A Medical Device Daily

I-Flow (Lake Forest, California) reported that it has entered into a memorandum of intent (MOI) with HAPC (New York) to amend the purchase price for I-Flow’s sale of its subsidiary, InfuSystem (Madison Heights, Michigan), which provides external ambulatory infusion pump services to doctors and their patients to HAPC.

HAPC also reported that its shareholder meeting to vote on the transaction is scheduled for Sept. 26.

The original purchase price was $140 million, subject to certain working capital adjustments as set forth in the stock purchase agreement dated as of Sept. 29, 2006, as amended to date. The original $140 million purchase price was to be paid in cash or a combination of a secured promissory note payable to I-Flow in an amount equal to $55 million plus the amount actually paid to HAPC’s shareholders who exercise their conversion rights, but not to exceed $75 million and (ii) an amount of cash equal to $65 million plus the difference between the maximum amount and the actual principal amount of the promissory note.

The MOI contemplates the new purchase price will be $100 million (subject to the existing working capital adjustments in the stock purchase agreement), plus a contingent payment right up to a maximum of $12 million.

The $100 million portion of the amended purchase price would be payable at closing in cash or a combination of (i) an amount of cash equal to $85 million less the amount actually paid to HAPC’s shareholders who exercise their conversion rights and (ii) a secured promissory note with a principal amount equal to $15 million plus the HAPC shareholder return amount.

The earn-out would provide that HAPC will make an additional cash payment to I-Flow of up to $12 million based on HAPC’s audited consolidated net revenues for its fiscal year ended Dec. 31, 2010. If HAPC’s consolidated revenues for FY 2010 are less than 2.744 times InfuSystem’s 2007 net revenues, excluding InfuSystem’s ON-Q®-related revenues, no additional payment will be due. If HAPC’s consolidated revenues for FY 2010 equal or exceed 3.375 times InfuSystem’s 2007 net revenues, excluding ON-Q-related revenues, I-Flow will receive the full $12 million additional payment. If HAPC’s consolidated net revenues for FY 2010 are between the 40% and 50% CAGR Targets, I-Flow will receive an additional payment equal to $3 million plus a pro rata portion of the remaining $9 million.

“The contemplated reduction in the sale price reflects the realities of today’s economic environment and the marketplace,” said Donald Earhart, I-Flow’s CEO/chairman. “Nonetheless, we believe the closing of this transaction will provide exceptional value to our shareholders while enabling us to concentrate our efforts on our proprietary ON-Q franchise.”

HAPC originally reported last October that it had entered into a definitive agreement to acquire InfuSystem (Medical Device Daily, Oct. 3, 2006). Since then, the deal has been extended several times.

I-Flow develops drug delivery systems.

HAPC is a blank check company formed for the purpose of acquiring one or more operating businesses in the healthcare industry.