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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(Amendment No. 9)
Under the Securities Exchange Act of 1934
COMNET Corporation
(Name of Issuer)
Common Stock, par value $.50
(Title of Class of Securities)
205255201
(CUSIP Number)
<TABLE>
<S> <C>
Kenneth C. Frazier Merck & Co., Inc.
Vice President, Public Affairs and Assistant General Counsel One Merck Drive
908-423-1000 Whitehouse Station, NJ 08889
(Name, Address and Telephone Number of Person Authorized to Receive Notes and Communications)
</TABLE>
September 25, 1998
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
/ /.
PAGE 1 OF PAGES
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CUSIP NO. 205255201 13D Page 2 of Pages
1 NAMES OF REPORTING PERSONS: MERCK-MEDCO MANAGED CARE, L.L.C.
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY): 22-3461740
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware
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NUMBER OF 7 SOLE VOTING POWER: 513,345 COMMON; 100,000 PREFERRED
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SHARES
BENEFICIALLY 8 SHARED VOTING POWER: --
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OWNED BY EACH
REPORTING 9 SOLE DISPOSITIVE POWER: 513,345 COMMON; 100,000 PREFERRED
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PERSON WITH
10 SHARED DISPOSITIVE POWER: --
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 513,345 COMMON
100,000 PREFERRED
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / /
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 15.58%; 67.6%
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14 TYPE OF REPORTING PERSON: CO.
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ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
In the period from September 14, 1998 through September 18, 1998, a
subsidiary of Merck-Medco Managed Care, L.L.C. ("Medco") sold the following
shares of COMNET Corporation ("Comnet") in open-market transactions:
<TABLE>
<CAPTION>
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DATE SHARES SOLD PRICE PER SHARE TOTAL
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<S> <C> <C> <C>
09-14-98 1,200 $7.71875 $ 9,262.50
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09-15-98 1,500 $7.71875 $ 11,578.13
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09-16-98 7,300 $7.20080 $ 52,565.84
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09-18-98 20,000 $7.19840 $ 143,968.00
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</TABLE>
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER
Medco and a subsidiary of Medco today entered into an Agreement for
Purchase and Sale of Securities (the "Purchase Agreement"), dated
September 25, 1998, with Comnet pursuant to which Comnet has agreed to purchase
from Medco's subsidiaries (i) 513,345 shares of Common Stock, and (ii) 100,000
shares of Preferred Stock of Comnet for a purchase price of $6.75 per share of
Common Stock and Preferred Stock for an aggregate purchase price of
$4,140,078.75. These shares represent all of the shares of Common Stock and
Preferred Stock of Comnet owned by Medco and its subsidiaries. Under the
Purchase Agreement, Comnet is required to pay the purchase price for the shares
on October 1, 1998.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Agreement for Purchase and Sale of Securities, by and among
Merck-Medco Managed Care, L.L.C., MCCO Corp. and COMNET Corporation, dated
September 25, 1998.
PAGE 3 OF PAGES
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SIGNATURE
After reasonable inquiry, and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
Date: September 25, 1998
MERCK & CO., INC.
By: /s/ Kenneth C. Frazier
Kenneth C. Frazier
Vice President, Public Affairs and
Assistant General Counsel
PAGE 4 OF PAGES
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EXHIBIT INDEX
Agreement for Purchase and Sale of Securities, by and among
Merck-Medco Managed Care, LLC, MCCO Corp. and COMNET Corporation, dated
September 25, 1998.
PAGE 5 OF PAGES
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AGREEMENT FOR PURCHASE AND SALE OF SECURITIES
THIS AGREEMENT FOR PURCHASE AND SALE OF SECURITIES (the "Agreement")
is made and entered into this 25th day of September, 1998, by and between
Merck-Medco Managed Care, L.L.C., a Delaware limited liability corporation, and
the subsidiaries or affiliates of it identified in the execution block of this
Agreement (collectively "Medco" or "Sellers") which entities, together, own
513,345 shares of the Common Stock and 100,000 shares of the Preferred Stock (as
defined below), and COMNET Corporation, a Delaware corporation ("COMNET" or
"Buyer"), regarding the acquisition by Buyer of all of the Common Stock and all
of the Preferred Stock from Medco, and the other transactions described below.
WHEREAS, Sellers are the sole and exclusive beneficial owners of an
aggregate of One Hundred Thousand (100,000) shares of 6% Convertible Preferred
Stock ($.01 par value) issued by COMNET (the "Preferred Stock") and Five Hundred
and Thirteen Thousand Three Hundred and Forty-five (513,345) shares of Common
Stock ($.50 par value) issued by COMNET (the "Common Stock"); and
WHEREAS, Sellers wish to sell all of the aforesaid shares of
Preferred Stock and all of the aforesaid shares of Common Stock in accordance
with the terms and conditions set out herein; and
WHEREAS, COMNET wishes to purchase all of the aforesaid shares of
Preferred Stock and Common Stock, with all such purchases to be made in
accordance with the terms and conditions set out herein.
NOW THEREFORE, in consideration of the premises and the mutual
promises, representations, warranties and covenants hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Sellers and COMNET intending to be legally bound hereby
agree as follows.
1. Purchase of the Preferred Stock and Common Stock. Sellers hereby
agree to sell, transfer and deliver to COMNET at Closing (defined
below) all of Sellers' right, title and interest in all of the
aforesaid shares of Preferred Stock and all of the aforesaid shares
of Common Stock, free and clear of any and all claims, liens,
encumbrances, security interests, pledges or any other clouds on
title of any nature whatsoever. COMNET hereby agrees to purchase from
Sellers at Closing the aforesaid 100,000 shares of Preferred Stock
and the aforesaid 513,345 shares of Common Stock.
2. Purchase Price; Closing. As the total purchase price for all of the
aforesaid shares of Preferred Stock, all of the aforesaid shares of
Common Stock and in consideration of the other transactions to be
consummated hereunder, COMNET agrees to pay Medco the following at
Closing:
a) Six Hundred and Seventy-five Thousand Dollars
($675,000.00) for all of the aforesaid shares of Preferred
Stock; plus
b) Three Million Four Hundred and Sixty-five Thousand
Seventy-eight Dollars and Seventy-five Cents
($3,465,078.75) for all of the aforesaid shares of Common
Stock.
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c) Payment to be made pursuant to Sections 2(a) and (b),
above, shall be made by federal wire transfer in
accordance with written instructions provided by Medco.
Payment in full shall be made at Closing -- October 1,
1998.
d) At Closing, Sellers shall deliver to COMNET the
certificates evidencing their ownership of all of the
aforesaid shares of Common Stock and Preferred Stock.
3. Financial Condition. COMNET hereby represents and warrants to Medco
that it has sufficient financial capacity to make at Closing the
payment to Sellers required under Section 2.
4. Disclosures by COMNET.
a) In connection with the sale to COMNET by Medco of COMNET
stock, COMNET hereby discloses to Medco the information
set out in Exhibit 3.1, hereto. Such disclosure includes
all of the material, non-public information regarding
business opportunities, contingent liabilities and the
general financial condition of COMNET and Group 1,
COMNET's 81%, publicly-held subsidiary.
b) All of the disclosed information set out in Exhibit 3.1 is
provided to Medco solely in connection with Medco's sale
to COMNET of the aforesaid Common and Preferred Stock.
c) Because the securities issued by COMNET and Group 1 are
traded on Nasdaq, National Market System, Medco hereby
agrees that use or dissemination by it of non-public,
material information about COMNET or Group 1 in connection
with any purchase or sale of securities of COMNET or Group
1 (except for sales to COMNET) could violate federal
securities laws. Accordingly, Medco hereby agrees that all
of the information set out in Exhibit 3.1, hereto, shall
be maintained by Medco in strict confidence and that any
disclosure of any of this information by Medco to anyone
else shall be done only upon the prior written consent of
the General Counsel of COMNET or his express designee.
Medco further agrees that until the information set out in
Exhibit 3.1, hereto, is made public, Medco may not
participate in any sale or purchase of any security issued
by COMNET or Group 1 (except for sales to COMNET) without
the express written consent of the General Counsel of
COMNET or Group 1, respectively, or his express designee.
d) Medco agrees that it has read and understands the
information set out in Exhibit 3.1, hereto, that the
identities of any third parties referenced therein but not
identified therein has been separately disclosed to them
and that it has been given any further information it has
requested regarding the matters disclosed therein.
e) Medco agrees that it has read the public information
provided by COMNET (including the Form 10-K Annual Reports
for COMNET's fiscal years ended March 31, 1998, 1997 and
1996, Form 10-Q Quarterly Report for the Quarter
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8
Ended June 30, 1998 and the Joint Proxy/Registration
Statement of COMNET and Group 1 dated August 6, 1998) and
such other information disclosed by COMNET to Medco in
connection with this transaction, it understands the
information set out in such reports and disclosures.
f) Sellers agree that COMNET has answered all inquiries that
it has made concerning COMNET, its business and financial
condition or any other matter relating to the operation of
COMNET and the offer and sale of Common Stock and
Preferred Stock hereunder. No oral or written statement or
inducement that is contrary to the information disclosed
to Sellers has been made by or on behalf of COMNET.
5. Medco's Authority, Status and Other Representations and Warranties.
a) Sellers, jointly and severally, warrant and represent to
Buyer that all of the aforesaid shares of the Common Stock
and Preferred Stock are owned beneficially and of record
solely and exclusively by Sellers; that there are no
options, warrants, rights, liens, encumbrances,
commitments or other clouds on title with respect to any
of the shares of the aforesaid shares of Common Stock or
Preferred Stock.
b) Sellers, jointly and severally, represent and warrant to
Buyer that each of Sellers is a corporation in good
standing under the laws of the State of Delaware. Sellers,
jointly and severally, each warrant and represent to Buyer
that at all times material hereto, each Seller has had and
shall have the capacity and authority to execute and
deliver this Agreement, to perform hereunder, and to
consummate the transactions contemplated hereby without
the necessity of any act or consent of any other person
whomsoever; that the execution, delivery and performance
by each under this Agreement and each and every agreement,
document and instrument applicable to it, made in
connection herewith shall be duly authorized and approved
by the necessary corporate authority; that this Agreement
and each and every agreement, document and instrument to
be executed, delivered and performed by Sellers in
connection herewith, will, when executed and delivered,
constitute the valid and legally binding respective
obligations of Sellers, except as enforceability may be
limited by applicable equitable principles or judicial
discretion, or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally.
c) Sellers, jointly and severally, represent and warrant to
Buyer that there are no authorizations, consents,
approvals, licenses, exemptions from or filings with, or
registrations with any governmental, quasi-governmental or
non-governmental regulatory agency or authority, necessary
on its part for, or in connection with, the transactions
contemplated hereunder, except for SEC Form 5 and an
amendment to SEC Form 13(d) that shall be filed by Medco
in connection with the sale of the aforesaid shares of
Common and Preferred Stock.
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d) Sellers, jointly and severally, represent and warrant to
Buyer that the execution and delivery of this Agreement by
each does not, and the consummation of the transactions
contemplated hereby will not, violate any provisions of
the Certificate of Incorporation, as amended, or Bylaws,
as amended, of any Seller.
e) Sellers, jointly and severally, represent and warrant to
Buyer, that there is no action, proceeding, investigation,
regulation or legislation instituted, threatened or
proposed before any court, governmental agency or
legislative body to enjoin, restrain, prohibit, or obtain
substantial damages in respect of, or related to, or
arising out of, this Agreement or the consummation of the
transactions contemplated hereby, which action,
proceeding, investigation, regulation or legislation, in
the reasonable judgment of Sellers would make it
inadvisable to consummate such transactions.
f) Sellers, jointly and severally, represent and warrant to
Buyer that Sellers' entry into and performance under this
Agreement shall not result in any violation of any
statute, law, ordinance, regulation, rule, judgment,
decree or order of any governmental agency to which any of
Sellers is subject.
g) Sellers, jointly and severally, represent and warrant to
Buyer that Sellers' entry into and performance under this
Agreement shall not result in any default, breach or other
violation of any loan or credit agreement, note, bond,
mortgage, indenture or other agreement, permit,
concession, contact or other instrument to which Sellers
are subject.
6. COMNET's Authority and Status.
a) COMNET represents and warrants to Sellers that it is a
corporation in good standing under the laws of the State
of Delaware and it has the capacity and authority to
execute and deliver this Agreement, to perform hereunder
and to consummate the transactions contemplated hereby
without the necessity of any act or consent of any other
person whomsoever. The execution, delivery and performance
by COMNET of this Agreement and each and every agreement,
document and instrument provided for herein have been duly
authorized and approved by its Board of Directors. This
Agreement, and each and every other agreement, document
and instrument to be executed, delivered and performed by
COMNET in connection herewith, constitutes or will, when
executed and delivered, constitute the valid and legally
binding obligation of COMNET, enforceable against COMNET
in accordance with their respective terms, except as
enforceability may be limited by applicable equitable
principles or judicial discretion, or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws
from time to time in effect affecting the enforcement of
creditors' rights generally.
b) COMNET represents and warrants to Sellers that the
execution and delivery of this Agreement by it does not,
and the consummation of the transactions
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10
contemplated hereby will not, violate any provisions of
the Certificate of Incorporation, as amended, or Bylaws,
as amended, of COMNET.
c) COMNET represents and warrants to Sellers that there is no
action, proceeding, investigation, regulation or
legislation instituted, threatened or proposed before any
court, governmental agency or legislative body to enjoin,
restrain, prohibit, or obtain substantial damages in
respect of, or related to, or arising out of, this
Agreement or the consummation of the transactions
contemplated hereby, which action, proceeding,
investigation, regulation or legislation, in the
reasonable judgment of COMNET would make it inadvisable to
consummate such transactions.
d) COMNET represents and warrants to Sellers that COMNET's
entry into and performance under this Agreement shall not
result in any violation of any statute, law, ordinance,
regulation, rule judgment, decree or order of any
governmental agency to which COMNET is subject.
e) COMNET represents and warrants to Sellers that COMNET's
entry into and performance under this Agreement shall not
result in any default, breach or other violation of any
loan or credit agreement, note, bond, mortgage, indenture
or other agreement, permit, concession, contact or other
instrument to which COMNET is or may be subject.
f) Buyer represents and warrants to Seller that there are no
authorizations, consents, approvals, licenses, exemptions
from or filings with, or registrations with any
governmental, quasi-governmental or non-governmental
regulatory agency or authority, necessary on its part for,
or in connection with, the transactions contemplated
hereunder.
7. Further Representations. COMNET hereby represents and warrants to
Medco that COMNET knows of no claim, demand or cause of action that
has been made, or to COMNET's best knowledge (after diligent inquiry)
may be made, by COMNET against Medco or any of the Sellers with
respect to Sellers' ownership of the Common Stock or the Preferred
Stock. Sellers hereby represent and warrant to COMNET that Sellers
know of no claim, demand or cause of action that has been made, or to
Sellers' best knowledge (after diligent inquiry) may be made, by
Sellers against COMNET with respect to Sellers' ownership of the
Common Stock or the Preferred Stock.
8. Mutual Indemnification.
a) Medco and COMNET each agrees to indemnify, defend and hold
harmless the other and their respective current and past
officers, directors, employees, agents and representatives
from all losses, damages, liabilities, costs (including
reasonable attorneys' and experts' fees) and expenses
(collectively, the "Losses") incurred by the party being
indemnified arising out of any material breach of any
representation, warrantee, covenant or agreement, made by
the indemnifying party in this Agreement.
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11
b) The indemnified party shall have the right to approve the
selection of any counsel selected by the indemnifying
party to defend hereunder, which approval shall not be
unreasonably conditioned, delayed or denied. The
indemnifying party shall not enter into any settlement
with respect to the matters indemnified hereunder which
may adversely affect any interest of the indemnified party
without first obtaining the written consent of the
indemnified party, which consent shall not be unreasonably
conditioned, delayed or denied. The indemnifying party
agrees to reimburse the indemnified party promptly for all
such Losses as they are incurred by the indemnified party;
provided, however, that with respect to any expenses
reimbursed to the indemnified party in advance of the
final disposition of any such proceeding covered by this
indemnification, the indemnified party shall have
delivered to the indemnifying party an undertaking to
repay to the indemnifying party the amounts so advanced if
it shall ultimately be determined that the indemnified
party is not entitled to be indemnified hereunder.
9. Payment of Fees and Expenses. Medco and COMNET each agrees that
regardless of whether the transactions contemplated hereunder close,
to pay its own fees and expenses, including the fees and expenses of
its respective counsel, accountants, brokers, advisors, employees and
other agents, if any, incurred in connection with the transactions
contemplated here, unless expressly agreed to otherwise in the
Agreement.
10. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand or
mailed by registered or certified mail, return receipt requested,
first class postage prepaid, addressed or telefax as follows:
a) If to Medco:
100 Summit Avenue
Montvale, NJ 07645
Attn.: Senior Vice President and General Counsel
Telefax: 201-358-5773
If to COMNET:
4200 Parliament Place
Suite 600
Lanham, MD 20706-1488
Attn.: Mark D. Funston
Chief Financial Officer
Telefax: (301) 918-0430
b) If delivered personally or by telefax, the date on which a
notice, request, instruction or document is delivered
shall be the date on which such delivery is
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made and, if delivered by mail, the date on which such
notice, request, instruction or document is received shall
be the date of delivery.
c) Any party hereto may change its address specified for
notices herein by designating a new address by notice in
accordance with this Section 10.
11. Brokers. COMNET and Medco each represents and warrants to the others
that no broker or finder has acted for it or any entity controlling,
controlled by or under common control with it in connection with the
transactions described in this Agreement.
12. Further Assurances. COMNET and Medco each covenants to the others
that at no additional expense to the others, at any time, and from
time to time each shall execute and deliver (or cause to be so done)
such additional instruments and take such actions as may be
reasonably requested by the other(s) to confirm or perfect or
otherwise to carry out the intent and purposes of this Agreement.
13. No Third Party Beneficiaries. Nothing contained herein shall be
construed to afford any rights or benefits to any person or entity
other than Medco or COMNET. Any implication of rights granted to any
third party is hereby expressly disclaimed.
14. Miscellaneous.
a) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective and
permitted successors and assigns. No delegation, transfer
or assignment of any rights or obligations under this
Agreement is permitted and any attempted transfer or
assignment shall be void, except as follows in this
Section 14(a). The rights, title, responsibilities,
interests and remedies hereunder of COMNET and Medco are
freely assignable by them to any entity which purchases or
succeeds to all or substantially all of the assets or
capital stock of such entity either through asset
acquisition, stock sale or merger (wherein the party
hereto is not the surviving entity).
b) The section and other headings in this Agreement are
inserted solely as a matter of convenience and for
reference, and are not a part of this Agreement.
c) This Agreement together with the documents executed
concurrently herewith constitute the entire agreement
among the parties hereto with respect to the transactions
contemplated hereby and supersedes and cancels any prior
agreements representations, warranties, or communications,
whether oral or written, among the parties hereto relating
to the transactions contemplated hereby.
d) This Agreement shall be governed by and enforced in
accordance with the laws of the State of Delaware,
principles of conflicts of law notwithstanding.
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13
e) Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder
may be waived by any other party to whom such compliance
is owed. No waiver of any provision of this Agreement
shall be deemed, or shall constitute, a waiver of any
other provision, whether or not similar, nor shall any
waiver constitute a continuing waiver. Neither this
Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only by an agreement
in writing signed by the party against whom or which the
enforcement of such change, waiver, discharge or
termination is sought.
f) This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
g) All pronouns used herein shall be deemed to refer to the
masculine, feminine or neuter gender as the context
requires. References herein to the plural shall include
the singular, or vice versa, as context requires.
h) In the event that any provision of this Agreement or any
word, phrase, clause, sentence or other portion thereof
shall be held to be unenforceable or invalid for any
reason, such provision or portion thereof shall be
modified or deleted in such a manner so as to effect the
agreement of the parties under this Agreement, as
modified, to the fullest extent permitted under law.
i) In the event any dispute arises under or related to any of
the provisions set out in this Agreement, the parties
hereto agree to submit any and all such disputes binding
arbitration pursuant to the then current Commercial Rules
of the American Arbitration Association and that the
decision by the AAA shall be binding upon them,
enforceable by any Court of competent jurisdiction.
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IN WITNESS WHEREOF, each party hereto has executed or caused this
Agreement to be executed on its behalf, all on the day and year first above
written.
Merck-Medco Managed Care, L.L.C,
a Delaware corporation (successor to
Containment Services, Inc.)
By: /s/ Bert I. Weinstein
----------------------------------------
Its: Senior Vice President and General Counsel
MCCO Corp., a Delaware corporation
By: /s/ Robert B. McGovern
----------------------------------------
Its: Vice President
COMNET Corporation, a Delaware
corporation
By: /s/ Robert Bowen
----------------------------------------
Its: President
