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                                                                   EXHIBIT 10.7



                              EMPLOYMENT AGREEMENT
                              --------------------


         AGREEMENT dated as of September 6, 1996 by and between I-Flow
Corporation (the "Company"), having its principal address at 2532 White Road,
Irvine, CA 92614 and James J. Dal Porto ("Employee").

         WHEREAS, the Company wishes to encourage Employee to continue to
render services to the Company by granting Employee certain rights upon
termination or upon a "Change in Control" as hereinafter defined,

         WHEREAS, the Employee wishes to enter into this Agreement;

         NOW, THEREFORE, the parties agree as follows:

     1.  Employment.
         ----------

         The Company agrees to employ Employee and Employee agrees to serve in
         such employment capacities as may be requested from time to time by the
         Chief Executive Officer or the Board of Directors of the Company.
         Employee hereby accepts such employment upon the terms and conditions
         set forth herein.  Nothing in this Agreement is intended to create and
         should not be interpreted to create an employment contract for any
         specified length of time between Company and Employee.

     2.  Termination of Employment.
         -------------------------

         Employee's employment may be terminated at any time, without cause, by
         either party upon sixty days written notice.  Employee's employment may
         be terminated at any time for cause, without notice. For purposes of
         this Agreement, cause shall be defined to include but shall not be
         limited to dishonesty, nonperformance of duties, immoral conduct
         detrimental to the Company, conviction of a felony, or unfaithfulness
         or a failure to act or not act in accordance with the direction of the
         Company.

     3.  Severance Pay.
         -------------

         (a) Termination of Employment for Cause.  In the event Employee's
             employment by Company is terminated for cause, or Employee
             voluntarily resigns, Company shall have no obligations to pay any
             severance pay to Employee.


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             (b) Termination for Reasons Other than Cause.  The Employee shall
                 be entitled to a severance package consisting of (i) a one time
                 payment equal to one year of his base salary at the time of
                 termination and (ii) immediate vesting of all Stock Options
                 granted up to the time of termination, with the exercise period
                 being no less than one year from the date of termination.  To
                 receive this severance package one of the following must be
                 true:

                 (1)  The Employee is terminated without cause.

                 (2)  The Employee is asked to accept a significant change in
                      job responsibility that is clearly a demotion.

                 (3)  The Employee is asked to relocate in order to remain
                      employed.

                 (4)  The Employee is asked to accept a reduction in salary
                      and/or benefits.

         4.  Change in Control.
             -----------------
             (a) In the event of a Change in Control as hereinafter defined, all
                 of Employee's Stock Options shall immediately vest and becomes
                 fully exercisable and the exercise period remaining shall be no
                 less than one year from the date of Change in Control.

             (b) In the event of a Change in Control as hereinafter defined,
                 all of Employee's Sock Options shall immediately vest and
                 become fully exercisable and the exercise period remaining
                 shall be no less than one year from the date of Change in
                 Control.

             (b) "Change in Control" shall mean the occurrence of any of the
                 following: (i) any "person" (as such term is used in Section
                 13(d) and 14(d) of the Securities Exchange Act of 1934, as
                 amended (the "Exchange Act") is or becomes a "beneficial owner"
                 (as defined in Rule 13d-3 under the Exchange Act), directly or
                 indirectly, of securities of the Corporation representing 30%
                 or more of the voting power of the then outstanding securities
                 of the Corporation; (ii) during any period of two consecutive
                 calendar years there is a change of 25% or more in the
                 composition of the Board of Directors of the Corporation in
                 office at the beginning of the period except for changes
                 approved by at least two-thirds of the Directors then in office
                 who were Directors at the beginning of the period; (iii) the
                 stockholders of the Corporation approve an agreement providing
                 for (A) the merger or consolidation of the Corporation with
                 another corporation where the stockholders of the Corporation,
                 immediately after the merger or consolidation, would not
                 beneficially own, immediately after the merger or
                 consolidation, shares


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            entitling such stockholders to 50% or more of all votes (without
            consideration of the rights of any class of stock to elect Directors
            by a separate class vote) to which all stockholders of the
            corporation issuing cash or securities in the merger of
            consolidation would be entitled in the election of directors or
            where the members of the Board, immediately prior to the merger or
            consolidation, would not, immediately after the merger or
            consolidation, constitute a majority of the Board of Directors of
            the corporation issuing cash or securities in the merger or
            consolidation or (B) the sale or other disposition of all or
            substantially all the assets of the Corporation, or a liquidation,
            dissolution or statutory exchange of the Corporation; or (iv) any
            person has commenced, or announced an intention to commence, a
            tender offer or exchange offer for 30% or more of the voting power
            of the then-outstanding securities of the Corporation.

        5.  Nothing herein shall be construed as requiring the Company to
            continue the employment of Employee except in the circumstances
            herein stated.

        6.  This Agreement shall be governed and construed in accordance with
            the laws of the State of California.

        7.  This Agreement shall be binding upon successors and assigns of
            the Company by merger, consolidation, purchase of assets or
            otherwise.

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above stated.


I-FLOW CORPORATION


By: /s/ DONALD M. EARHART                        By: /s/ JAMES J. DAL PORTO
    -------------------------------                  ---------------------------
    Donald M. Earhart                                James J. Dal Porto
    Chairman, President & CEO                        Employee


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