Document:

<PAGE>

                                                                   EXHIBIT 10.17
                                                                     PAGE 1 OF 4

FLUOR HUMAN RESOURCES POLICY

                                                                POLICY/PROCEDURE

THIS FLUOR ENTERPRISES, INC. POLICY IS SUBJECT TO MODIFICATION OR REVISION IN
PART OR IN ITS ENTIRETY TO REFLECT CHANGES IN CONDITIONS SUBSEQUENT TO THE
EFFECTIVE DATE OF THIS POLICY.

SUBJECT: BUSINESS ETHICS AND CONDUCT

HR-148
EFFECTIVE DATE:  03-03-03
SUPERSEDES:      08-05-02

I.       POLICY

         Employees are expected to adhere to the highest standards of business
         ethics and to conduct themselves and Fluor's business in a manner that
         will safeguard the company's reputation and retain the respect of its
         shareholders and all who associate with Fluor. No one in Fluor may give
         any order or directive that would violate the principle of strict
         adherence to the law, regulations governing company activities, or this
         policy. Fluor has additional policies in place that supplement and
         support the standards of conduct in this policy. Employees are expected
         to adhere to these and all other company policies as well.

II.      STANDARDS OF CONDUCT

         A.       CONFLICTS OF INTEREST AND MISAPPROPRIATION OF CORPORATE
                  OPPORTUNITIES:

                  1.       Employees must avoid circumstances giving rise to
                           potential bias due to conflicting personal interests
                           and investments not consistent with the employee's
                           performance of company business. In addition,
                           employees are prohibited from taking for themselves
                           opportunities related to Fluor's business, using
                           Fluor's property, information, or position for
                           personal gain, or competing with Fluor for business
                           opportunities.

                  2.       The company recognizes that the complexities of
                           personal and company interests may occasionally
                           result in situations where employees feel compelled
                           to excuse themselves from a particular transaction
                           because of inability to preclude the appearance of
                           bias or the occurrence of personal gain at the
                           expense of the company. To facilitate the avoidance
                           of such circumstances and to protect both employees
                           and the company, all potential personal conflicts and
                           all opportunities that relate to Fluor's business
                           must be disclosed in writing upon initial employment
                           with the company, at the time of the re-certification
                           of this policy, and at any other time in the course
                           of employment when potential conflict situations or
                           opportunities that relate to Fluor's business arise.

                  3.       Employees must disclose to their supervisors,
                           management, Human Resources or the Ethics Hotline
                           (see Section III of this policy) circumstances,
                           investments, interests, or affiliations which could
                           reasonably be expected to:

                           a.       Create the appearance of personal gain at
                                    company expense (including, but not limited
                                    to, opportunities that relate to Fluor's
                                    business);

                           b.       Create the appearance of preferential
                                    treatment or lack of impartiality;

                           c.       Impede company economy or efficiency;

                           d.       Result in a loss of independence and
                                    objectivity;

                           e.       Reflect poorly on the company or its
                                    clients; or

                                          UNITED STATES HUMAN RESOURCES POLICIES
<PAGE>
                                                                          HR-148
                                                        EFFECTIVE DATE: 03-03-03
                                                                     PAGE 2 OF 4

FLUOR HUMAN RESOURCES POLICY

                                                                POLICY/PROCEDURE

THIS FLUOR ENTERPRISES, INC. POLICY IS SUBJECT TO MODIFICATION OR REVISION IN
PART OR IN ITS ENTIRETY TO REFLECT CHANGES IN CONDITIONS SUBSEQUENT TO THE
EFFECTIVE DATE OF THIS POLICY.

SUBJECT: BUSINESS ETHICS AND CONDUCT

                           f.       Have the effect of diminishing the trust and
                                    confidence of the public, the government,
                                    our clients, or other employees in the
                                    company.

                  4.       Employees must notify a supervisor, member of
                           management or member of Human Resources before
                           accepting membership on any for-profit board of
                           directors.

                  5.       Officers must disclose any circumstances,
                           investments, interests, or affiliations described in
                           Section II.A.3. (a) through (f) of this policy to the
                           Senior Vice President Law. Officers must notify the
                           Senior Vice President Law before accepting membership
                           on any board of directors, whether of a charitable
                           organization, or otherwise.

         B.       CONFIDENTIAL INFORMATION: Many aspects of Fluor's business,
                  with the exception of those normally found in the public
                  domain, are confidential and proprietary information and are
                  only to be shared with co-workers on a need-to-know basis.
                  This includes, but is not necessarily restricted to,
                  technologies and concepts, financial position, construction or
                  expansion plans, computer programs, process data, bid data,
                  and employee histories / pay, or any business plans of Fluor's
                  clients, partners, customers, suppliers, and contractors. All
                  employees are required to sign an agreement in which they
                  agree not to disclose confidential information belonging to
                  Fluor, its clients, or others with whom it does business.
                  Furthermore, Fluor recognizes the confidentiality of business
                  data and no employee shall seek to obtain such data through
                  collusion, bribery, or any illegal or unethical means.

         C.       ANTI-TRUST: Employees will not engage in any practice that
                  restricts trade and, as such, violates anti-trust regulations,
                  such as giving to, accepting from, or discussing with a
                  competitor, unpublished competitive data (prices or terms and
                  conditions of sales agreements). Employees may not enter into
                  any agreement or plan that would restrict competition.

         D.       ACCURATE RECORD-KEEPING AND REPORTING: Fluor's books, records,
                  accounts, and reports must accurately reflect its
                  transactions, and must be subject to an adequate system of
                  internal controls and disclosure controls to promote the
                  highest degree of integrity. Reports and documents that Fluor
                  files with or submits to the Securities and Exchange
                  Commission, and other public communications, should contain
                  full, fair, accurate, timely and understandable disclosure.

         E.       POLITICAL CONTRIBUTIONS AND ACTIVITIES: Participation and
                  involvement in public issues, including political activities,
                  are on the individual's own behalf and not on behalf of the
                  company. Employees may also, if they so choose, make voluntary
                  contributions to political causes which are solicited without
                  direction or coercion. Any such contribution or failure to
                  contribute shall not advantage or disadvantage the employee.

         F.       GOVERNMENT CONTRACTING: The statutes and regulations governing
                  business with or for governmental entities are complex and
                  impose different and special requirements from those
                  applicable to the private sector. Failure to comply with these
                  requirements may be a criminal offense. The company has
                  specific business conduct standards for this area. Any
                  questions regarding compliance should be referred to Fluor's
                  Legal Services Group.

         G.       BOYCOTT: Employees shall not engage in any organized effort on
                  behalf of the company to punish an organization by refusing to
                  buy, sell, or use its products or services. It is illegal for
                  Fluor or employees acting on its behalf to participate in or
                  cooperate with boycotts conducted by countries other than the
                  United States. When an issue over a boycott arises, employees
                  are expected to contact Fluor's Legal Services Group.

                                          UNITED STATES HUMAN RESOURCES POLICIES
<PAGE>
                                                                          HR-148
                                                        EFFECTIVE DATE: 03-03-03
                                                                     PAGE 3 OF 4

FLUOR HUMAN RESOURCES POLICY

                                                                POLICY/PROCEDURE

THIS FLUOR ENTERPRISES, INC. POLICY IS SUBJECT TO MODIFICATION OR REVISION IN
PART OR IN ITS ENTIRETY TO REFLECT CHANGES IN CONDITIONS SUBSEQUENT TO THE
EFFECTIVE DATE OF THIS POLICY.

SUBJECT: BUSINESS ETHICS AND CONDUCT

         H.       INSIDER TRADING: Trading on inside information about a
                  corporation's securities or conveying such inside information
                  to others ("tipping") or suggesting that anyone purchase or
                  sell a corporation's securities while in possession of inside
                  information is strictly prohibited by law. An employee who,
                  during the course of his or her employment, has come into
                  possession of material non-public information relating to
                  Fluor or any other corporation, including any of its clients,
                  may not buy or sell the securities of that corporation. In
                  addition, the employee may not permit any member of his or her
                  immediate family or anyone acting on his or her behalf to
                  purchase or sell such securities.

         I.       CORPORATE ASSETS: Employees are expected to respect the
                  company's assets as they would their own. Corporate assets
                  take many forms (land, buildings, equipment, etc.), and
                  support daily work (desks, tools, computers, telephones,
                  etc.).

         J.       FAIR DEALING: Employees should deal fairly with Fluor's
                  customers, supplier, competitors and employees. No employee
                  should take unfair advantage of anyone through manipulation,
                  concealment, abuse of confidential, privileged or proprietary
                  information, or misrepresentation of material facts.

         K.       BRIBES, PAYOFFS AND GRATUITIES: Employees must not bribe or
                  make payoffs to anyone, nor may they accept anything of more
                  than nominal value from anyone with whom Fluor does business
                  (suppliers, contractors, clients, etc.).

         L.       COPYRIGHTS: In accordance with United States law, no employee
                  shall make unauthorized copies of copyrighted materials such
                  as books, magazines, newspapers, periodicals, computer
                  programs, or user manuals.

         M.       COMPLIANCE WITH LAWS AND REGULATIONS: Employees shall comply
                  with all applicable laws and regulations including those
                  applicable to the conduct of business with governmental
                  bodies, which include, but are not limited to, those regarding
                  cost accounting, time charging, national security,
                  procurement, and discrimination.

III.     COMMUNICATIONS AND REPORTING

         A.       ENCOURAGING OPEN COMMUNICATION: No policy can anticipate every
                  situation that may arise. Accordingly, this policy is not
                  meant to be all-inclusive, but rather is intended to serve as
                  a source of guiding principles and to encourage communication
                  and dialogue between employees and supervisors concerning
                  standards of conduct addressed in the policy. Employees are
                  encouraged to discuss with any supervisor, manager or member
                  of Human Resources questions about particular circumstances
                  that may implicate the provisions of this policy.

         B.       REPORTING OBLIGATIONS: Employees who believe that Fluor's
                  standards are not being practiced are required to report the
                  circumstances to their supervisors, managers or a member of
                  Human Resources, Retaliation for reports of misconduct by
                  others made in good faith is prohibited by law, and Fluor will
                  not permit retaliation of any kind against any employee who
                  reports misconduct in good faith.

         C.       ETHICS HOTLINE: In the event that an employee does not want to
                  report internally, the company has an Ethics Hotline which is
                  managed by an external organization specializing in compliance
                  and reporting issues. Employees may call the hotline at
                  1-800-223-1544 to report potential legal, ethical, accounting
                  or auditing violations or concerns. Any calls to the Ethics
                  Hotline may be made anonymously, although employees are
                  encouraged to identify themselves so that a full confidential
                  investigation is possible.

                                          UNITED STATES HUMAN RESOURCES POLICIES
<PAGE>
                                                                          HR-148
                                                        EFFECTIVE DATE: 03-03-03
                                                                     PAGE 4 OF 4

FLUOR HUMAN RESOURCES POLICY

                                                                POLICY/PROCEDURE

THIS FLUOR ENTERPRISES, INC. POLICY IS SUBJECT TO MODIFICATION OR REVISION IN
PART OR IN ITS ENTIRETY TO REFLECT CHANGES IN CONDITIONS SUBSEQUENT TO THE
EFFECTIVE DATE OF THIS POLICY.

SUBJECT: BUSINESS ETHICS AND CONDUCT

IV.      COMPLIANCE

         A.       VIOLATIONS: Violation of this policy by any employee may
                  result in disciplinary action, up to and including
                  termination. Civil charges against the employee may also be
                  filed.

         B.       SIGNATURES AND REAFFIRMATIONS

                  1.       Newly hired employees will sign and receive copies of
                           Fluor Human Resources Policy, HR-148, Business Ethics
                           and Conduct.

                  2.       Employees will recertify their adherence to Policy
                           HR-148 as required.

V.       EXCEPTIONS

         None

                                          UNITED STATES HUMAN RESOURCES POLICIES<PAGE>

                                                                   EXHIBIT 10.12

                              RESTRICTED STOCK PLAN

                                       OF

                               I-FLOW CORPORATION

         I-FLOW CORPORATION (the "Company"), a Delaware corporation, has adopted
the I-Flow Corporation Restricted Stock Plan (the "Plan"), effective December 4,
2001, for the benefit of its eligible employees. This Plan, and offers and sales
of securities pursuant hereto, are intended to meet the requirements of, and
qualify under, Rule 506 promulgated under the Securities Act, as such rule may
be amended from time to time, and offers and sales of securities pursuant hereto
are therefore intended to be exempt from the registration requirements of the
Securities Act.

         The purpose of the Plan is to enable the Company to obtain and retain
the services of key Employees considered essential to the long-range success of
the Company by offering them an opportunity to own stock in the Company.

                                    ARTICLE I
                                   DEFINITIONS

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

         1.1      Administrator. "Administrator" shall mean the administrator of
the Plan, which may be, at the sole discretion of the Board, either the Board or
a Committee.

         1.2      Award. "Award" shall mean an award of Restricted Stock granted
under the Plan.

         1.3      Award Agreement. "Award Agreement" shall mean a written
agreement executed by an authorized officer of the Company and the Restricted
Stockholder which shall contain such terms and conditions with respect to an
Award as the Administrator shall determine, consistent with the Plan.

         1.4      Board. "Board" shall mean the Board of Directors of the
Company.

         1.5      Change in Control. "Change in Control" shall mean the
following and shall be deemed to occur if any of the following events occurs:

         (a)      Any Person becomes the beneficial owner (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either the then
outstanding shares of Common Stock or the combined voting power of the Company's
then outstanding securities entitled to vote generally in the election of
directors; or

         (b)      At any time that the Company has any class of any equity
security registered pursuant to Section 12 of the Exchange Act, individuals who,
as of the effective date hereof, constitute the Board (the "INCUMBENT BOARD")
cease for any reason to constitute at least a majority of the Board; provided,
however, that any individual who becomes a director after the effective date
hereof whose election, or nomination for election by the Company's stockholders,
is approved by a vote of at least a majority of the directors then comprising
the Incumbent Board

                                       1

<PAGE>

shall be considered to be a member of the Incumbent Board unless that individual
was nominated or elected by any person, entity or group (as defined above)
having the power to exercise, through beneficial ownership, voting agreement
and/or proxy, twenty percent (20%) or more of either the outstanding shares of
Common Stock or the combined voting power of the Company's then outstanding
voting securities entitled to vote generally in the election of directors, in
which case that individual shall not be considered to be a member of the
Incumbent Board unless such individual's election or nomination for election by
the Company's stockholders is approved by a vote of at least two-thirds of the
directors then comprising the Incumbent Board; or

         (c)      Consummation by the Company of the sale or other disposition
by the Company of all or substantially all of the Company's assets or a merger,
consolidation or other reorganization of the Company with any other person,
corporation or other entity, other than:

                  (i)      a merger, consolidation or other reorganization that
         would result in the voting securities of the Company outstanding
         immediately prior thereto (or, in the case of a merger, consolidation
         or other reorganization that is preceded or accomplished by an
         acquisition or series of related acquisitions by any Person, by tender
         or exchange offer or otherwise, of voting securities representing 5% or
         more of the combined voting power of all securities of the Company,
         immediately prior to such acquisition or the first acquisition in such
         series of acquisitions) continuing to represent, either by remaining
         outstanding or by being converted into voting securities of another
         entity, more than 50% of the combined voting power of the voting
         securities of the Company or such other entity outstanding immediately
         after such Reorganization (or series of related transactions involving
         such a merger, consolidation or other reorganization), or

                  (ii)     a merger, consolidation or other reorganization
         effected to implement a recapitalization or reincorporation of the
         Company (or similar transaction) that does not result in a material
         change in beneficial ownership of the voting securities of the Company
         or its successor; or

         (d)      Approval by the stockholders of the Company or an order by a
court of competent jurisdiction of a plan of liquidation of the Company.

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

         1.7      Committee. "Committee" shall mean any such committee or
committees appointed as provided in Section 5.1.

         1.8      Common Stock. "Common Stock" shall mean the common stock of
the Company, par value $0.001 per share, as adjusted pursuant to Section 2.3.

         1.9      Company. "Company" shall mean I-Flow Corporation, a Delaware
corporation.

         1.10     Employee. "Employee" shall mean any employee of the Company or
one of its Subsidiaries (other than any employee who is an officer or director
of the Company or one of its Subsidiaries).

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

                                       2

<PAGE>

         1.12     Fair Market Value. "Fair Market Value" of a share of the
Common Stock as of a particular date means:

         (a)      if the stock is listed on an established stock exchange or
exchanges (including for this purpose, the Nasdaq National Market), the
arithmetic mean of the highest and lowest sale prices of the stock for such
trading day on the primary exchange upon which the stock trades, as measured by
volume, as published in The Wall Street Journal, or, if no sale price was quoted
for such date, then as of the next preceding date on which such a sale price was
quoted; or

         (b)      if the stock is not then listed on an exchange or the Nasdaq
National Market, the average of the closing bid and asked prices per share for
the stock in the over-the-counter market on such date (in the case of (a) or
(b), subject to adjustment as and if necessary and appropriate to set an
exercise price not less than 100% of the fair market value of the stock on the
date an Award is granted); or

         (c)      if the stock is not then listed on an exchange or quoted in
the over-the-counter market, an amount determined in good faith by the
Administrator; provided, however, that if the stock is traded on the Nasdaq
SmallCap Market and both sales prices and bid and asked prices are quoted or
available, the Administrator may elect to determine Fair Market Value under
either clause (a) or (b) above.

         The Fair Market Value of rights or property other than capital stock of
the Company means the fair market value thereof as determined by the
Administrator on the basis of such factors as it may deem appropriate.

         1.13     Person. "Person" shall mean any person, entity or group,
within the meaning of Section 13(d) or 14(d) of the Exchange Act, but excluding
(a) the Company and its Subsidiaries, (b) any employee stock ownership or other
employee benefit plan maintained by the Company and (c) an underwriter or
underwriting syndicate that has acquired the Company's securities solely in
connection with a public offering thereof.

         1.14     Plan. "Plan" shall mean the I-Flow Corporation Restricted
Stock Plan.

         1.15     Restricted Stock. "Restricted Stock" shall mean Common Stock
awarded under Article IV.

         1.16     Restricted Stockholder. "Restricted Stockholder" shall mean an
Employee granted an award of Restricted Stock under Article IV.

         1.17     Securities Act. "Securities Act" shall mean the Securities Act
of 1933, as amended.

         1.18     Subsidiary. "Subsidiary" shall mean any corporation in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.

                                       3

<PAGE>

                                   ARTICLE II
                             SHARES SUBJECT TO PLAN

         2.1      Shares Subject to Plan. The shares of stock subject to Awards
shall be Common Stock. The aggregate number of such shares which may be issued
upon any such Awards under the Plan shall not exceed one hundred twenty five
thousand (125,000) shares (subject to adjustment as provided in Section 2.3).
The Common Stock to be issued under this Plan will be made available, at the
discretion of the Administrator, either from authorized but unissued shares of
Common Stock or from previously issued shares of Common Stock reacquired by the
Company, including without limitation shares purchased on the open market.

         2.2      Availability of Unissued Shares. Shares of Common Stock which
are delivered by the Restricted Stockholder or withheld by the Company, in
payment of the tax withholding thereon may again be awarded hereunder. Shares of
Common Stock which are issued pursuant to an Award and which are reacquired by
the Company pursuant to this Plan or the terms of the Award under which such
shares were issued, will again become available for the grant of further Awards
under this Plan as part of the shares available under Section 2.1.

         2.3      Adjustments.

         (a)      If the Company consummates any merger, consolidation or other
reorganization in which holders of shares of Common Stock are entitled to
receive in respect of such shares any additional shares or new or different
shares or securities, cash or other consideration (including, without
limitation, a different number of shares of Common Stock), or if the outstanding
shares of Common Stock are increased, decreased or exchanged for a different
number or kind of shares or other securities through merger, consolidation, sale
or exchange of assets of the Company, reorganization, recapitalization,
reclassification, combination, stock dividend, stock split, reverse stock split,
spin-off, or similar transaction then an appropriate and proportionate
adjustment shall be made by the Administrator in its discretion in (i) the
maximum number and kind of shares subject to the Plan as provided in Section
2.1; and/or (ii) the price per share to be paid by the Company to Restricted
Stockholders upon exercise by the Company of the right to repurchase the
Restricted Stock upon termination of employment; provided, however, that the
aggregate purchase price payable for the Restricted Stock shall remain the same.

         (b)      The grant of an Award will not affect in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its business or
assets.

         2.4      Reservation of Shares. The Company, during the term of the
Plan, shall at all times reserve and keep available such number of shares of
Common Stock as shall be sufficient to satisfy the requirements of the Plan.

                                   ARTICLE III
                               GRANTING OF AWARDS

         3.1      Award Agreement. Each Award shall be evidenced by an Award
Agreement in substantially the form attached hereto as Exhibit A or such other
form established by the Administrator from time to time not inconsistent with
the terms of the Plan.

                                       4

<PAGE>

         3.2      At-Will Employment. Nothing in the Plan or in any Award
Agreement hereunder shall confer upon any Restricted Stockholder any right to
continue in the employ of the Company or any Subsidiary or shall interfere with
or restrict in any way the rights of the Company and any Subsidiary, which are
hereby expressly reserved, to discharge any Restricted Stockholder at any time
for any reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in a written employment agreement between the Restricted
Stockholder and the Company and any Subsidiary.

                                   ARTICLE IV
                            AWARD OF RESTRICTED STOCK

         4.1      Eligibility.

         (a)      Restricted Stock may be awarded to any Employee; provided,
however, that:

                  (i)      each Employee who receives an Award under the Plan
         must either qualify as an "accredited investor," as such term in
         defined in Rule 501 under the Securities Act, or meet the purchaser
         characteristics set forth in Rule 506(b)(2)(ii) under the Securities
         Act; and

                  (ii)     the Company may not grant Awards to more than
         thirty-five (35) Employees who do not qualify as "accredited investors"
         as defined in Rule 501 under the Securities Act.

         (b)      The selection of Award recipients from the pool of eligible
Employees shall be within the sole and absolute discretion of the Administrator.
No Employee shall be allowed to purchase shares of Restricted Stock under this
Plan unless such Employee has executed an Award Agreement.

         4.2      Award of Restricted Stock.

         (a)      The Administrator may from time to time, in its sole
discretion:

                  (i)      select from among the eligible Employees (including
         Employees who have previously received other Awards under the Plan)
         such of them as in its opinion should be granted Restricted Stock;

                  (ii)     determine the purchase price, if any, the number of
         shares of Restricted Stock subject to the Award, the restrictions
         applicable to the Award, and the other terms and conditions applicable
         to such Restricted Stock, consistent with the Plan; provided, however,
         that the purchase price shall be no less than the par value of the
         Common Stock to be purchased, unless otherwise permitted by applicable
         state law, and in all cases, legal consideration shall be required for
         each issuance of Restricted Stock; and

                  (iii)    upon the selection of an eligible Employee to be
         granted Restricted Stock, instruct the appropriate officer or officers
         of the Company to cause such Restricted Stock to be issued and impose
         such conditions on the issuance of such Restricted Stock as it deems
         appropriate.

                                       5

<PAGE>

         4.3      Rights as Stockholders. Subject to Section 4.4, upon delivery
of the shares of Restricted Stock to the escrow holder pursuant to Section 4.5,
the Restricted Stockholder shall have, unless otherwise provided by the
Administrator, all the rights of a stockholder with respect to said shares,
subject to the restrictions in his or her Award Agreement, including the right
to receive all dividends and other distributions paid or made with respect to
the shares; provided, however, that any shares received by the Restricted
Stockholder with respect to shares of Restricted Stock as a result of stock
dividends, stock splits or any other form of recapitalization or a similar
transaction affecting the Company's securities without receipt of consideration,
and, in the due discretion of the Administrator, any other extraordinary
distributions with respect to the Common Stock, shall be subject to the
restrictions set forth in Section 4.4.

         4.4      Restriction. All shares of Restricted Stock issued under the
Plan (including any shares received by Restricted Stockholders thereof with
respect to shares of Restricted Stock as a result of stock dividends, stock
splits or any other form of recapitalization or a similar transaction affecting
the Company's securities without receipt of consideration) shall, in the terms
of each individual Award Agreement, be subject to such restrictions as the
Administrator shall provide, which restrictions may include, without limitation,
restrictions concerning transferability; provided, however, that, upon the
vesting of Restricted Stock in accordance with the provisions of the Award
Agreement all restrictions shall lapse and such Common Stock shall become freely
transferable, subject to restrictions under applicable state and federal
securities laws. Unvested Restricted Stock may not be sold or encumbered until
all restrictions are terminated or expire. A Restricted Stockholder's rights in
unvested Restricted Stock shall lapse and his unvested Restricted Stock shall be
forfeited back to the Company immediately upon his termination of employment
with the Company for any reason unless the Administrator shall determine
otherwise in its sole discretion; provided, however, that if the Restricted
Stockholder paid any consideration for the Restricted Stock upon its issuance,
then the Company shall reimburse him for the same upon such termination of
employment and forfeiture of unvested Restricted Stock not later than ninety
(90) days following such termination.

         4.5      Escrow. With respect to each share of unvested Restricted
Stock, the Secretary of the Company, or such other escrow holder as the
Administrator may appoint, shall retain physical custody of the certificate
representing such share until the restrictions imposed under the Award Agreement
with respect to such share expire or shall have been removed, whereupon the
certificate representing such share shall be delivered to the Restricted
Stockholder; provided, however, that if other shares of still unvested
Restricted Stock are also represented by the same stock certificate, then such
certificate shall be retired and new certificates representing the vested and
unvested portions of the Award shall be issued in place of the existing
certificate. The certificate representing the vested Common Stock shall be
delivered to the Restricted Stockholder and the certificate representing the
shares of still unvested Restricted Stock shall be retained by the escrow
holder.

         4.6      Forfeiture Provisions. Pursuant to its general authority to
determine the terms and conditions applicable to Awards under the Plan, the
Administrator shall have the right to provide, in the terms of Awards made under
the Plan, that if the Restricted Stockholder is discharged from employment with
the Company for cause, or the Restricted Stockholder performs acts of willful
malfeasance or gross negligence in a matter of material importance to the
Company, as determined by the Administrator, (a) any proceeds, gains or other
economic benefit actually or constructively received by the Restricted
Stockholder upon any receipt of the Award, or upon the receipt or resale of any
Common Stock underlying the Award, must be paid to the Company, and

                                       6

<PAGE>

(b) the Award shall terminate and (whether or not vested) shall be forfeited.
The Administrator shall have sole discretion with respect to the application of
the provisions of this paragraph and such exercise of discretion shall be
conclusive and binding upon the Restricted Stockholder, and all other persons.

         4.7      Section 83(b) Election. If a Restricted Stockholder makes an
election under Section 83(b) of the Code, or any successor section thereto, to
be taxed with respect to the Restricted Stock as of the date of transfer of the
Restricted Stock rather than as of the date or dates upon which the Restricted
Stockholder would otherwise be taxable under Section 83(a) of the Code, the
Restricted Stockholder shall deliver a copy of such election to the Company
immediately after filing such election with the Internal Revenue Service.

         4.8      Company Assistance. The Company may assist any person to whom
an Award is granted in the payment of the purchase price of that Award, by
lending such amounts to such person on such terms and at such rates of interest
and upon such security (if any) as may be consistent with applicable law and
approved by the Administrator. The Company may offer or permit such assistance
on an ad hoc basis to any Restricted Stockholder without incurring any
obligation to offer or permit such assistance on other occasions or to other
Restricted Stockholders.

                                    ARTICLE V
                                 ADMINISTRATION

         5.1      Administration of the Plan. The Plan will be administered by
the Board and may also be administered by one or more Committees of the Board
appointed pursuant to this Section 5.1. The Board may appoint one or more
Committees to administer the Plan, each of which shall consist of one or more
members of the Board appointed by and holding office at the pleasure of the
Board.

         5.2      Duties and Powers of Administrator. It shall be the duty of
the Administrator to conduct the general administration of the Plan in
accordance with its provisions. The Administrator shall have the authority to
interpret the Plan and the agreements pursuant to which Awards are granted or
awarded, to adopt such rules and regulations for the administration,
interpretation, and application of the Plan as are consistent therewith, to
interpret, amend or revoke any such rules, and to make any other determinations
which it believes necessary or advisable for the administration of the Plan. The
Administrator shall have exclusive power to select the eligible Employees to be
granted Restricted Stock, to determine the number of shares of Restricted Stock
to be granted to each eligible Employee selected and to determine the time or
times when Restricted Stock will be granted. Any such grant or award under the
Plan need not be the same with respect to each Restricted Stockholder. The Board
may at any time and from time to time exercise any and all rights and duties of
the Committee under the Plan.

         5.3      Majority Rule; Unanimous Written Consent. The Administrator
shall act by a majority of its members in attendance at a meeting at which a
quorum is present or by a memorandum or other written instrument signed by all
members of the Administrator.

         5.4      Good Faith Actions. All actions taken and all interpretations
and determinations made by the Committee or the Board in good faith shall be
final and binding upon all Restricted Stockholders, the Company and all other
interested parties with respect to all matters relating to the Plan or any Award
under the Plan. No members of the Committee or Board shall be

                                       7

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personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or Awards.

                                   ARTICLE VI
                            MISCELLANEOUS PROVISIONS

         6.1      Not Transferable. No share of Restricted Stock awarded under
the Plan, nor any rights and privileges pertaining thereto, may be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of, alienated
or encumbered unless and until such share has been issued and all restrictions
applicable to such share have lapsed.

         6.2      Amendment, Suspension or Termination of the Plan. Except as
otherwise provided in this Section 6.2, the Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board without obtaining the approval of the Restricted
Stockholders. No stockholder approval of any amendment or revision will be
required unless such approval is required by applicable law, rule or regulation.
No amendment, suspension or termination of the Plan shall, without the written
consent of the Restricted Stockholder, alter or impair any rights or obligations
under any Award theretofore granted or awarded, unless the Award itself
otherwise expressly so provides. No Awards may be granted or awarded during any
period of suspension or after termination of the Plan.

         6.3      Term of Plan. The Plan is effective on the date the Plan is
adopted by the Board. The Plan shall terminate ten (10) years after the adoption
of the Plan, if not earlier terminated by the Board. Termination of the Plan
shall not affect any Award granted prior to the termination of the Plan.

         6.4      Change in Control.

         (a)      In the event of any Change in Control, the Administrator, in
its sole and absolute discretion, and on such terms and conditions as it deems
appropriate, either by the terms of the Award Agreement or by action taken prior
to the occurrence of such Change in Control transaction or event and either
automatically or upon the Restricted Stockholder's request, is hereby authorized
to take any one or more of the following actions in the Board's discretion:

                  (i)      to provide for either the purchase of any such Award
         for an amount of cash equal to the amount that could have been attained
         upon the realization of the Restricted Stockholder's rights had such
         Award been currently fully vested or the replacement of such Award with
         other rights or property selected by the Board in its sole discretion;

                  (ii)     to provide that the Award cannot vest after such
         event;

                  (iii)    to provide that such Award be assumed by the
         successor or survivor corporation, or a parent or subsidiary thereof,
         or shall be substituted for by similar awards covering the stock of the
         successor or survivor corporation, or a parent or subsidiary thereof,
         with appropriate adjustments as to the number and kind of shares and
         prices;

                  (iv)     to make adjustments in the terms and conditions of,
         and the criteria included in, outstanding Awards and Awards which may
         be granted in the future; and

                                       8

<PAGE>

                  (v)      to provide that, for a specified period of time prior
         to such event, the restrictions imposed under an Award Agreement upon
         some or all shares of Restricted Stock may be terminated, and some or
         all shares of such Restricted Stock may cease to be subject to
         forfeiture under Section 4.4 after such event.

         (b)      The Administrator may, in its discretion, include such further
provisions and limitations in any Award Agreement as it may deem equitable and
in the best interests of the Company.

         6.5      Tax Withholding. The Company shall be entitled to require
payment in cash or deduction from other compensation payable to each Restricted
Stockholder of any sums required by federal, state or local tax law to be
withheld with respect to the issuance, vesting or payment of any Award. The
Administrator may in its discretion and in satisfaction of the foregoing
requirement allow such Restricted Stockholder to elect to have the Company
withhold shares of Common Stock otherwise issuable under such Award (or allow
the return of shares of Common Stock) having a Fair Market Value equal to the
sums required to be withheld.

         6.6      Legends. The certificates representing the shares of Common
Stock issued under the Plan shall bear the following legends giving notice of
restrictions on transfer of such shares under the Securities Act and under the
Plan as follows:

         (a)      The securities evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and may not be sold, transferred, assigned or hypothecated unless (i) there is
an effective registration statement under the Securities Act covering such
securities, (ii) the sale is made in accordance with Rule 144 under the
Securities Act and the Company and its legal counsel are provided with
reasonably satisfactory evidence that the requirements of Rule 144 have been
satisfied, or (iii) the Company receives an opinion of counsel for the holder of
these securities, reasonably satisfactory to the Company, stating that such
sale, transfer, assignment or hypothecation is exempt from the registration and
prospectus delivery requirements of the Securities Act.

         (b)      The securities evidenced by this certificate are subject to
certain limitations on transfer as set forth in that certain Restricted Stock
Grant Agreement, dated as of _____________, 20__, between the Company and the
stockholder a party thereto and the Company's Restricted Stock Plan (copies of
which are available for inspection at the offices of the Company).

         (c)      Any other legends required by applicable state or federal
securities laws, as determined by the Administrator.

         6.7      Effect of Plan Upon Other Compensation Plans. The adoption of
the Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Subsidiary. Nothing in the Plan shall be construed to
limit the right of the Company (a) to establish any other forms of incentives or
compensation for employees, directors or consultants of the Company or any
Subsidiary, or (b) to grant or assume other awards otherwise than under the
Plan.

         6.8      Compliance with Laws. The Plan, the granting and vesting of
Awards under the Plan and the issuance and delivery of shares of Common Stock
and the payment of money under the Plan or under Awards granted hereunder are
subject to compliance with all applicable federal

                                       9

<PAGE>

and state laws, rules and regulations (including but not limited to state and
federal securities law and federal margin requirements) and to such approvals by
any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Company, be necessary or advisable in connection therewith. The
Company will be under no obligation to register or qualify the issuance of
Awards or underlying securities under the Securities Act or applicable state
securities laws and the Company shall not be obligated to grant, issue, deliver
or effect any transfer of shares of Common Stock granted under the Plan unless
such grant, issuance, delivery or transfer is at such time effectively
registered or exempt from registration under applicable state and federal
securities laws. Any securities delivered under the Plan shall be subject to
such restrictions, and the person acquiring such securities shall, if requested
by the Company, provide such assurances and representations to the Company as
the Company may deem necessary or desirable to assure compliance with all
applicable legal requirements. To the extent permitted by applicable law, the
Plan and Awards granted or awarded hereunder shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.

         6.9      Interpretation. Headings herein are for convenience of
reference only, do not constitute a part of the Plan, and will not affect the
meaning or interpretation of the Plan. References herein to Sections or Articles
are references to the referenced Section or Article hereof, unless otherwise
specified.

         6.10     Governing Law. The Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.

                                      * * *

         I hereby certify that the foregoing Plan was duly adopted by the Board
of Directors of I-Flow Corporation on December 4, 2001

         Executed on this 4th day of December, 2001.

                                          ______________________________________
                                                  Assistant Secretary

                                       10

<PAGE>

                                    EXHIBIT A

                    FORM OF RESTRICTED STOCK GRANT AGREEMENT

                                       11

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