<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
I-Flow Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] Fee not required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
I-FLOW CORPORATION
2532 WHITE ROAD
IRVINE, CALIFORNIA 92614
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------------
To the Shareholders of I-Flow Corporation:
The Annual Meeting of Shareholders of I-Flow Corporation (the "Company")
will be held at the Hyatt Regency Irvine, 17900 Jamboree Boulevard, Irvine,
California, on Wednesday, May 14, 1997 at 9:30 a.m., Pacific Time, for the
following purposes:
1. To elect eight directors to serve for the coming year and until their
successors are elected and qualified. Management has nominated for
director the eight persons specified in the accompanying Proxy
Statement.
2. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
The close of business on March 28, 1997 has been fixed as the record date
for determination of shareholders entitled to receive notice of and to vote at
the Annual Meeting and any adjournment thereof.
Your attention is directed to the accompanying Proxy Statement. To
constitute a quorum for the conduct of business at the Annual Meeting, it is
necessary that holders of a majority of all outstanding shares of Common Stock
be present in person or be represented by proxy. To assure representation at the
Annual Meeting, you are urged to date and sign the enclosed proxy and return it
promptly in the enclosed envelope.
By Order of the Board of Directors
Donald M. Earhart
Chief Executive Officer
Irvine, California
Dated: April 1, 1997
<PAGE> 3
I-FLOW CORPORATION
2532 WHITE ROAD
IRVINE, CALIFORNIA 92614
------------------------
PROXY STATEMENT
Your proxy is solicited by the Board of Directors of I-Flow Corporation
(the "Company") for use at the Annual Meeting of Shareholders on Wednesday, May
14, 1997, or at any adjournment or postponement thereof, for purposes set forth
in the accompanying Notice of Annual Meeting of Shareholders. This Proxy
Statement and accompanying form of proxy will be first mailed to shareholders on
or about April 1, 1997. The Company's principal address is 2532 White Road,
Irvine, CA 92614.
The Company will bear the cost of solicitation of proxies. Proxies may be
solicited in person or by telephone, facsimile, telegraph or cable by personnel
of the Company who will not receive any additional compensation for such
solicitation. In addition, the Company will request brokers or other persons
holding stock in their names or in the names of their nominees to forward
proxies and proxy material to the beneficial owners of such stock and will
reimburse them for expenses incurred in so doing.
VOTING
Only shareholders of record at the close of business on March 28, 1997 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. As
of the Record Date, the Company had 12,079,505 shares of common stock (the
"Common Stock") and 656,250 shares of Series B Preferred Stock (the "Preferred
Stock") outstanding. The Preferred Stock is convertible into 700,000 shares of
Common Stock. Shares of Common Stock and the Common Stock equivalent shares of
Preferred Stock (the "Voting Shares") each have one vote per share, except that
shareholders may have cumulative voting rights with respect to the election of
directors, and vote together as a class on the matters referred to in the
accompanying Notice of Annual Meeting of Shareholders. A majority of the Voting
Shares outstanding on the Record Date and entitled to vote at the Annual
Meeting, present in person or by proxy, will constitute a quorum for the
transaction of business at the Annual Meeting. Abstentions and broker non-votes
will be counted for purposes of determining the presence or absence of a quorum,
but will not be counted for purposes of determining the outcome of any vote,
although they will have the same effect as a negative vote.
In voting for directors, each shareholder has the right to cumulate his
votes and give one candidate a number of votes equal to the number of directors
to be elected, multiplied by the number of votes to which his shares are
entitled, or to distribute his total votes on the same principle among as many
candidates as he desires, and the eight candidates receiving the highest number
of votes will be elected. In order for one or all shareholders to be entitled to
cumulate votes, one shareholder must give notice prior to the voting of his
intention to cumulate his votes. In the event that any person other than the
nominees named herein should be nominated for election as a director, the proxy
holders may, in the exercise of their best judgment, vote the proxies they
receive cumulatively to elect as directors as many of the nominees named herein
as the votes represented by the proxies held by them are entitled to elect.
Each proxy will be voted FOR the election of the eight director nominees
named herein, unless the shareholder otherwise directs in the shareholder's
proxy. Where the shareholder has appropriately directed how the proxy is to be
voted, it will be voted according to the shareholder's direction. Any
shareholder has the power to revoke the shareholder's proxy at any time before
it is voted at the Annual Meeting by submitting a written notice of revocation
to the Secretary of the Company or by filing a duly executed proxy bearing a
later date. A proxy will not be voted if the shareholder who executed it is
present at the Annual Meeting and elects to vote the shares represented thereby
in person.
<PAGE> 4
PRINCIPAL SHAREHOLDERS AND
STOCK OWNERSHIP OF MANAGEMENT
The table below sets forth information regarding the beneficial ownership
of the outstanding Voting Shares as of February 28, 1997, of (i) each of the
Company's directors and nominees and each of the executive officers named in the
summary compensation table found elsewhere in the Proxy Statement, (ii) each
person known by the Company to be the beneficial owner of more than five percent
of I-Flow Corporation outstanding Common Stock or Preferred Stock and (iii) all
of the Company's directors and executive officers as a group. Unless otherwise
indicated, and except for voting and investment powers held jointly with a
person's spouse, the Company believes that the beneficial owner has sole voting
and investment power over such shares. As of February 28, 1997 there were
12,778,429 Voting Shares outstanding.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
VOTING SHARES VOTING SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
- ----------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Proactive Partners(1)................................ 1,425,925(2) 10.65%
50 Osgood Place,
San Francisco, CA 94133
Donald M. Earhart.................................... 1,284,844(3) 9.18%
10 Delphinus
Irvine, CA 92715
Charles C. McGettigan................................ 944,782(4) 7.18%
50 Osgood Place
San Francisco, CA 94133
Henry T. Tai, Ph.D., M.D............................. 474,567(5) 3.71%
P.O. Box 335
Pacific Palisades, CA 90272
Joel S. Kanter....................................... 393,412(6) 3.07%
Windy City, Inc.
8000 Towers Crescent Dr., Suite 1070
Vienna, VA 22182
John H. Abeles, M.D.................................. 357,019(7) 2.79%
2365 N.W. 41st Street
Boca Raton, FL 33431
James J. Dal Porto................................... 146,930(8) 1.14%
20 Edgewood
Coto de Caza, CA 92679
Gayle L. Arnold...................................... 34,778(9) *
19842 Edgewood
Huntington Beach, CA 92646
Jack H. Halperin..................................... 29,950(10) *
361 Silver Court
Woodmere, NY 11598
Erik H. Loudon....................................... 28,500(11) *
22 Hans Place
London SW1X 0EP, England
All Directors and Executive Officers as a group (9
Persons)........................................... 3,694,782(12) 25.13%
</TABLE>
- ---------------
* Less than 1%
(1) "Proactive Partners" consists of three San Francisco based merchant banking
funds, Proactive Partners L.P., Lagunitas Partners, L.P., and Fremont
Proactive Partners, L.P. Charles C. McGettigan, a director of I-Flow, is a
general partner of Proactive Partners, L.P. and Fremont Proactive Partners,
L.P.; an affiliate of Mr. McGettigan is a general partner of Lagunitas
Partners, L.P.
(2) Includes (i) 118,893 shares of the Company's Common Stock held by
"Proactive Partners", (ii) 656,250 shares of Series B Preferred Stock held
by "Proactive Partners" which is convertible at any
2
<PAGE> 5
time to 700,000 shares of the Company's Common Stock, and (iii) 607,032
shares of Common Stock issuable upon exercise of warrants held by
"Proactive Partners". 81,149 shares of Common Stock, 447,917 shares of
Series B Preferred Stock which is convertible at any time to 477,780 shares
of Common Stock and 355,938 shares of Common Stock issuable upon exercise
of warrants owned by Proactive Partners, L.P. and Fremont Proactive
Partners, L.P. are also included below in the beneficial ownership of
Charles C. McGettigan.
(3) Includes (i) 54,300 shares of Common Stock held of record by Mr. Earhart,
(ii) 9,591 shares of Common Stock held of record by Mr. Earhart's immediate
family, and (iii) 1,220,953 shares of Common Stock issuable upon the
exercise of stock options held by Mr. Earhart. Does not include 40,249
shares issuable upon exercise of options granted to Mr. Earhart, but not
exercisable within 60 days.
(4) Includes (i) 81,149 shares of Common Stock held by Proactive Partners, L.P.
and Fremont Proactive Partners, L.P., (ii) 447,917 shares of Series B
Preferred Stock which is convertible at any time to 477,780 shares of
Common Stock and 355,938 shares of Common Stock issuable upon exercise of
warrants held by Proactive Partners, L.P. and Fremont Proactive Partners,
L.P., two funds in which Mr. McGettigan is a general partner and which are
also included above in the beneficial ownership of "Proactive Partners",
and (iii) 29,915 shares of Common Stock issuable upon exercise of stock
options held by Mr. McGettigan. Does not include 7,500 shares issuable upon
exercise of stock options granted to Mr. McGettigan, but not exercisable
within 60 days.
(5) Includes (i) 444,367 shares of Common Stock held of record by Dr. Tai, and
(ii) 30,200 shares of Common Stock issuable upon exercise of stock options
held by Dr. Tai. Does not include 7,500 shares issuable upon exercise of
stock options granted to Dr. Tai, but not exercisable within 60 days. The
shares and options listed include shares held by: (i) Henry T. Tai, M.D.,
Pension Plan, of which Dr. Tai is beneficiary; (ii) Dr. Tai's wholly owned
corporation, Henry T. Tai, M.D., Inc., and (iii) Dr. Tai individually. Dr.
Tai has sole voting and dispositive power with respect to all shares.
(6) Includes (i) 300,000 shares of Common Stock held of record by Walnut
Capital Corporation, a corporation having Mr. Kanter as its President, (ii)
63,862 shares of Common Stock held of record by Windy City, Inc., a
corporation having Mr. Kanter as its President, (iii) 1,050 shares of
Common Stock held of record by Mr. Kanter's immediate family, and (iv)
28,500 shares of Common Stock issuable upon exercise of options held by
Windy City, Inc. Does not include 7,500 shares issuable upon exercise of
stock options granted to Windy City, Inc., but not exercisable within 60
days. Mr. Kanter does not own any of the voting securities of Windy City,
Inc. or Walnut Capital Corporation.
(7) Includes (i) 327,819 shares of Common Stock held of record by Northlea
Partners Ltd., a limited partnership, of which Dr. Abeles is the general
partner (as to which Dr. Abeles disclaims beneficial ownership except to
the extent of his pecuniary interest), and (ii) 29,200 shares of Common
Stock issuable upon exercise of stock options held by Northlea Partners,
Ltd. Does not include 7,500 shares issuable upon exercise of options
granted to Northlea Partners, Ltd., but not exercisable within 60 days.
(8) Includes (i) 11,000 shares of Common Stock held of record by Mr. Dal Porto,
and (ii) 135,930 shares of Common Stock issuable upon exercise of stock
options held by Mr. Dal Porto. Does not include 208,196 shares issuable
upon exercise of stock options granted to Mr. Dal Porto, but not
exercisable within 60 days.
(9) Includes 34,778 shares of Common Stock issuable upon exercise of stock
options held by Ms. Arnold. Does not include 65,991 shares issuable upon
exercise of stock options granted to Ms. Arnold, but not exercisable within
60 days.
(10) Includes (i) 1,450 shares of Common Stock held of record by Mr. Halperin,
and (ii) 28,500 shares of Common Stock issuable upon exercise of stock
options held by Mr. Halperin. Does not include 7,500 shares issuable upon
exercise of stock options granted to Mr. Halperin, but not exercisable
within 60 days.
3
<PAGE> 6
(11) Includes 28,500 shares of Common Stock issuable upon exercise of stock
options held by Mr. Loudon. Does not include 7,500 shares issuable upon
exercise of stock options granted to Mr. Loudon, but not exercisable within
60 days.
(12) Includes (i) 81,149 shares of Common Stock, 447,917 shares of Series B
Preferred Stock, convertible into 477,780 shares of Common Stock, and
355,938 shares of Common Stock issuable upon exercise of warrants held by
Proactive Partners, L.P. and Fremont Proactive Partners, L.P., two funds in
which Mr. McGettigan is a general partner and which are also included above
in the beneficial ownership of "Proactive Partners" and Mr. McGettigan and
(ii) 300,000 shares of Common Stock held by Walnut Capital which are also
included above in the beneficial ownership of Mr. Kanter. Does not include
359,436 shares of Common Stock issuable upon exercise of stock options held
by certain officers and directors, which are not exercisable within 60
days.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The directors to be elected at the Annual Meeting are to serve a term
expiring at the Annual Meeting in 1998 and until their successors have been
elected and qualified. The number of authorized members of the Company's Board
of Directors is currently eight. Unless the vote is withheld by the shareholder,
proxies will be voted for the election of the nominees listed below. If any
nominee should become unavailable for election, the proxies will be voted for
the election of a substitute nominee selected by the Board of Directors. It is
not expected, however, that any nominee will be unavailable for election.
Nominees receiving the greatest number of votes at the Annual Meeting up to the
number of authorized directors will be elected.
The following persons will be nominated at the Annual Meeting to serve as a
director of the Company:
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION OR EMPLOYMENT AGE SINCE
- ------------------------------ ----------------------------------------- --- -------------
<S> <C> <C> <C>
John H. Abeles, M.D........... President of MedVest, Inc., a consulting 52 1985
and venture capital firm in the medical
products industry; currently serves on
the Board sof Directors of AccuMed
International, Inc., Dusa
Pharmaceuticals, Inc., Healthcare
Acquisition Corporation and Oryx
Technology, Inc.
Henry T. Tai, Ph.D., M.D...... Founder of the Company; practicing 52 1990
oncology and hematology specialist, and (Formerly a
academic appointee at the University of director from
Southern California Medical School; 1985 to 1988)
currently Secretary of the Company.
Donald M. Earhart............. Chairman of the Board (since March 1991), 53 1990
Chief Executive Officer (since July
1990), and President of the Company
(since June 1990); President of Optical
Division of Allergan, Inc. from 1986 to
1990; currently serves on the Boards of
Directors of Abacus Investments, Ltd. and
Oncometrics Imaging Corp.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION OR EMPLOYMENT AGE SINCE
- ------------------------------ ----------------------------------------- --- -------------
<S> <C> <C> <C>
Jack H. Halperin, Esq......... Corporate and securities attorney who has 50 1991
been in private practice since 1988;
member of Bresler and Bab, a New York law
firm from 1987 to 1988; member of
Solinger, Grosz & Goldwasser, P.C. from
1981 to 1987; currently serves on the
Boards of Directors of AccuMed
International, Inc., Memry Corporation
and Xytronics, Inc.
Joel S. Kanter................ President of Windy City, Inc., an 40 1991
investment management firm; President of
Walnut Financial Services, Inc., a
diversified financial services and
consulting company; former Managing
Director of Investor's Washington
Service, a Washington D.C. based service
that provides information for
corporations and institutional money
managers; currently serves on the Boards
of Directors of GranCare, Inc.,
Healthcare Acquisition Corporation,
Medcross, Inc., Osteoimplant
Technologies, Inc., Vitalink Pharmacy
Services, Inc. and Walnut Financial
Services, Inc.
Erik H. Loudon................ Managing Director of EHL Investment 58 1991
Services Limited in the Channel Islands;
Director of Sarasin Investment
Management, Ltd. in London from 1985 to
1989; currently serves on the Boards of
Directors of Emerge Capital Luxembourg,
Leaf Asset Management Luxembourg, and
Fotolabo S.A. Switzerland.
Charles C. McGettigan......... General partner since 1991 of Proactive 52 1992
Partners, L.P., a merchant banking fund;
co-founder in 1988 of McGettigan, Wick &
Co., Inc., an investment banking firm;
Principal, Corporate Finance, of
Hambrecht & Quist, Inc. from 1984 to
1988; currently serves on the Boards of
Directors of Digital Dictation, Inc.,
Modtech, Inc., NDE Environmental, Inc.,
Onsite Energy, Inc., PMR Corporation,
Phoenix Network, Inc., Sonex Research,
Inc. and Wray-Tech Instruments, Inc.
James J. Dal Porto............ Joined the Company in October 1989 as 44 1996
Controller. Promoted to Treasurer in
October 1990, to Vice President of
Finance and Administration in March 1991,
to Executive Vice President, Chief
Financial Officer in March 1993 and to
Chief Operating Officer in February 1994.
</TABLE>
5
<PAGE> 8
BOARD COMMITTEES & MEETINGS
The Board of Directors held a total of 10 meetings during the year ended
December 31, 1996.
The Board of Directors has an Audit Committee with Joel Kanter, Jack
Halperin and John Abeles as its members. The Audit Committee reviews with
management and the Company's independent public accountants such matters as the
Company's internal accounting controls and procedures, the plan and results of
the audit engagement and suggestions of the accountants for improvements in
accounting procedures. It considers the type and scope of services, both of an
audit and a non-audit character, to be performed by the independent public
accountants and reviews the respective costs related to the performance of such
services. During each Committee meeting, members of the Committee and
representatives of the accountants have an opportunity for discussions outside
the presence of management, if desired. There were two Audit Committee meetings
during the year ended December 31, 1996.
The Board of Directors has a Compensation Committee with Henry Tai, Eric
Loudon and Charles McGettigan as its members. The purpose of the Compensation
Committee is to set policy concerning Board compensation, to grant options under
the Stock Option Plans and to review compensation issues concerning officers and
key employees of the Company. There were two Compensation Committee meetings
during the year ended December 31, 1996.
The Company does not have a nominating committee.
BOARD COMPENSATION
Outside members of the Board of Directors are compensated by the Company
for meetings attended and all directors are reimbursed for their travel
expenses. In calendar year 1996, Messrs. Abeles, Tai, Kanter, Halperin,
McGettigan and Loudon were considered to be outside members of the Board of
Directors. The cash compensation for the outside directors in calendar year 1996
was $500 per meeting for telephonic attendance and $750 per meeting for
in-person meeting attendance. In addition, outside directors receive stock
options described below. The total amount of director's fees paid by the Company
in calendar year 1996 was $35,000.
The Company has a Non-Employee Director Stock Option Plan, which was
approved by the shareholders at the Annual Shareholders meeting on May 4, 1992
(and amended at the Annual Shareholders meeting on May 11, 1995). Under the
terms of this plan (as amended), effective on the first business day of each
calendar year, commencing January 2, 1992, each outside director then serving is
automatically granted options, expiring five years from the date of grant, to
purchase 10,000 shares of the Company's Common Stock at an exercise price equal
to the market price of the Company's Common Stock on the date of grant. These
options vest on a quarterly basis throughout the calendar year. New non-employee
directors joining the Board after the first business day of the calendar year
receive options to purchase a pro rated portion of the 10,000 shares. As of
December 31, 1996, 165,715 of these options, with exercise prices ranging from
$1.63 to $5.38, were outstanding and exercisable. On January 2, 1997, options to
purchase an additional 60,000 shares at exercise prices of $5.44, were issued
under the plan. The options expire at the earlier of five years from the date of
grant or two years after termination of the option holder's status as a
director.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation for services
rendered in all capacities during the fiscal years ended December 31, 1996, 1995
and 1994 of the present Chief Executive Officer and all other executive officers
whose salary and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------- ------------
($) SECURITIES
($) OTHER ANNUAL UNDERLYING
($) BONUS COMPENSATION OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY (A) (B) (#)
- ------------------------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Donald M. Earhart(c)....................... 1996 $200,000 $125,000 $ 7,212 225,000
President & Chief Executive Officer 1995 200,000 80,000 6,827 150,000
1994 200,000 40,000 9,330 254,000
James J. Dal Porto(c)...................... 1996 115,320 85,000 4,435 110,000
Executive Vice President, COO 1995 115,320 35,000 7,540 50,000
1994 104,830 20,000 12,600 73,000
Gayle L. Arnold............................ 1996 92,000 23,000 -- 30,000
Vice President, Finance
</TABLE>
- ---------------
(a) Bonuses awarded for each year were paid in February of the following year.
The 1996 bonus for Mr. Earhart included $40,000 in cash and $85,000 in
deferred compensation to be paid by the Company only upon the exercise of
stock options to purchase 19,495 shares of the Company's Common Stock. The
1996 bonus for Mr. Dal Porto included $35,000 in cash and $50,000 in
deferred compensation to be paid by the Company only upon the exercise of
stock options to purchase 11,468 shares of the Company's Common Stock. The
1996 bonus for Ms. Arnold included $8,000 in cash and $15,000 in deferred
compensation to be paid by the Company only upon the exercise of stock
options to purchase 3,440 shares of the Company's Common Stock. The 1995
bonus for Mr. Earhart included $40,000 in cash and $40,000 in deferred
compensation to be paid by the Company only upon the exercise of stock
options to purchase 9,174 shares of the Company's Common Stock. The 1994
bonus for Mr. Earhart consisted of $40,000 in deferred compensation to be
paid by the Company only upon the exercise of stock options to purchase
17,778 shares of the Company's Common Stock.
(b) Accrued vacation paid in the 1996, 1995 and 1994 calendar years.
(c) Terms and conditions of employment of Mr. Earhart and Mr. Dal Porto are
outlined in Employment Agreements they have with the Company which are
described elsewhere herein under the caption "Certain Other Transactions".
7
<PAGE> 10
The following table shows information regarding stock options granted to
the named executive officers during fiscal year 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL MARKET
SECURITIES OPTIONS PRICE PER
UNDERLYING GRANTED TO EXERCISE SHARE ON
OPTIONS EMPLOYEES OR BASE DATE OF
GRANTED IN FISCAL YEAR PRICE GRANT EXPIRATION
NAME (#) 1996 ($/SHARE) ($/SHARE) DATE
- -------------------------------- ---------- -------------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Donald M. Earhart............... 225,000(a) 42.5% $4.36 $5.13 12/30/2005
James J. Dal Porto.............. 110,000(b) 20.8% $4.36 $5.13 12/30/2000
Gayle L. Arnold................. 30,000(b) 5.7% $4.36 $5.13 12/30/2000
</TABLE>
- ---------------
(a) All options are immediately vested and exercisable upon the date of grant.
(b) These options vest 20% after one year from the date of grant, and the
remainder on a pro rata daily basis over the next four years. All options
become immediately exercisable upon the disposition of all or substantially
all of the Company's assets or capital stock.
The following table shows certain information concerning stock option
exercises by named executive officers during fiscal year 1996 and the value of
options held by such executives at 1996 year end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY OPTIONS
UNDERLYING UNEXERCISED AT FISCAL YEAR END
SHARES OPTIONS AT YEAR END -----------------------------
ACQUIRED $ VALUE ----------------------------- (A) (A)
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald M. Earhart........ 0 0 1,024,429 61,881 $ 2,908,835 $ 292,883
James J. Dal Porto....... 43,000 86,750 110,650 217,818 329,549 408,226
Gayle L. Arnold.......... 7,000 22,596 29,633 46,807 88,918 107,078
</TABLE>
- ---------------
(a) Value of unexercised options is based on the Nasdaq last sale price on
December 31, 1996 ($5.44 per share).
CERTAIN OTHER TRANSACTIONS
Donald Earhart joined the Company in June 1990 as the President and Chief
Operating Officer. Mr. Earhart became the Chief Executive Officer of the Company
in July 1990 and Chairman of the Board in March 1991. Upon the commencement of
his employment, Mr. Earhart entered into a written Employment Agreement with the
Company for a four (4) year term pursuant to which he will serve as a Chief
Executive Officer of the Company for a minimum base salary of $200,000 per
annum, subject to adjustment upward by the Board of Directors, plus a bonus to
be determined annually by the Board based upon attainment of goals set by the
Board. Under the Employment Agreement, Mr. Earhart is entitled to a severance
payment equal to two (2) times his annual salary plus the previous year's bonus
if the employment is terminated by the Company without cause, or if the
employment is terminated by the employee for good reason after a change of
control with respect to the Company. Mr. Earhart was granted fully vested
options to purchase 120,000 shares of the Company's Common Stock at an exercise
price of $2.20 per share, expiring October 24, 2001, at the time his employment
commenced. All option grants to Mr. Earhart from the commencement of his
employment to the end of the 1996 fiscal year are included in the Summary
Compensation Table and Aggregated Option Exercise Table above. The specific
options granted in the 1996 fiscal year are indicated in the above Option Grant
Table. Mr. Earhart is entitled to register the shares underlying the options
under the
8
<PAGE> 11
Securities Act of 1933, at the expense of the Company. The Agreement is
renewable annually at the discretion of the Board of Directors.
In September 1996, Mr. Dal Porto entered into a written employment
agreement with the Company whereby he is entitled to a severance payment equal
to one (1) times his annual salary plus immediate vesting of all stock options
granted up to the time of termination if the employment is terminated by the
Company without cause, or if he is asked to accept a significant change in job
responsibility, relocate or accept a reduction in salary and/or benefits. In the
event of a change in control of the Company, as defined, the Company agrees to
employ Mr. Dal Porto for a period of one year after the change in control or pay
him in lieu of employment for the same compensation including incentive
compensation and all benefits.
AUDITORS
The firm of Deloitte & Touche has served as the Company's independent
public accountants for the calendar year ended December 31, 1996 and has been
selected to serve for the fiscal year ended December 31, 1997. A representative
of Deloitte & Touche is expected to be present at the Annual Meeting, at which
time such representative will be given an opportunity to make a statement, if
desired, and to respond to appropriate shareholder questions.
ANNUAL REPORTS
The Company's Annual Report for the calendar year ended December 31, 1996,
including audited financial statements, is being mailed to shareholders along
with this Proxy Statement. In addition, the Company has filed an Annual Report
on Form 10-K for its calendar year ended December 31, 1996 with the Securities
and Exchange Commission. SHAREHOLDERS MAY OBTAIN A COPY OF THE FORM 10-K ANNUAL
REPORT INCLUDING FINANCIAL STATEMENTS, WITHOUT CHARGE, BY WRITING THE COMPANY AT
THE ADDRESS LISTED ABOVE.
OTHER BUSINESS
At the time of the preparation of this Proxy Statement, the Company's Board
of Directors had not been informed of any other matters which would be presented
for action at the Annual Meeting. If any other matters are properly presented,
the persons named in the accompanying form of Proxy will vote or refrain from
voting in accordance with their best judgment.
1998 SHAREHOLDER PROPOSALS
Shareholders who wish to include proposals for action at the Company's 1998
Annual Meeting of Shareholders in next year's proxy statement and proxy card
must cause their proposals to be received in writing by the Company at its
address set forth on the first page of this Proxy Statement no later than
December 3, 1997. Such proposals should be addressed to the Company's Secretary,
and may be included in next year's proxy statement if they comply with certain
rules and regulations promulgated by the Commission.
Shareholders who do not present proposals for inclusion in the Proxy
Statement but who still intend to submit a proposal at the 1998 Annual Meeting
must, in accordance with the Company's Bylaws, provide timely written notice of
the matter to the Secretary of the Company. To be timely, a shareholder's
written notice must be delivered to or mailed and received at the principal
executive offices of the Company not less than 60 days nor more then 90 days
prior to the Annual Meeting as originally scheduled. If less than 70 days notice
or prior public disclosure of the date of the scheduled Annual Meeting is given,
then notice of the proposed business matter must be received by the Secretary
not later than the close of business on the tenth day following the day on which
such notice of the date of the scheduled Annual Meeting was mailed or the day on
which such public disclosure was made, whichever first occurs. Any notice to the
Secretary must include as to each matter the shareholder proposes to bring
before the meeting: (i) a brief description of the proposal desired to be
brought before the Annual Meeting and the reasons for conducting such business
at the
9
<PAGE> 12
Annual Meeting; (ii) the name and record address of the shareholder proposing
such business and any other shareholders known by such shareholder to be
supporting such proposal; (iii) the class and number of shares of the Company's
stock which are beneficially owned by the shareholder and (iv) any financial
interest of the shareholder in such proposal.
By Order of the Board of Directors
DONALD M. EARHART
Chief Executive Officer
Dated: April 1, 1997
10
<PAGE> 13
I-FLOW CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS
The undersigned hereby appoints Donald M. Earhart and James J. Dal
Porto, and each of them, as Proxies, each with full power to appoint such
Proxy's substitute, and hereby authorizes them to represent and vote as
designated below all the shares of Common Stock of I-Flow Corporation held of
record by the undersigned on March 28, 1997 at the Annual Meeting of
Shareholders to be held on May 14, 1997, and at any adjournments or
postponements thereof.
(Please sign and date on the reverse side)
[SEE REVERSE SIDE]
<PAGE> 14
Please mark your
[X] votes as in this
example
Management recommends that you vote FOR all nominees for director listed below.
1. Election of FOR All nominees WITHHOLD AUTHORITY
Directors: [ ] listed below [ ] To vote for all
(except as nominees
indicated to listed below.
the contrary
below).
Nominees: Donald M. Earhart Dr. John H. Abeles Dr. Henry T. Tai
Joel S. Kanter Jack H. Halperin Erik H. Loudon
Charles C. McGettigan James J. Dal Porto
INSTRUCTIONS: To withhold authority to vote for any individual nominee, line
through the nominee's name.
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or adjournment or
postponements thereof.
This proxy will be voted as directed. If no direction is made, this Proxy
will be voted FOR the election of the eight director nominees set forth in
the accompanying Proxy Statement.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE.
Date: , 1997 SIGNATURE(S)
-------- ---------------------------- -----------------
(Shares of
Common Stock)
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the President or authorized officer. If a
partnership, limited liability company or other entity, please sign entity's
full name by authorized person.
