further, that, in the event of the Stockholder’s death,
this Agreement shall be assignable to his estate or other successor, and
payments pursuant to Section 3 shall be made to such estate or other successor,
as applicable. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
     19. Severability. Whenever possible, each provision or portion of any
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
     20. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same instrument and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
     21. Facsimile Signature. This Agreement may be executed by facsimile
signature and a facsimile signature shall constitute an original for all
purposes.
     22. Headings. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
[The remainder of this page is intentionally left blank.]

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     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.

            I-FLOW CORPORATION
      By:           Name:   James J. Dal Porto        Title:   Executive Vice
President & Chief Operating Officer        STOCKHOLDER                          
 

     The undersigned hereby accepts the terms and provisions of the foregoing
Escrow Agreement and agrees to accept, hold, deal with and dispose of any
property comprising the Escrow Fund in accordance with the foregoing Escrow
Agreement.

            [______]
      By:           Name:           Title:        

Signature Page to
Noncompetition Escrow Agreement