Exhibit 8.5
[GRAPHIC OMITTED]
[H(3)GM LETTERHEAD]
May ____, 2000
Total eMed, Inc.
5301 Virginia Way, Suite 250
Brentwood, TN 37027
Re: MERGER OF AQ MERGER CORP. WITH AND INTO TOTAL EMED, INC.
Dear Ladies/Gentlemen:
We have acted as tax counsel to Total eMed, Inc., a Delaware corporation
("Total eMed"), in connection with the transactions contemplated by that certain
Agreement of Reorganization and Merger dated as of February 21, 2000 (the
"Agreement") by and among MedicaLogic, Inc., an Oregon corporation ("MDLI"), its
wholly-owned subsidiary, AQ Merger Corp., a Delaware corporation ("Merger
Corp."), and Total eMed. Pursuant to the Agreement, Merger Corp. will merge with
and into Total eMed and Total eMed will become a wholly-owned subsidiary of MDLI
(the "Merger").
In connection with the Merger, you have asked us to render an opinion that
the reorganization described in the Agreement will qualify as a tax-free
reorganization pursuant to section 368 of the Internal Revenue Code of 1986, as
amended to the date of this letter (the "Code"). In response to your request,
our opinion is set forth below.
Except as otherwise provided in this letter, capitalized terms referred to
herein have the meanings set forth in the Agreement. All section references,
unless otherwise indicated, are to the Code.
For the purpose of rendering this opinion, we have examined and are relying
upon (without any independent investigation or review thereof) the truth and
accuracy, at all relevant times, of the statements, covenants, representations
and warranties contained in the following documents:
1. The Agreement (including Exhibits thereto);
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2. Representations made to us by MDLI and Merger Corp.;
3. Representations made to us by Total eMed;
4. Representations made to us in Continuity of Interest Certificates
by certain shareholders of Total eMed;
5. The Joint Proxy Statement and Form S-4 filed by MDLI with the
Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934, as amended; and
6. Such other instruments and documents relating to the formation,
organization and operation of MDLI, Merger Corp. and Total eMed or to the
consummation of the Merger and the transactions contemplated in the
Agreement as we have deemed necessary or appropriate.
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon, without any independent investigation
or review thereof) that:
1. Original documents (including signatures) are authentic;
documents submitted to us as copies conform to the original documents; and
there has been (or will be by the Effective Time of the Merger) due
execution and delivery of all documents where due execution and delivery
are prerequisites to effectiveness thereof.
2. The transactions contemplated by the Agreement and the Form S-4
will be consummated as described therein.
3. Total eMed, MDLI and Merger Corp. have the legal right and power
under all applicable laws and regulations to enter into, execute and
consummate the transactions contemplated by and described in the Agreement
and the Form S-4.
4. The continuity of interest requirement as specified in U.S.
Treasury Regulations Section 1.368-1(e) and as interpreted in certain
Internal Revenue Service rulings and federal judicial decisions will be
satisfied.
5. After the Merger, Total eMed will hold "substantially all" of the
properties held prior to the Merger by it and Merger Corp. within the
meaning of Section 368(a)(2)(E)(i) of the Code and the Treasury Regulations
promulgated thereunder.
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May ____, 2000
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6. To the extent any expenses relating to the Merger (or the "plan
of reorganization" within the meaning of Treasury Regulations Sections
1.368-1(c) and 1.368- 2(g) with respect to the Merger) are funded directly
or indirectly by a party other than the incurring party, such expenses will
be within the guidelines established in Revenue Ruling 73-54, 1973-1 C.B.
187.
7. No outstanding indebtedness of Total eMed, MDLI or Merger Corp.
has or will represent equity for tax purposes; no outstanding equity of
Total eMed, MDLI or Merger Corp. has represented or will represent
indebtedness for tax purposes; no outstanding security, instrument,
agreement or arrangement (other than Total eMed common or preferred stock)
that provided for or contains a right to acquire Total eMed common or
preferred stock or to share in the appreciation of Total eMed common or
preferred stock will represent outstanding equity of Total eMed for
purposes of Section 368(c) of the Code.
8. Any representation or statement made "to the best of knowledge"
or similarly qualified is correct without such qualification.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that, for federal income tax purposes, the Merger will constitute
a "reorganization" as defined in Section 368(a) of the Code.
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below.
1. This opinion is rendered as of the date of this letter and
represents, and is based upon our best judgment, regarding the application
of federal income tax laws arising under the Code, existing judicial
decisions, administrative regulations and published rulings and procedures.
Our opinion is not binding upon the Internal Revenue Service or the courts,
and the Internal Revenue Service is not precluded from successfully
asserting a contrary position. Furthermore, no assurance can be given that
future legislative, judicial or administrative changes, on either a
prospective or retroactive basis, would not adversely affect the accuracy
of the conclusions stated herein. Nevertheless, we undertake no
responsibility to advise you of any new developments in the application or
interpretation of the federal income tax laws.
2. This opinion addresses only the specific tax opinion set forth
above, and does not address any other federal, state, local or foreign tax
consequences that may result from the Merger or any other transaction
(including any transaction undertaken in connection with
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the Merger). In particular, without limitation, we express no opinion
regarding (i) whether, and the extent to which, any Total eMed shareholder
who has provided or will provide services to Total eMed, MDLI or Merger
Corp. will have compensation income under any provision of the Code; (ii)
the effects of any such compensation income, including but not limited to,
the effect upon the basis and holding period of the MDLI common stock
received by any such shareholder in the Merger; (iii) the potential
application of the "golden parachute" provisions (Sections 280G, 3121(v)(2)
and 4999) of the Code, the alternative minimum tax provisions (Sections 55,
56, and 57) of the Code and Sections 108, 305, 306, 357 and 424 of the
Code, or the Treasury Regulations promulgated thereunder; (iv) the tax
consequences of the Merger to MDLI, Merger Corp. or Total eMed, including
without limitation, the recognition of any gain and the survival and/or
availability, after the Merger, of any of the federal income tax attributes
or elections of Total eMed, after application of any provision of the Code,
as well as the Treasury Regulations promulgated thereunder and judicial
interpretations thereof; (v) the basis of any equity interest in Total eMed
acquired by MDLI in the Merger; (vi) the tax consequences of any
transaction in which Total eMed stock or a right to acquire Total eMed
stock was received; and (vii) the tax consequences of the Merger (including
the opinion set forth above) as applied to specific stockholders of Total
eMed and/or holders of options or warrants for Total eMed stock, including
but not limited to, dealers in securities, corporate shareholders subject
to the alternative minimum tax, foreign persons, and holders of shares
acquired upon exercise of stock options or in other compensatory
transactions, including without limitation the tax consequences to the
holders of options for Total eMed stock of MDLI's assumption of such
outstanding options.
3. No opinion is expressed as to any transaction other than the
Merger as described in the Agreement or to any transaction whatsoever,
including the Merger, if all the transactions described in the Agreement
are not consummated in accordance with the terms of such Agreement and
without waiver or breach of any material provision thereof or if all of the
representations, warranties, statements and assumptions upon which we have
relied are not true and accurate at all relevant times. In the event any
one of the statements, representations, warranties, or assumptions upon
which we have relied to issue this opinion is incorrect, our opinion might
be adversely affected and may not be relied upon.
Total eMed, Inc.
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4. This opinion is intended solely for the purpose of satisfying the
request of Total eMed, and accordingly, may not be relied upon for any
other purpose or by any other person or entity, and may not be made
available to any other person or entity without our prior written consent.
Sincerely,
HARWELL HOWARD HYNE GABBERT
& MANNER, P.C.