<PAGE> 1
As filed with the Securities and Exchange Commission on February 1997
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
I-FLOW CORPORATION
(Exact name of Registrant as specified in its charter)
2532 WHITE ROAD
IRVINE, CALIFORNIA 92614
(714) 553-0888
(Address, including zip code, and telephone number,
including area code, of Registrant's Principal Executive Offices)
CALIFORNIA 3841 33-0121984
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
------------------------
GAYLE L. ARNOLD
VICE PRESIDENT, FINANCE
I-FLOW CORPORATION
2532 WHITE ROAD
IRVINE, CALIFORNIA 92614
(714) 553-0888
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPIES TO:
MARK W. SHURTLEFF
GIBSON, DUNN & CRUTCHER LLP
JAMBOREE CENTER, 4 PARK PLAZA
IRVINE, CALIFORNIA 92614
(714) 451-3802
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered in this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================================
PROPOSED PROPOSED
TITLE OF EACH AMOUNT MAXIMUM MAXIMUM AMOUNT OF
CLASS OF SECURITIES TO BE OFFERING AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PRICE PER SHARE OFFERING PRICE FEE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK 4,835,271(2) $ 5.22(3) $25,240,114 $7,648.52
===========================================================================================================
</TABLE>
(1) Includes indeterminate number of shares of Common Stock that may be
issued in connection with a stock split, stock dividend,
recapitalization, etc.
(2) Shares offered by certain Selling Shareholders.
(3) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) and based on the average of the high and the low
prices of the Common Stock of Registrant reported on the Nasdaq Small-Cap
Issues System for February 6, 1997.
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<PAGE> 2
PROSPECTUS
I-FLOW CORPORATION
4,835,271 SHARES OF COMMON STOCK
-------------
This Prospectus relates to an offering (the "Offering") of up to
4,835,271 shares of Common Stock (the "Common Stock") of I-Flow Corporation (the
"Company"). The Offering includes the sale by certain selling shareholders (the
"Selling Shareholders") of up to 2,301,161 shares of Common Stock (the "Resale
Shares") which were previously issued in one or more private placement
transactions, not involving a public offering; and up to 1,087,032 shares of
Common Stock (the "Warrant Shares") issuable upon exercise of outstanding
warrants which were previously issued in one or more private placement
transactions, not involving a public offering; and up to 1,447,078 shares of
Common Stock (the "Option Shares") issuable upon exercise of outstanding options
which were previously issued in one or more transactions, not involving a public
offering. The Company's Common Stock trades on the Nasdaq Small-Cap System under
the symbol "IFLO". On February 6, 1997 the low bid price for the Common Stock
was $5.06 and the high ask price was $5.38.
The issuance of Warrant Shares may occur from time to time and at any
time at the discretion of the warrant holder prior to the expiration date of the
warrant. The issuance of Option Shares may occur from time to time and at any
time at the discretion of the option holder prior to the expiration date of the
option. It is expected that certain Selling Shareholders may offer the Resale
Shares which they own, at any time and from time to time, directly through
agents, dealers or underwriters in the over-the-counter market, or otherwise, on
terms and conditions determined at the time of sale by the Selling Shareholders
or as a result of private negotiations between buyer and seller. The Company
will not receive any proceeds from the sale of the Resale Shares by the Selling
Shareholders. Expenses of any such resale will be borne by the buyer and seller
as they may agree.
--------------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND PROSPECTIVE
PURCHASERS SHOULD CAREFULLY CONSIDER THE FACTORS SPECIFIED UNDER THE CAPTION
"RISK FACTORS."
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY , 1997
<PAGE> 3
RISK FACTORS
In analyzing the Company and its business, prospective investors should
read the entire Prospectus and carefully consider, among other things, the
following risk factors:
1. ACCUMULATED DEFICIT.
As of December 31, 1995 the Company's accumulated deficit was
approximately $18.0 million. The year ended December 31, 1995 was the first
profitable year for the Company with net income of $1,069,000. The Company had
net losses of $1,673,000, and $2,636,000 for the years ended December 31,
1994, and 1993, respectively. There can be no assurance that the Company's
profitability will continue in the future, and further losses may arise.
2. CONTINUED CAPITAL REQUIREMENTS.
Prior to 1995, the Company had financed its operations and working
capital requirements primarily through equity financings. During the year ended
December 31, 1995, the Company's operating activities provided positive cash
flow of $1,701,000. As of December 31, 1995, the Company had cash on hand of
$5,628,000 and net receivables of $1,567,000. Management believes the Company's
funds are sufficient to provide for its projected needs to maintain operations
for the next 12 months.
On July 22, 1996, the Company purchased substantially all of the assets
of Block Medical, Inc. The assets were acquired for an aggregate purchase price
of approximately $17.5 million. Consideration for the purchase consisted of the
following: cash of $15,000,000, 433,018 shares of I-Flow Corporation Common
Stock with a value of $2,000,000 as of the date of closing, and a warrant to
purchase 250,000 shares of I-Flow Corporation Common Stock at an exercise price
of $4.62, expiring July 22, 2001.
In conjunction with the aforementioned acquisition of Block Medical
Inc., the Company entered into a $4,000,000 note payable with a bank due in
monthly installments bearing interest at the bank's prime rate plus 1.5% (11.25%
at September 30, 1996) through July 2000. The note is collateralized by
substantially all of the Company's assets and requires the Company to comply
with certain covenants.
Additionally, the Company increased the maximum available borrowing
limit on its line of credit from $1,500,000 to $3,000,000 in July 1996 and
extended the expiration date to July 1997.
3. NO ASSURANCE OF MARKET ACCEPTANCE.
The Company markets its products primarily to the alternate care site
provider. The Company's success in selling its products is intrinsically,
although not exclusively, tied to the success of the home health care industry
which is the largest group of alternate health care providers.
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4. LIMITATIONS ON THIRD PARTY REIMBURSEMENT.
The home healthcare industry is heavily dependent upon payment for its
services by private insurers and governmental agencies. Changes in the
reimbursement system could adversely affect this industry. The Company's
products fall into the general category of infusion devices and related
disposable products with regard to reimbursement issues. Reimbursements are not
paid directly to the Company. Rather, users of the product (i.e., homecare
groups or physicians) will request that their patients' health insurance
provider provide them some form of reimbursement for the disposables that are
consumed in a therapy and a pump rental fee for loaning the device to the
patients. They typically also request fees for setting up the equipment and
providing the associated visitation services that are usual and customary for
infusion therapies.
The Company believes that the current trend in the insurance industry
(both private and governmental) has been to decrease reimbursement and move
towards capitation, thereby encouraging providers to use the lowest cost method
of delivering medications. No assurance can be given that this trend will
continue or that the insurance industry will continue to provide any
reimbursements.
5. RAPID TECHNOLOGICAL CHANGE AND INTENSE COMPETITION.
The intravenous drug and nutrient infusion segment of the home health
care industry is highly competitive. Some of the competitors have significantly
greater resources than the Company for research and development, manufacturing
and marketing, and may be better able to compete for a share of the market, even
in areas in which the Company's products may be superior. There can be no
assurance that the Company will be able to successfully compete in the infusion
device industry. The industry is subject to technological changes and there can
be no assurance that the Company will be able to maintain any existing
technological lead long enough to establish its products and to obtain
profitability.
6. PROPOSED HEALTH CARE REFORM.
The Company's products are sold to health care providers and changes to
the health care system may adversely affect the Company's ability to sell its
products.
7. ATTRACTION AND RETENTION OF KEY PERSONNEL.
The Company's ability to develop commercially viable products and to
maintain a competitive position in a business environment characterized by
intense competition and technological development depends upon its ability to
attract and retain skilled scientific, engineering, management, sales and
marketing personnel. Competition for the services of such personnel is intense,
and there can be no assurance that the Company will be able to attract or retain
the personnel necessary for the Company's success. The loss by the Company of
the services of any of its key personnel could have a material adverse impact on
the business and prospects of the Company. The Company has a key man life
insurance policy ($1,000,000 face value) as to its President and Chief Executive
Officer.
8. DEPENDENCE UPON COMPONENT SUPPLIERS.
While the Company performs final assembly and testing of its Vivus,
SideKick, Paragon, Band-It, Liberty and Medi-SIS infusion systems, certain
component parts, including customized
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<PAGE> 5
semiconductors, special motors and pumping mechanisms, and all molded products
are obtained from independent contractors based upon specifications provided by
the Company. Although the Company does not anticipate significant delays or
disruption in the manufacture and delivery of its product, there can be no
assurance that delays or disruptions will not occur. The loss or breakdown of
the Company's relationship with its independent contractors could subject the
Company to substantial delays in the delivery of its product to customers.
Significant delays could subject the Company to possible cancellation of orders
and the loss of customers.
Micro Mo Electronics, Inc., St. Petersburg, Florida, is the sole
supplier of the Company's DC motors utilized in the Vivus Infuser, and Foxboro,
Inc., San Jose, California, is the sole supplier of the pressure transducers
utilized in the Vivus Infuser. The Company, however, is currently investigating
other vendors as backup suppliers. The Company believes that it is economically
prohibitive to order from two or more vendors simultaneously and that it is the
industry standard to select a primary vendor and have substitute vendors to call
upon in an emergency situation. Certain other electronic components such as the
keyboards, liquid crystal displays, and the circuit boards are also sole-sourced
because of the customization of these components, but acceptable substitute
vendors are believed to be generally available.
The Company also believes that, should its sole-source suppliers be
unwilling or unable to produce the components or sub-assemblies required for its
products, it would not have substantial difficulty in replacing such vendors.
However, there can be no assurance that the Company will be able to obtain
uninterrupted supplies of critical components for its products.
9. PRODUCT LIABILITY ISSUES MAY ARISE.
A defect in the design or manufacture of the Company's products, or in
the failure of the devices to perform for the use which the Company specifies
for the system, may subject the Company to claims of liability for injuries and
otherwise. The Company has obtained product liability insurance in the amount of
$4,000,000 including legal defense costs. Any substantial underinsured loss
would have a material adverse effect on the Company's financial condition and
the results of its operations. The Company believes that the amount of product
liability insurance carried is comparable to similarly situated companies.
10. NO DIVIDEND.
The Company has not paid and does not anticipate the payment of
dividends on its Common Stock in the foreseeable future.
11. COMPANY IS DEPENDENT UPON GOVERNMENT REGULATIONS FOR THE MANUFACTURING AND
MARKETING OF ITS PRODUCTS.
The Company has been granted permission by the FDA to market the Vivus
4000 Infusion System, the SideKick, the Paragon, the Band-It Syringe Delivery
System, the Liberty IV Bag Delivery System, and the Medi-SIS Syringe Infusion
System. However, the marketing of medical devices such as the Company's products
is subject to laws, rules and regulations administered by the FDA. Although such
laws, rules and regulations currently in effect do not adversely impact the
current operation of the Company or its ability to manufacture and market its
products, there can be no assurance that such laws, rules and regulations will
remain in effect, or that other laws, rules or regulations may not be enacted
which might adversely impact the Company's ability to manufacture and market
infusion devices.
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The Company is also subject to foreign regulations regarding the
marketing and sale of its products. The Company must receive approvals from
certain government agencies prior to the sale of products in certain countries.
To date the Company has received certain of the necessary approvals and has been
granted permission to use the "CE" mark on its products for import into the 18
member countries of the European Economic Union. However, there can be no
assurances that such laws, rules and regulations will remain in effect, or that
other laws, rules or regulations may not be enacted which might adversely impact
the Company's ability to manufacture and market infusion devices in foreign
countries.
12. DEPENDENCE UPON PATENTS AND PROPRIETARY TECHNOLOGY.
The Company relies substantially upon its proprietary capabilities. The
Company believes that its proprietary rights in multiple drug infusion
technology may limit development and marketing by others of the disposable
products used with the Company's Vivus 4000 Infusion System. The Company has
received a patent on the Band-It Syringe Delivery System and the Company has
U.S. patent applications pending for the Vivus 4000, the Vivus 4000/2, the
SideKick, the Paragon, the Liberty and the Medi-SIS. Copyrights have been
obtained for the Vivus programming software. There can be no assurance that
others will not independently develop products with equivalent or superior
capabilities or otherwise obtain access to the Company's capabilities.
13. MANUFACTURING DIFFICULTIES
The Company has been manufacturing the Vivus product line for over four
years, the SideKick for over three years, and the Paragon for over two years and
has established that it can manufacture in commercial quantities. The Company
may encounter difficulties scaling up production of its new products and hiring
and training of additional qualified manufacturing personnel. The occurrence of
difficulties as the Company manufactures its new products and increases
production could lead to fluctuations in operating results and have an adverse
effect on the Company's business, financial condition and results of operations.
14. LIMITED PUBLIC TRADING MARKET; POSSIBLE VOLATILITY OF STOCK PRICE.
The Company's Common Stock has been traded publicly only since February
13, 1990, and since then has had only a few market makers. The current six-month
average trading volume is approximately 2.8 million shares. There can be no
assurance that a more active or established trading market for the Company's
Common Stock will develop, or if developed that it will be maintained. The
trading price of the Company's Common Stock could fluctuate significantly in
response to variations in quarterly operating results and many other factors.
15. POTENTIAL FUTURE SALES OF SHARES PURSUANT TO RULE 144.
A substantial number of the shares of the Company's outstanding Common
Stock may be resold either through this Prospectus or pursuant to Rule 144
adopted under the Securities Act. Sales of substantial amounts of the Company's
Common Stock in the public market could adversely affect the prevailing market
price of the Common Stock.
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16. BLOCK MEDICAL ACQUISITION.
With the recent acquisition of substantially all of the assets of Block
Medical, Inc., the Company faces the operating challenges of integrating this
somewhat larger business, including its manufacturing facility in Mexico.
Additionally, Block Medical has not, until recently, been profitable. No
assurances can be given that the Company will be able to effectively and rapidly
integrate the business or operate it profitably. Further, the acquisition
required material financing by the Company, which caused some dilution and debt
leverage. Finally, the acquisition price resulted in the recording of intangible
assets of approximately $7.4 million, which will have a negative impact on
future earnings.
AVAILABLE INFORMATION
I-Flow Corporation, a California corporation (the "Company") is subject
to the informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information filed
by the Company can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, Room 1024; the John C. Kluczynski Building, 230 South
Dearborn Street, Chicago, Illinois 60604, Room 3190; and 75 Park Place, New
York, New York 10007, 14th Floor. Copies of such materials can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Website
that contains reports, proxy statements and other information regarding
registrants that file electronically with the Commission. The address of the
Website is http:llwww.sec.gov. The Common Stock of the Company is traded on The
Nasdaq Small-Cap Issues System. Reports and other information concerning the
Company may be inspected at the National Association of Securities Dealers, Inc.
at 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus constitutes a part of a registration statement on Form
S-3 (together with all amendments and exhibits, the "Registration Statement")
filed by the Company with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus does not contain all of the
information included in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Reference is made to such Registration Statement and to the exhibits relating
thereto for further information with respect to the Company and the securities
offered hereby.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
2. The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996.
3. The Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996.
4. The Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996.
5. The Company's Current Report on Form 8-K dated July 22,
1996.
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6. The Company's amended Current Report on Form 8-K/A filed
October 2, 1996.
7. The description of the Company's Common Stock contained in
the Company's Registration Statement on Form S-1 (No.
33-41207-LA) including any amendment or report filed for the
purpose of updating such description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of this Offering shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the respective dates
of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
and superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the request of such person, a copy of any or all
of the foregoing documents incorporated herein by reference, other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference into such documents). Requests for such documents should be directed
to the Chief Financial Officer of the Company at 2532 White Road, Irvine,
California 92614 (Telephone: 714/553-0888).
THE COMPANY
When used in this discussion, the words "believes", "anticipates" and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those projected. Readers are cautioned
not to place undue reliance on these forward-looking statements which speak only
as of the date hereof. The Company undertakes no obligation to republish revised
forward-looking statements to reflect the occurrence of unanticipated events.
Readers are also urged to carefully review and consider the various disclosures
made by the Company in this report which seek to advise interested parties of
the factors that affect the Company's business, as well as in the Company's
periodic reports on Forms 10-K, 10-Q and 8-K filed with the Commission.
I-Flow Corporation (the "Company" or "I-Flow") designs, develops,
manufactures and markets technically advanced, ambulatory infusion systems that
administer antibiotics, analgesics, chemotherapeutic agents, hormones,
nutrients, hydration therapies and other medical treatments to patients. The
Company's devices are designed for portability, convenience, reliability,
economy and technical sophistication such that cost effective healthcare may be
delivered at various sites -- most frequently, the home, hospitals and physician
offices.
In 1990, I-Flow received U.S. Food and Drug Administration (the "FDA")
permission to market the Vivus 4000(TM) Infusion System, its first product, and
in 1991 emerged from its development stage. The Vivus 4000(TM) Infusion System
is a remotely programmable ambulatory infusion system capable of delivering up
to four different solutions, each at its own schedule. In July 1992, I-Flow
began marketing a reusable, low cost IV infusion pump for the delivery of
antibiotics, the SideKick(TM). It offers cost and convenience benefits to
customers, and quality-of-life advantages to patients. In May 1993, the Company
began to market the Paragon(TM), a low cost IV drug delivery system for
chemotherapy, pain medications and other critical drugs which
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need to be administered at very low flow rates over many days. Late in 1994, the
Company began to market the elite, an electronic Paragon with an "end of
infusion" alarm. Both the Paragon and the elite are reimbursable under existing
Medicare product codes.
The Company received permission to market five new products from the
FDA during 1995: (1) the Band-It(TM) Drug Delivery System which the Company
believes is an advantageous choice for delivering medications that can be
concentrated in a 10-cc syringe -- such as antibiotics, diuretics and bolus
chemotherapy, (2) the Fixed Rate Gravity Set which is used with standard IV bags
and provides for the delivery of medications and intravenous fluids at a
controlled flow rate, (3) the Liberty, a mechanical-only pump designed to
deliver medications from a standard hospital IV mini-bag, (4) the Medi-SIS(TM),
a mechanical syringe pump which uses unique spring technology to deliver
medications from standard syringes and (5) a bolus device for patient controlled
analgesia (PCA). Except for the PCA device, the Company began marketing these
new products in 1996.
The Company was incorporated in the State of California in July 1985.
The Company's corporate offices are located at 2532 White Road, Irvine,
California 92614. The telephone number is (714) 553-0888.
The ambulatory infusion market may be thought of as having four
segments: (1) the high end, sophisticated, multiple-therapy, computer-controlled
devices, (2) the single drug electro-mechanical, single-therapy, single-channel
infusion devices normally costing $2,000 or more to purchase, (3) reusable,
mechanical-only infusion pumps, and (4) disposable or one time use devices such
as elastomeric infusers, which are relatively expensive on a cost per dose
delivered basis.
I-Flow's first product, the Vivus System, competes in the high end as a
technologically advanced infusion pump. As the number of patients requiring
multiple drugs or multiple therapies increases, the Company believes this
segment should expand and overlap portions of the second segment.
The Company's more recent products (including the SideKick, Paragon,
elite, and the new products, the Band-It, Liberty and Medi-SIS) are designed to
be innovative, low-cost, mechanical alternatives for infusion therapies which
compete in the second, third and fourth segments of the market. In fact, the
Company currently has the only reusable mechanical-only infusion pumps which,
because of their low cost per dose delivered, can compete as a low cost
alternative to elastomeric infusers. These reusable mechanical-only pumps may
also replace some of the electro-mechanical pumps in the market, which cost
considerably more. The new products expand the Company's marketplace to include
inpatient as well as outpatient institutions and are designed to address the
managed-care issues of cost without compromising patient care.
Two new products that were introduced towards the end of 1995 are:
The Band-It Syringe Delivery System -- An inexpensive system for
infusing a standard Becton-Dickinson syringe. Cost per dose is below
the cost of standard gravity systems.
Fixed Flow Rate Gravity Sets -- An easy-to-use gravity set that
utilizes a standard IV bag and eliminates the need for drop counting.
This set also reduces the chance of accidental medication free-flow.
Nursing and patient training time is greatly reduced.
Two additional products, the Liberty and the Medi-SIS, have recently
been introduced and provide a system for both inpatient and outpatient
institutions. These new systems of IV infusion products are designed to be the
lowest cost per dose systems on the market.
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Distribution of the Vivus and the four new products introduced since
late 1995 is currently managed directly through the I-Flow sales force as well
as through regional and national medical equipment distributors. As of January,
1997, the Company had 12 internal sales representatives located throughout the
United States. The Company is actively pursuing additional distribution
arrangements for its new products.
In November 1994, the Company signed an exclusive national distribution
agreement with SoloPak Pharmaceuticals Inc. ("SoloPak") for the SideKick,
Paragon and elite product lines. During the year ended December 31, 1994, the
Company received a $500,000 non-refundable fee in consideration for an option
included in the agreement for the purchase of the U.S. distribution rights for
these products in June of 1996. In March 1996, this agreement was superseded
with a new agreement in which SoloPak purchased the exclusive right and license
to manufacture and sell the products in the U.S. and Puerto Rico. Pursuant to
the new agreement, SoloPak paid the Company $1.3 million in consideration of the
license in March 1996 and will pay the Company guaranteed royalties of $1.0
million per quarter during each of the three succeeding quarters in 1996.
Additionally, SoloPak will pay I-Flow a royalty equal to two percent of their
net sales of the products for the 1997 and 1998 calendar years. Per the terms of
the agreement, I-Flow has the right of first refusal to supply SoloPak with
services and assistance in assembling the completed products until March 1998.
The Company retained the rights to sell the products outside the United States
and Puerto Rico.
The Company sells the SideKick and Paragon into the international
market and has signed agreements with distributors in various countries.
Currently, the Company is selling its products through distributors in the
Canada, Brazil, the Benelux Countries, Germany, England, Ireland, Italy, Mexico,
Spain, Korea, Australia, New Zealand and Israel.
On July 3, 1996, the Company entered into an agreement for the purchase
of substantially all of the assets of Block Medical, Inc., a wholly-owned
subsidiary of Hillenbrand Industries, Inc. The transactions contemplated by this
agreement were consummated on July 22, 1996. The assets were acquired for an
aggregate purchase price of approximately $17.5 million. The purchase price was
allocated to the net assets acquired, in-process research and development and
goodwill. The amount allocated to in-process research and development,
approximately $5 million, has been expensed as of the acquisition date.
Consideration for the purchase consisted of the following: cash of $15,000,000,
433,018 shares of I-Flow Corporation Common Stock with a value of $2,000,000 as
of the date of closing, and a warrant to purchase 250,000 shares of I-Flow
Corporation Common Stock at an exercise price of $4.62, expiring July 22, 2001.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Resale
Shares by the Selling Shareholders. The Company may, in the future, receive
proceeds from the sale of Common Stock issuable upon exercise of certain
warrants or options but only if such warrants or options are exercised and then
only in an amount equal to the exercise price thereof multiplied by the number
of warrants or options exercised. The Company expects to use any such proceeds
for working capital and general corporate purposes.
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SELLING SHAREHOLDERS
The Selling Shareholders (which term includes their transferees,
pledgees, donees or their successors) may from time to time offer and sell
pursuant to this Prospectus any or all of the Resale Shares, option shares or
Warrant Shares. The following table shows the number of shares of Common Stock
beneficially owned by each Selling Shareholder as of the date shown and the
number of Resale Shares, option shares or Warrant Shares that may be offered for
the account of such Selling Shareholder pursuant to this Prospectus, assuming
that all of the Resale Shares, option shares or Warrant Shares indicated below
as being beneficially owned by each Selling Shareholder are to be offered
pursuant to this Prospectus. The information about each Selling Shareholder has
been obtained from that Selling Shareholder. Except as described in the
footnotes below, none of the Selling Shareholders holds any position or office
with, has been employed by, or has otherwise had a material relationship with
the Company or its affiliates within the past three years. Because the Selling
Shareholders may offer all or some portion of the Resale Shares, option shares
or Warrant Shares pursuant to this Prospectus, no estimate can be given as to
the amount of the Resale Shares, option shares or Warrant Shares that will be
held by the Selling Shareholders upon termination of any such offering.
<TABLE>
<CAPTION>
(2)
(1) Resale Shares,
Number of Shares option shares or
Beneficially Warrant Shares
Owned as of Covered by This
Name of Beneficial Owner January 22, 1997 Prospectus
------------------------ ---------------- ----------------
<S> <C> <C>
Shareholders in 1993 & 1995
Private Placements (3)
------------------------
American Equities Overseas, Inc. 10,059 10,059
Axa Banque 488,400 198,000
Bank Von Ernst 5,000 5,000
Banque Privee Edmond Rothschild 7,000 7,000
Courcoux Bouvet SA. 43,000 38,000
Cruttenden Roth, Inc. 75,000 75,000
James J. Dal Porto (4) 296,468 211,000
Donald M. Earhart (4) 1,142,610 527,500
Emerge Capital 65,000 40,000
France Finance IV 176,500 165,000
Manfred Goodman 4,000 4,000
Groupama Gestion 400,000 250,000
Groupe des Assurances Nationale (GAN) 176,750 176,750
Hillenbrand Industries, Inc. (5) 683,018 683,018
Julantis Trading 14,060 5,700
Kelebe Investment Corp 19,000 19,000
Leopold Joseph (Guernsey) 20,000 20,000
Lesley H. Levy 4,000 4,000
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
(1)
Number of Shares (2)
Beneficially Resale Shares
Owned as of Covered by This
Name of Beneficial Owner January 22, 1997 Prospectus
------------------------ ---------------- ----------
<S> <C> <C>
Robert S. London 75,000 75,000
Mizebourne Investment Corp 26,500 10,000
Deborah G. Page 4,903 4,903
James V. Proesel 14,716 14,716
Herbert I. Rosen 21,250 21,250
Ann Safriet Pension Plan 17,265 17,265
Joel Safriet Pension Plan 29,735 29,735
Samisa Investment Corp 22,500 22,500
David R. Selmer 2,483 2,483
Jack H. Setian 27,900 27,900
Silicon Valley Bank 40,000 40,000
Synalgest SA 50,000 50,000
Henry T. Tai, M.D. (6) 411,367 107,694
Chelu Travieso-Earhart 9,591 8,004
Union Bancaire Prive, Geneve 5,000 5,000
Vitali Maritime Corp 35,455 10,000
J. Watling 5,000 5,000
Windy City, Inc. (7) 92,551 18,869
Convertible Preferred Shareholders with
Registration Rights (8)
-----------------------
Fremont Proactive Partners, L.P. (9) 62,433 62,433
Lagunitas Partners, L.P. (9) 416,216 416,216
Proactive Partners, L.P. (9) 832,432 832,432
Proactive Investment Managers, L.P. (9) 114,844 114,844
Other Selling Shareholders (10) 500,000
-------
TOTAL 4,835,271
=========
</TABLE>
11
<PAGE> 13
(1) Beneficial ownership includes shares issuable upon exercise of
warrants and options.
(2) Shares owned, or to be owned, by this Selling Shareholder, the
resale of which is offered for the account of such Shareholder by
this Prospectus.
(3) Includes shares issued by the Company: (i) in December 1993 in a
private placement of Units for $2.00 per Unit, with each Unit
consisting of two shares of Common Stock and a warrant, expiring
December 1996, to purchase one share of Common Stock at an
exercise price of $3.00 per share; and (ii) in July 1995 in a
private placement from a special warrant exercise program which
authorized a reduction in the exercise price of certain warrants
for a limited period of time expiring July 31, 1995. The shares
listed for these Selling Shareholders include shares issuable
upon exercise of such warrants.
(4) This Selling Shareholder is an officer as well as a director of
the Company.
(5) Such number represents the maximum number of shares of Common
Stock issuable upon exercise of a warrant assuming that
Hillenbrand Industries, Inc. exercises its warrant for 250,000
shares of Common Stock (subject to adjustment as provided in the
warrant). As of the date of this Prospectus, that warrant is not
exercisable and therefore Hillenbrand Industries, Inc. owns
433,018 shares of Common Stock.
(6) This Selling Shareholder is a director of the Company.
(7) Joel Kanter, a director of the Company, is the President of Windy
City, Inc.
(8) Includes Series B Preferred Shares, which are convertible into
700,000 shares of Common Stock, issued by the Company in October
1992 in a private placement. As part of this placement, the
Company also granted warrants, expiring October 5, 1997, to
purchase 607,032 shares of Common Stock at exercise prices
ranging from $2.40 to $4.80 per share. The shares listed for
these Selling Shareholders to be registered in this Prospectus
includes shares issuable upon exercise of such warrants.
(9) Charles McGettigan, a director of the Company, is a general
partner of Proactive Investment Managers, L.P. which is the
general partner of Proactive Partners, L.P. Mr. McGettigan is the
general partner of Fremont Proactive Partners, L.P., and is
affiliated with the general partner of Lagunitas Partners, L.P.
(10) These shares may be resold from time to time, pursuant to this
Prospectus, by other Selling Shareholders. The names and other
relevant information with respect to these shareholders will be
provided by a Supplement to this Prospectus.
12
<PAGE> 14
PLAN OF DISTRIBUTION
The Resale Shares may be sold from time to time in one or more
transactions at a fixed offering price, at varying prices determined at the time
of sale or at negotiated prices. Such sales may be made to purchasers directly
by the Selling Shareholders or, alternatively, the Selling Shareholders may
offer the Resale Shares through underwriters, dealers, brokers or agents, who
may receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Shareholders and/or the purchasers of the Resale
Shares for whom they may act as agents. The Selling Shareholders and any
underwriters, dealers, brokers or agents that participate in the distribution of
Resale Shares may be deemed to be underwriters, and any profits on the sale of
the Resale Shares by them and any discounts, commissions or concessions received
by any such underwriters, dealers, brokers or agents may be deemed to be
underwriting discounts and commissions under the Securities Act.
To the extent required at the time a particular offer of the Resale
Shares by the Selling Shareholders is made, a supplement to this Prospectus will
be distributed which will set forth the number of Resale Shares being offered
and the terms of the offering, including the name or names of any underwriters,
dealers, brokers or agents, the purchase price paid by any underwriter for the
Resale Shares purchased from the Selling Shareholders, and any discounts,
commissions, or concessions allowed or reallowed to dealers, including the
proposed selling price to the public.
The Common Stock offered hereby by the Company upon exercise of
outstanding warrants (the "Warrant Shares") shall be issued to holders of such
warrants upon exercise thereof at the election of the warrant holder in
accordance with the terms of the warrants. Warrants may be exercised, in whole
or in part, by the holders thereof by giving written notice of the exercise to
the Company or its agent.
The Common Stock offered hereby by the Company upon exercise of
outstanding options (the "Options Shares") shall be issued to holders of such
options upon exercise thereof at the election of the option holder in accordance
with the terms of the options. Options may be exercised, in whole or in part, by
the holders thereof by giving written notice of the exercise to the Company or
its agent.
LEGAL MATTERS
The validity of the issuance of the Warrant Shares, Options Shares or
Resale Shares offered hereby will be passed upon for the Company by Gibson, Dunn
& Crutcher LLP, 4 Park Plaza, Jamboree Center, Irvine, California 92614.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1995 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The financial statements incorporated in this prospectus by reference
from the Company's Current Report on Form 8-K dated July 22, 1996 of Block
Medical, Inc. for the year ended December 2, 1995 have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
13
<PAGE> 15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC Registration Fee..........................................$ 7,649
Printing...................................................... 3,000*
Legal Fees and Expenses....................................... 15,000*
Accounting Fees and Expenses.................................. 5,000*
Blue Sky Fees and Expenses.................................... 7,000*
Miscellaneous................................................. 2,000*
-------
Total.........................................................$39,649*
=======
* This amount is an estimate that is subject to future contingencies.
The foregoing expenses will be paid in 1997. Additional expenses where
material will be reported by amendment to this Registration Statement. The
Company will bear all expenses for the preparation and filing of the
Registration Statement and certain other expenses. The Selling Shareholders will
pay no portion of the foregoing expenses.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 317 of the California General Law (the "CGCL"), the
Company is in certain circumstances permitted to indemnify its directors and
officers against certain expenses (including attorneys' fees), judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with threatened, pending or completed civil, criminal, administrative or
investigative actions, suits or proceedings (other than an action by or in the
right of the Company), in which such persons were or are parties, or are
threatened to be made parties, by reason of the fact that they were or are
directors or officers of the Company, if such persons acted in good faith and in
a manner they reasonably believed to be in the best interests of the Company,
and with respect to any criminal action or proceeding, had no reasonable cause
to believe their conduct was unlawful. In addition, the Company is in certain
circumstances permitted to indemnify its directors and officers against expenses
incurred in connection with the defense or settlement of a threatened, pending
or completed action by or in the right of the Company, and against amounts paid
in settlement of any such action, if such persons acted in good faith and in a
manner they believed to be in the best interests of the Company and its
shareholders provided that the specified court approval is obtained.
Under Section 204(a)(10) of the CGCL, the personal liability of a
director for monetary damages in an action brought by or in the right of the
corporation for breach of the director's duty to the corporation and its
shareholders may be eliminated, except for the liability of a director resulting
from (i) acts or omissions involving intentional misconduct or the absence of
good faith, (ii) any transaction from which a director derived an improper
personal benefit, (iii) acts or omissions showing a reckless disregard for the
director's duty, (iv) acts or omissions constituting an unexcused pattern of
inattention to the director's duty or (v) the making of an illegal distribution
to shareholders or an illegal loan or guaranty.
As permitted under the CGCL, the Restated Articles of Incorporation of
the Company provide that the personal liability of the directors of the Company
for monetary damages shall be eliminated to the fullest extent permissible under
California law. The Restated Articles of Incorporation of the Company also
provide that the Company is authorized to provide
II-1
<PAGE> 16
indemnification for its directors and officers for breach of their duty to the
Company and its shareholders through Bylaw provisions or through agreements with
the directors and officers, or both, in excess of the indemnification otherwise
permitted by Section 317 of the CGCL. The Company's Bylaws provide for
indemnification of its directors and officers to the fullest extent permitted by
Section 317 of the CGCL.
Directors and officers of the Company are covered by a Directors and
Officers' Liability Policy issued by Steadfast Insurance Company.
ITEM 16. EXHIBITS.
Set forth below is a list of the exhibits filed as part of this
Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
3.1(1) Restated Articles of Incorporation of the Company
3.2(2) Certificate of Amendment to Restated Articles of Incorporation dated June 14, 1991
3.3(3) Certificate of Amendment to Restated Articles of Incorporation dated May 12, 1992
3.4(3) Certificate of Determination covering the Company's Series B Preferred Stock filed with the
Secretary of State on October 5, 1992
3.5(2) Restated Bylaws as of July 22, 1991 of the Company
4.1(3) Specimen Common Stock Certificate
4.2(4) Form of Warrant (Class F) dated October 5, 1992 included in units sold in
1992 private placement of Series B Preferred Stock
4.3(5) Form of Warrant (Class G) dated December 17, 1993 included in units sold in 1993 private placement
4.4(5) Certificate of Adjustment to Underwriter Warrants, dated December 17, 1993
4.5(6) Form of Warrant (Class H) dated June 3, 1994, issued in conjunction with a consulting agreement
4.6 Form of Warrant dated July 3, 1996, issued in conjunction with the purchase of substantially
all of the assets of Block Medical, Inc.
4.7 Form of Warrant dated July 18, 1996, issued in conjunction with the borrowing of funds
from Silicon Valley Bank.
</TABLE>
II-2
<PAGE> 17
<TABLE>
<S> <C>
5.1* Opinion of Legal Counsel (relating to legality of securities being registered).
10.1(7) Agreement for Purchase and Sale of Assets dated as of July 3, 1996 By and Among I-Flow Corporation,
Block Medical, Inc. and Hillenbrand Industries, Inc.
23.1 Independent Auditors' Consent
23.2* Consent of Legal Counsel (included in Exhibit 5.1 hereto)
24 Power of Attorney (included on signature page hereto)
</TABLE>
- ---------------
* To be filed by amendment.
(1) Incorporated by reference to exhibit with this title filed with
the Company's Form 10-K for its fiscal year ended September 30,
1990.
(2) Incorporated by reference to exhibit with this title filed with
the Company's Registration Statement (#33-41207-LA) declared
effective August 8, 1991.
(3) Incorporated by reference to exhibit with this title filed
with the Company's Post Effective Amendment to its
Registration Statement (#33-41207-LA) declared effective
November 6, 1992.
(4) Incorporated by reference to exhibit with this title filed with
the Company's Form 10-K for its fiscal year ended December 31,
1992.
(5) Incorporated by reference to exhibit with this title filed with
the Company's Form 10-K for its fiscal year ended December 31,
1993.
(6) Incorporated by reference to exhibit with this title filed with
the Company's Form 10-K for its fiscal year ended December 31,
1994.
(7) Incorporated by reference to exhibit with this title filed with
the Company's Current Report on Form 8-K/A filed October 2,
1996.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this registration statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in this registration statement;
II-3
<PAGE> 18
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement; provided, however, that the undertakings set forth in
paragraphs (i) and (ii) above do not apply if the information required
to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Company pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities as that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Company hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons controlling
the Company pursuant to the provisions described in Item 15 above the Company
has been informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
II-4
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irvine, State of California, on February 5, 1997.
I-FLOW CORPORATION
BY: Donald M. Earhart /s/
---------------------------
Donald M. Earhart
President & CEO
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Gayle L Arnold and James J. Dal Porto his or her true and lawful
attorneys-in-fact and agents, each acting alone, with full powers of
substitution and resubstitution, for him or her and his or her name, place and
stead, at any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and to file the same,
all with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, each acting alone, with full powers and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as full to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming that all said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 5, 1997.
Signature Title
--------- -----
Donald M. Earhart /s/ Chairman, President, & CEO
-------------------------
Donald M. Earhart
James J. Dal Porto /s/ Director, Executive Vice President
------------------------- and Chief Operating Officer
James J. Dal Porto
Gayle L. Arnold /s/ Principal Financial and Accounting Officer
-------------------------
Gayle L. Arnold
John H. Abeles /s/ Director
-------------------------
John H. Abeles, M.D.
Jack H. Halpering /s/ Director
-------------------------
Jack H. Halperin
Joel S. Kanter /s/ Director
-------------------------
Joel S. Kanter
Erik H. Loudon /s/ Director
-------------------------
Erik H. Loudon
Charles C. McGettigan /s/ Director
-------------------------
Charles C. McGettigan
Henry T. Tai /s/ Director and Secretary
-------------------------
Henry T. Tai, Ph.D., M.D.
II-5
<PAGE> 1
EXHIBIT 4.6
THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT COVERING SUCH SECURITIES OR THE ISSUER
RECEIVES AN OPINION OF COUNSEL STATING THAT SUCH
DISPOSITION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENT OF SUCH ACT.
WARRANT TO PURCHASE 250,000 SHARES OF COMMON STOCK OF I-FLOW CORPORATION
This certifies that BLOCK MEDICAL, INC., a Delaware corporation (the
"Holder") is entitled, subject to the terms and conditions set forth below, to
subscribe for and purchase from I-FLOW CORPORATION, a California corporation
(the "Company"), Two Hundred Fifty Thousand (250,000) fully-paid and
non-assessable shares of the Company's Common Stock (the "Warrant Shares"), no
par value, at an initial purchase price of $4.61875 per Warrant Share (the
"Exercise Price") (which amount is equal to the "Base Share Price" as defined
in Section 2.1(b) of the "Purchase Agreement," as defined below).
The Exercise Price and the character of the Warrant Shares are subject
to adjustment as provided herein. The term "Warrant Shares" as used herein
includes the shares of the Company's Common Stock (and such other securities or
property into which such shares of Common Stock may hereafter be changed) which
are at the time receivable by the Holder upon exercise of this Warrant. This
Warrant is being issued pursuant to that certain Agreement for Purchase and
Sale of Assets, dated as of June 3, 1996, by and among the Holder, the Company
and the Holder's wholly-owned subsidiary, Block Medical, Inc. (the "Purchase
Agreement"). The term "Warrant" as used herein shall include this Warrant and
any Warrant delivered as provided herein in substitution or exchange herefor.
1. Exercise and Expiration. This Warrant may be exercised as a whole
or in part at any time or from time to time on or after the earlier of (i)
January 1, 1999, or (ii) an "I-Flow Change in Control," as defined below, but
must be exercised on or prior to July 22, 2001 (which date is the fifth (5th)
anniversary date of the "Closing Date" as defined in Section 10.1 of the
Purchase Agreement), at which time this Warrant shall expire and shall no
longer be exercisable. This Warrant shall be exercised by surrender hereof at
the Company's principal executive office together with delivery of a signed
Subscription Agreement in the form attached hereto as Annex I specifying the
number of Warrant Shares to be purchased and payment of the Exercise Price for
the Warrant Shares to be purchased. In the event of any exercise of this
Warrant, (i) stock certificates for the shares of Common Stock purchased by
virtue of such exercise shall be delivered to the Holder forthwith, and unless
this Warrant has been fully exercised or has expired, a new Warrant,
representing the number of Warrant Shares with respect to which this Warrant
remains outstanding shall also be delivered to the Holder forthwith and (ii)
the stock certificates
<PAGE> 2
for the shares of Common Stock so purchased shall be dated the date of such
surrender and the Holder shall be deemed for all purposes to be the Holder of
the shares of Common Stock so purchased as of the date of such surrender.
For purposes hereof, an "I-Flow Change of Control" shall be deemed to
have occurred if and when:
(a) Except as provided by subparagraph (c) hereof, there is
an acquisition (other than from the Company) by any person, entity or "group",
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (excluding, for this purpose, the
Company or its subsidiaries, or any employee benefit plan of the Company or its
subsidiaries which acquires beneficial ownership of voting securities of the
Company), of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of fifty percent (50%) or more of either the then
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; or
(b) Individuals who, as of the date hereof, constitute the
Board of Directors of the Company (as of the date hereof the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board of Directors
of the Company, provided that any person becoming a director subsequent to the
date hereof whose election, or nomination for election by the Company's
stockholders, is or was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened acquisition described in (a) above or actual or
threatened election contest relating to the election of the directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board; or
(c) There is approval by the stockholders of the Company of
a reorganization, merger or consolidation with any other person, entity or
corporation, other than
(i) a merger or consolidation that would result in
the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
another entity) more than fifty percent (50%) of the combined
voting power of the voting securities of the Company or such
other entity outstanding immediately after such merger or
consolidation, or
(ii) a merger or consolidation effected to implement
a recapitalization of the Company (or similar transaction) in
which no person or entity acquires fifty percent (50%) or more
of the combined voting power of the Company's then outstanding
voting securities; or
2
<PAGE> 3
(d) There is approval by the stockholders of the Company of
a plan of complete liquidation of the Company or an agreement for the sale or
other disposition by the Company of all or substantially all of the Company's
assets.
Notwithstanding the foregoing, any transaction which has
as its principal purpose the reincorporation of the Company so as to effect a
change in the state of its domicile shall not be deemed to be an I-Flow Change
in Control.
2. Adjustments. The Exercise Price and the number of Warrant
Shares issuable upon exercise of this Warrant shall be subject to adjustment
from time to time as follows:
(a) Share Splits and Certain Dividends. In the event the
Company should at any time or from time to time after the date hereof fix a
record date for the effectuation of a split or subdivision of its outstanding
Common Shares or the determination of holders of Common Shares entitled to
receive a dividend or other distribution payable in additional Common Shares or
other securities or rights convertible into, or entitling the holders thereof to
receive directly or indirectly additional Common Shares (hereinafter referred to
as "Share Equivalents") without payment of any consideration (or payment of less
than full fair consideration) by such holders for the additional Common Shares
or the Shares Equivalents (including the additional Common Shares issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Exercise Price per Warrant Share shall be appropriately decreased and the
number of Warrant Shares shall be appropriately increased in proportion to such
increase of outstanding Common Shares so that the Holder will receive, after
such record date, the same number of shares for the same total consideration as
it would have received by exercising the Warrant immediately before the record
date.
(b) Reverse Share Splits. If the number of Common Shares
outstanding at any time after the date hereof is decreased by a combination of
the outstanding Common Shares, then, on the record date of such combination, the
Exercise Price shall be appropriately increased and the number of Warrant Shares
issuable upon exercise hereof shall be appropriately decreased in proportion to
such decrease in outstanding Common Shares.
(c) Merger or Consolidation. If the Company shall at any
time consolidate with or merge into another corporation, the Holder will
thereafter receive, upon the exercise hereof, the securities or property to
which the holder of the number of Common Shares deliverable at the time of such
consolidation or merger upon the exercise of this Warrant would have received
upon such consolidation or merger, and the company shall take such steps in
connection with such consolidation or merger as may be necessary to assure that
the Holder shall thereafter receive such securities or property deliverable upon
the exercise of the Warrant.
(d) Elimination of Fractions. The Company shall not be
required to issue fractional Warrant Shares upon any exercise hereof. As to any
final fraction of a Warrant Share which the Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect to such final fraction in an amount based on the closing price of the
Company's stock that day.
3
<PAGE> 4
3. Registration Rights. The registration rights associated with
the Warrant Shares shall be set forth in that certain Registration Rights
Agreement of even date herewith by and between Hillenbrand Industries, Inc.,
Block Medical, Inc. and I-Flow Corporation and is incorporated herein by
reference.
4. Transfer of Warrant. In addition to the other restrictions on
transfer set forth herein, this Warrant may not be sold, transferred, assigned,
pledged or otherwise disposed of absent the Company's prior written consent,
which consent may be withheld or conditionally granted in its sole discretion;
provided, however, that the Holder shall be permitted to transfer this Warrant
to Hillenbrand Industries, Inc., an Indiana corporation and the parent of
Holder, without the Company's prior written consent.
5. Reservation of Common Stock. The Company hereby covenants and
agrees that it shall at all times reserve and keep authorized and available for
issuance, free of any preemptive rights or rights of first refusal, a
sufficient number of Warrant Shares for the purpose of issuance upon exercise
of this Warrant to permit the exercise of this Warrant as a whole. The Company
further covenants and agrees that all shares of Common Stock which may be
issued upon the exercise of this Warrant in accordance with the terms hereof
will, upon issuance, be fully paid and non-assessable and free from all taxes,
liens and charges with respect to the issue thereof.
6. Mutilated or Lost Warrant. In the event this Warrant shall be
mutilated, lost, stolen or destroyed, the Company shall -- upon the Holder's
request -- issue and deliver in exchange and substitution for and upon
cancellation of this Warrant if mutilated, or in lieu of and substitution for
the Warrant if lost, stolen or destroyed, a new Warrant of like tenor and
representing an equivalent right of interest, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
an indemnity reasonably satisfactory to the Company.
7. Governing Law. This Warrant shall be governed by and construed
in accordance with the internal laws of the State of California.
8. No Rights as Stockholder. This Warrant shall not entitle the
Holder to any of the rights of a Stockholder of the Company, including without
limitation the right to vote or attend or receive any notice of meetings of
stockholders or any other proceedings of the Company.
<PAGE> 5
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and delivered by its duly authorized officer as of the 22nd day of
July, 1996.
I-FLOW CORPORATION
2532 White Road
Irvine, California 92714
By: /s/ DONALD M. EARHART
------------------------------
Donald M. Earhart
Chairman, CEO and President
<PAGE> 6
SUBSCRIPTION AGREEMENT
The undersigned holder of the Warant to which this Subscription
Agreement is attached as Annex I hereby (i) subscribes for ____________________
Warrant Shares (as defined in the Warrant) which the undersigned is entitled to
purchase pursuant to the terms of such Warrant, and (ii) directs that the
certificates evidencing such shares of Common Stock be issued and delivered to
______________________________________. Full payment of the Exercise Price (as
defined in the Warrant) accompanies delivery of this Subscription Agreement.
Date: --------------------------------------
----------------------------- Signature
--------------------------------------
Type or Print Name
--------------------------------------
Street Address
--------------------------------------
City, State Zip Code
ANNEX I
TO
WARRANT
<PAGE> 1
EXHIBIT 4.7
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
-----------------------------------------
WARRANT TO PURCHASE STOCK
WARRANT TO PURCHASE 60,000 ISSUE DATE: JULY 18, 1996
SHARES OF THE COMMON EXPIRATION DATE: JULY 18, 2001
STOCK OF I-FLOW CORPORATION INITIAL EXERCISE PRICE: $5.00 PER SHARE
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other
good and valuable consideration, SILICON VALLEY BANK ("Holder") is entitled to
purchase the number of fully paid and non-assessable shares of the class of
securities (the "Shares") of the corporation (the "Company") at the initial
exercise price per Share (the "Warrant Price") all as set forth above and as
adjusted pursuant to Article 2 of this Warrant, subject to the provisions and
upon the terms and conditions set forth in this Warrant.
ARTICLE 1. EXERCISE.
1.1 METHOD OF EXERCISE. Holder may exercise this Warrant by
delivering a duly executed Notice of Exercise in substantially the form
attached as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as
specified in Section 1.1, Holder may from time to time convert this Warrant, in
whole or in part, into a number of Shares determined by dividing (a) the
aggregate fair market value of the Shares or other securities otherwise issuable
upon exercise of this Warrant minus the aggregate Warrant Price of such Shares
by (b) the fair market value of one Share. The fair market value of the Shares
shall be determined pursuant Section 1.4.
1.3
1.4 FAIR MARKET VALUE. If the Shares are traded in a public
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not traded in a public
market, the Board of Directors of the Company shall determine fair market value
in its reasonable good faith judgment. The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a
reputable investment banking firm to undertake such valuation. If the valuation
of such investment banking firm is greater than that determined by the Board of
Directors, then all fees and expenses of such investment banking firm shall be
paid by the Company. In all other circumstances, such fees and expenses shall
be paid by Holder.
1.5 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant,
a new warrant of like tenor.
1.7 REPURCHASE ON SALE, MERGER OR CONSOLIDATION OF THE COMPANY.
1.7.1 "ACQUISITION". For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of
the assets of the Company, or any reorganization, consolidation, or merger of
the Company where the holders of the Company's securities before the
transaction beneficially own less than 50% of the outstanding voting securities
of the surviving entity after the transaction.
1.7.2. ASSUMPTION OF WARRANT. If upon the closing of any Acquisition
the successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
-1-
<PAGE> 2
WARRANT TO PURCHASE STOCK
- -------------------------------------------------------------------------------
1.7.3. NONASSUMPTION. If upon the closing of any Acquisition the
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
1.74. [DELETED]
ARTICLE 2. ADJUSTMENTS TO THE SHARES
2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares
are combined or consolidated, by reclassification or otherwise, into a lesser
number of shares, the Warrant Price shall be proportionately increased*.
* and the number of shares shall be proportionately decreased.
2.4 ADJUSTMENTS FOR DILUTING ISSUANCES. The Warrant Price and the
number of Shares issuable upon exercise of this Warrant or, if the Shares are
Preferred Stock, the number of shares of common stock issuable upon conversion
of the Shares, shall be subject to adjustment, from time to time in the manner
set forth on Exhibit A in the event of Diluting Issuances (as defined on Exhibit
A).
2.5 NO IMPAIRMENT. The Company shall not, by amendment of its
Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder's rights under this Article against impairment. If the Company
takes any action affecting the Shares or its common stock other than as
described above that adversely affects Holder's rights under this Warrant, the
Warrant Price shall be adjusted downward and the number of Shares issuable upon
exercise of this Warrant shall be adjusted upward in such a manner that the
aggregate Warrant Price of this Warrant is unchanged.
2.6 FRACTIONAL SHARES. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the fractional interest by the fair market value of a full Share.
2.7 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is based.
The Company shall, upon written request, furnish Holder a certificate setting
forth the Warrant Price in effect upon the date hereof and the series of
adjustments leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents
and warrants to the Holder as follows:
<PAGE> 3
(a) [DELETED]
(b) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time
(a) to declare any dividend or distribution upon its common stock, whether in
cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (c) to effect any reclassification or recapitalization of common
stock; (d) to merge or consolidate with or into any other corporation, or sell,
lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (e) offer holders of registration rights the
opportunity to participate in an underwritten public offering of the company's
securities for cash, then, in connection with each such event, the Company shall
give Holder (1) at least 20 days prior written notice of the date on which a
record will be taken for such dividend, distribution, or subscription rights
(and specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 INFORMATION RIGHTS. So long as the Holder holds this Warrant
and/or any of the Shares, the Company shall deliver to the Holder (a) promptly
after mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
3.4 REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED. The
Company agrees that the Shares or, if the Shares are convertible into common
stock of the Company, such common stock, shall be subject to the registration
rights set forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS.
4.1 TERM: NOTICE OF EXPIRATION. This Warrant is exercisable, in
whole or in part, at any time and from time to time on or before the Expiration
Date set forth above. The Company shall give Holder written notice of Holder's
right to exercise this Warrant in the form attached as Appendix 2 not more than
90 days and not less than 30 days before the Expiration Date. If the notice is
not so given, the Expiration Date shall automatically be extended until 30 days
after the date the Company delivers the notice to Holder.
4.2 LEGENDS. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon a conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and
the Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, if reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holders notice of
proposed sale.
4.4 TRANSFER PROCEDURE. Subject to the provisions of Section 4.2,
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder if applicable).
Unless the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
<PAGE> 4
4.5 NOTICES. All notices and other communications from the Company
to the Holder, or vice versa, shall be deemed delivered and effective when
given personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 WAIVER. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or
termination is sought.
4.7 ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 GOVERNING LAW. This Warrant shall be governed by and construed
in accordance with the laws of the State of California, without giving effect
to its principles regarding conflicts of law.
I-FLOW CORPORATION
By /s/
--------------------------------
Chairman of the Board, President
or Vice President
By /s/
--------------------------------
Ass't Secretary
<PAGE> 5
WARRANT TO PURCHASE STOCK
- -------------------------------------------------------------------------------
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase __________ shares of the
Common/Series _____ Preferred [strike one] Stock of __________ pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to __________ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
------------------------------------
(NAME)
------------------------------------
------------------------------------
(ADDRESS)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
- ------------------------------------
(Signature)
- ------------------------------------
(Date)
APPENDIX 2
NOTICE THAT WARRANT IS ABOUT TO EXPIRE
-----------, ----
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Dear ______________:
This is to advise you that the Warrant issued to you described below
will expire on ___________________, 19__.
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your only
notice of pending expiration.
(Name of Issuer)
By
---------------------------------
Its
---------------------------------
<PAGE> 6
Warrant to Purchase Stock
- -------------------------------------------------------------------------------
EXHIBIT A
ANTI-DILUTION PROVISIONS
In the event of the issuance (a "Diluting Issuance") by the Company,
after the Issue Date of the Warrant, of securities at a price per share less
than the Warrant Price, the price and the number of Shares issuable upon
exercise of the Warrant, shall be adjusted as a result of Diluting Issuances in
accordance with the Holder's standard form of Anti-Dilution Agreement in effect
on the Issue Date.
Subject to sections 5 and 6 of the Warrant, under no circumstances
shall the aggregate Warrant Price payable by the Holder upon exercise of the
Warrant increase as a result of any adjustment arising from a Diluting Issuance.
EXHIBIT B
REGISTRATION RIGHTS
The Company and the Holder shall enter into Holder's standard form of
Registration Rights Agreement as in effect on the Issue Date of the Warrant.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
I-Flow Corporation on Form S-3 of our report dated January 26, 1996, except for
Note 11 which the date is March 7, 1996, appearing in and incorporated by
reference in the Annual Report on Form 10-K of I-Flow Corporation for the year
ended December 31, 1995, and to the reference to us under the heading "Experts"
in the Prospectus, which is part of this Registration Statement.
Deloitte & Touche LLP
Costa Mesa, California
February 7, 1997
<PAGE> 2
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
I-Flow Corporation on Form S-3 of our report dated June 25, 1996, except for
Note 7, as to which the date is July 3, 1996 (relating to the financial
statements of Block Medical, Inc.), appearing in and incorporated by reference
in the Current Report on Form 8-K of I-Flow Corporation dated July 22, 1996,
and to the reference to us under the heading "Experts" in the Prospectus, which
is part of this Registration Statement.
Deloitte & Touche LLP
Costa Mesa, California
February 7, 1997
