<PAGE>
EXHIBIT 2.1
EXECUTION COPY
MASTER SEPARATION AND DISTRIBUTION AGREEMENT
BETWEEN
MERCK & CO., INC.
AND
MEDCO HEALTH SOLUTIONS, INC.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I CERTAIN ACTIONS AT OR PRIOR TO
THE DISTRIBUTION DATE.................2
Section 1.1.
Treatment of
Intercompany Accounts..........................2
Section 1.2.
Charter and
Bylaws..........................................2
Section 1.3.
Documents to Be
Delivered By Merck and Medco................2
Section 1.4.
Documents
Delivered.........................................3
Section 1.5.
Transactions Prior to
the Distribution......................3
Section 1.6.
Conditions Precedent
to the Closing of the Notes
Offering....................................................4
ARTICLE II THE
DISTRIBUTION....................................................5
Section 2.1.
The
Distribution............................................5
Section 2.2.
Actions In Connection
with the Distribution.................6
Section 2.3.
Sole Discretion of
Merck....................................7
Section 2.4.
Conditions To
Distribution..................................7
Section 2.5.
Fractional
Shares...........................................9
ARTICLE III COVENANTS AND OTHER
MATTERS........................................9
Section 3.1.
Release of Merck from
Credit Support Arrangements...........9
Section 3.2.
Further Assurances and
Agreements..........................10
Section 3.3.
Further
Instruments........................................11
Section 3.4.
Agreement for Exchange
of Information......................11
Section 3.5.
Auditors and Audits;
Annual and Quarterly Statements
and Accounting.............................................13
Section 3.6.
Expenses...................................................15
Section 3.7.
Governmental
Approvals.....................................15
Section 3.8.
Patent
License.............................................15
Section 3.9.
Non-Competition............................................15
Section 3.10.
Use of Merck Name and Mark.................................16
ARTICLE IV
MISCELLANEOUS......................................................17
Section 4.1.
Entire
Agreement...........................................17
Section 4.2.
Governing
Law..............................................17
Section 4.3.
Termination................................................17
Section 4.4.
Notices....................................................17
Section 4.5.
Counterparts...............................................18
Section 4.6.
Binding Effect;
Assignment; Third-Party Beneficiaries......18
Section 4.7.
Severability...............................................18
Section 4.8.
Failure or Indulgence
Not Waiver; Remedies Cumulative......18
Section 4.9.
Amendment..................................................18
Section 4.10.
Authority..................................................19
Section 4.11.
Interpretation.............................................19
Section 4.12.
Conflicting Agreements.....................................19
Section 4.13.
Offset.....................................................19
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TABLE OF CONTENTS
Page
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Section 4.14.
DISPUTE RESOLUTION.........................................19
ARTICLE V
DEFINITIONS.........................................................20
Section 5.1.
Affiliate..................................................20
Section 5.2.
Ancillary
Agreements.......................................20
Section 5.3.
Business
Day...............................................20
Section 5.4.
Code.......................................................20
Section 5.5.
Commission.................................................20
Section 5.6.
Confidential
Disclosure Agreement..........................20
Section 5.7.
Consolidated
Period........................................20
Section 5.8.
Credit
Facility............................................20
Section 5.9.
Credit Support
Arrangements................................20
Section 5.10.
Credit Support Insurance Coverage..........................20
Section 5.11.
Distribution...............................................20
Section 5.12.
Distribution Agent.........................................20
Section 5.13.
Distribution Date..........................................20
Section 5.14.
Employee Matters Agreement.................................21
Section 5.15.
Equity Securities..........................................21
Section 5.16.
Exchange Act...............................................21
Section 5.17.
Existing Authority.........................................21
Section 5.18.
Governmental Approvals.....................................21
Section 5.19.
Governmental Authority.....................................21
Section 5.20.
Group......................................................21
Section 5.21.
Indemnification Agreement..................................21
Section 5.22.
Information................................................21
Section 5.23.
Information Statement......................................21
Section 5.24.
Intercompany Payment.......................................21
Section 5.25.
Law........................................................21
Section 5.26.
Medco Acquiror.............................................22
Section 5.27.
Medco Auditors.............................................22
Section 5.28.
Medco Board................................................22
Section 5.29.
Medco Group................................................22
Section 5.30.
Merck Auditors.............................................22
Section 5.31.
Merck Board................................................22
Section 5.32.
Merck Business.............................................22
Section 5.33.
Merck Common Stock.........................................22
Section 5.34.
Merck Dividend.............................................22
Section 5.35.
Merck Group................................................22
Section 5.36.
Notes Offering.............................................22
Section 5.37.
Notes Offering Closing.....................................22
Section 5.38.
Notes Registration Statement...............................22
Section 5.39.
Notes Underwriters.........................................22
Section 5.40.
Notes Underwriting Agreement...............................23
Section 5.41.
NYSE.......................................................23
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TABLE OF CONTENTS
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Section 5.42.
Patent.....................................................23
Section 5.43.
Patent License.............................................23
Section 5.44.
Person.....................................................23
Section 5.45.
Prohibited Activities......................................23
Section 5.46.
Record Date................................................23
Section 5.47.
Receiving Party............................................23
Section 5.48.
Securities Act.............................................23
Section 5.49.
Subsidiary.................................................23
Section 5.50.
Tax Agreement..............................................23
Section 5.51.
Transferring Party.........................................23
iii
<PAGE>
SCHEDULE
--------
SCHEDULE 3.8 Medco Patents Subject to License
to Merck
EXHIBITS
--------
EXHIBIT A Second Amended and Restated
Certificate of Incorporation
EXHIBIT B Amended and Restated Bylaws
EXHIBIT C Employee Matters Agreement
EXHIBIT D Tax Responsibility Allocation
Agreement
EXHIBIT E Confidential Disclosure
Agreement
EXHIBIT F Indemnification and Insurance
Matters Agreement
<PAGE>
MASTER SEPARATION AND DISTRIBUTION AGREEMENT
THIS MASTER
SEPARATION AND DISTRIBUTION AGREEMENT (this "Agreement") is
entered into as of August __, 2003, between
Merck & Co., Inc., a New Jersey
corporation ("Merck"), and Medco Health
Solutions, Inc., a Delaware corporation
("Medco"). Capitalized terms used herein
and not otherwise defined shall have
the meanings ascribed to such terms in
Article V hereof.
RECITALS
WHEREAS, the
Board of Directors of Merck (the "Merck Board") has determined
that it is appropriate and desirable for
Merck to separate the Medco Group from
the Merck Group in a manner that would
permit Merck to divest its entire
ownership interest in Medco through a
pro-rata distribution of all of the
outstanding shares of common stock, par
value $0.01 per share, of Medco (the
"Medco Common Stock") to the holders of
common stock, par value $0.01 per share,
of Merck (the "Merck Common Stock"),
pursuant to the terms and subject to the
conditions of this Agreement (the
"Distribution");
WHEREAS, the
Distribution is intended to qualify as a tax-free transaction
(except as to the payment of cash in lieu
of fractional shares) to Merck and its
shareholders pursuant to Sections 355 and
368(a)(1)(D) of the Internal Revenue
Code of 1986, as amended (the "Code");
WHEREAS, Medco
has filed with the Commission (as defined below) a
registration statement on Form 10 to effect
the registration of the Medco Common
Stock pursuant to the Exchange Act in
connection with the Distribution (the
"Form 10");
WHEREAS, on or
prior to the Distribution Date, Medco will have completed a
public offering (the "Notes Offering") of
senior unsecured notes (the "Notes")
in the aggregate principal amount of up to
$500 million pursuant to a
registration statement on Form S-1
(Registration No. 333-86404) (the "Notes
Registration Statement") declared effective
by the Securities and Exchange
Commission (the "Commission");
WHEREAS, in
connection with the Distribution, Medco will have entered into
a $1,150 million senior secured credit
facility and $500 million 364-day
renewable accounts receivable financing
facility (collectively, the "Credit
Facility");
WHEREAS, in
connection with the Distribution, the Board of Directors of
Medco (the "Medco Board") has declared cash
dividends of $2 billion (the "Merck
Dividend") payable to Merck, as the sole
holder of the Medco Common Stock on or
prior to the Distribution Date, with the
Merck Dividend to be paid out of
borrowings under the Credit Facility, the
net proceeds of the Notes Offering,
and the proceeds from the Intercompany
Payment (as defined herein); and
WHEREAS, the parties intend in
this Agreement, including the Schedule and
Exhibits hereto, to set forth the principal
arrangements between them regarding
the Distribution;
<PAGE>
NOW, THEREFORE,
in consideration of the foregoing and the covenants and
agreements set forth below, the parties
hereto agree as follows:
ARTICLE I
CERTAIN ACTIONS AT OR PRIOR TO THE DISTRIBUTION DATE
Section 1.1.
Treatment of
Intercompany Accounts. On or prior to the
Distribution Date, the parties shall settle
(i) the net intercompany receivable
due from Merck to Medco arising from
transactions that occurred after December
29, 2001 and on or prior to July 31, 2003
(the "Initial Period") and (ii) any
amounts owing between the parties solely as
a result of transfers of cash during
the period from August 1, 2003 through the
day prior to the Distribution Date
(the "August Pre-Distribution Period")
pursuant to the parties' customary cash
transfer procedures by means of a cash
payment from Merck to Medco in cash equal
to the sum of (a) the amount of such net
intercompany receivable and (b) the
August Pre-Distribution Net Cash Transfer
Amount (such net payment from Merck,
the "Intercompany Payment"). All amounts
payable by Merck to Medco and by Medco
to Merck arising from transactions that
occurred prior to the Distribution after
July 31, 2003 (or from transactions that
occurred during the Initial Period but
which are not appropriately reflected in
the Intercompany Payment) shall be
settled after the Distribution Date in
accordance with the timeframe in which
the payor customarily settles such payables
but not to exceed 60 days (unless
otherwise provided in an agreement between
Merck and Medco). The "August
Pre-Distribution Net Cash Transfer Amount"
(which may be positive or negative)
shall mean (x) the amount of cash
transferred from Medco to Merck during August
Pre-Distribution Period pursuant to the
parties' customary cash transfer
procedures less (y) the amount of cash
transferred from Merck to Medco during
such period pursuant to such
procedures.
Section 1.2.
Charter and Bylaws.
Merck and Medco shall each take all
actions that may be required to provide for
the adoption by Medco, at or prior
to the Distribution Date, of the Amended
and Restated Certificate of
Incorporation and the Amended and Restated
Bylaws in substantially the same
forms attached hereto as Exhibits A and B,
respectively.
Section 1.3.
Documents to Be
Delivered By Merck and Medco. On or prior to
the Distribution Date, Merck will execute
and deliver (and where applicable
cause a member of the Merck Group to
execute and deliver) to Medco (and/or to
the appropriate member of the Medco Group),
and Medco will execute and deliver
(and where applicable cause a member of the
Medco Group to execute and deliver)
to Merck (and/or to the appropriate member
of the Merck Group), all of the
following items and agreements
(collectively, together with all agreements and
documents contemplated by this Agreement,
including the agreements listed in
Section 1.4, as such agreements may be
amended from time to time, the "Ancillary
Agreements"):
(a) an Employee Matters Agreement
substantially in the form attached
hereto as Exhibit C (the "Employee Matters
Agreement");
(b) a Tax Responsibility Allocation
Agreement substantially in the form
attached hereto as Exhibit D (the "Tax
Agreement");
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<PAGE>
(c) a Confidential Disclosure
Agreement substantially in the form attached
hereto as Exhibit E (the "Confidential
Disclosure Agreement");
(d) an Indemnification and Insurance
Matters Agreement substantially in
the form attached hereto as Exhibit F (the
"Indemnification Agreement"); and
(e) such other agreements, documents
or instruments as the parties may
agree are necessary or desirable in order
to achieve the purposes hereof.
Unless otherwise
provided herein, the document deliveries contemplated in
this Section 1.3 shall occur on or prior to
the Distribution Date.
Section 1.4.
Documents Delivered.
Prior to the date of this Agreement,
Medco, Merck and/or other members of their
respective Group have duly executed
and delivered:
(a) the Amended and Restated Managed
Care Agreement between Merck and
Medco, dated as of May 28, 2003, together
with Amendment No. 1 dated as of July
23, 2003;
(b) the Patient Assistance Program
Agreement by and among Merck, Merck
Patient Assistance Program, Inc. and Medco,
dated as of June 28, 2002;
(c) the Integrated Prescription Drug
Plan Master Agreement by and among
Merck-Medco Managed Care, L.L.C., PAID
Prescriptions, L.L.C., Merck-Medco Rx
Services of New Jersey, L.L.C., and Merck,
dated as of January 1, 2003;
(d) the Research Study Agreement
between Merck and the Institute for
Effectiveness Research, L.L.C., dated as of
June 28, 2002;
(e) the E-Health Services Agreement
between Merck and Medco, dated as of
June 28, 2002;
(f) the Point of Care Data Services
Agreement between Merck and Medco,
dated as of June 28, 2002;
(g) the Consumer Marketing Data
Services Agreement between Merck and
Medco, dated as of June 28, 2002; and
(h) the Data Flow Continuation
Agreement between Merck and Medco, dated as
of June 28, 2002.
Section 1.5.
Transactions Prior to
the Distribution. Medco represents and
warrants that the Notes Registration
Statement was declared effective by the
Commission on _____, 2003. Medco will
declare the Merck Dividend in the
aggregate amount of $2 billion, payable on
or prior to the Distribution Date to
Merck, as the sole holder of Medco Common
Stock. Subject to the conditions
specified in Section 1.6, Medco shall use
its best efforts to consummate the
Notes Offering and the Credit Facility on
or prior to the Distribution Date.
Such efforts shall include, but not
necessarily be limited to, those specified
in this Section 1.5:
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<PAGE>
(a) Registration Statements. Medco
shall file such amendments or
supplements to the Notes Registration
Statement as may be necessary in order to
cause the same to become and remain
effective as required by Law or by the
underwriters of the Notes Offering (the
"Notes Underwriters"), including, but
not limited to, filing such amendments to
the Notes Registration Statement as
promptly as practicable as may be required
by the Notes Underwriters, the
Commission or federal, state or foreign
securities Laws. Medco shall also take
all actions necessary to prepare, file and
cause to become and remain effective
any registration statements or amendments
thereof which are required to reflect
the establishment of, or amendments to, any
employee benefit and other plans, in
each case as necessary or appropriate in
connection with the Notes Offering and
the Distribution or the other transactions
contemplated by this Agreement.
(b) Underwriting Agreement. Medco
shall duly execute and deliver an
underwriting agreement with the Notes
Underwriters for the Notes Offering (the
"Notes Underwriting Agreement") in form and
substance acceptable by Merck, and
Medco shall comply with its obligations
under, and shall not amend, the Notes
Underwriting Agreement or waive any
provision or condition contained therein
without the prior approval of Merck.
(c) Other Matters. Medco shall consult
with Merck and the Notes
Underwriters regarding the timing and other
material matters with respect to the
Notes Offering and the Credit Facility.
(d) Blue Sky. Medco shall use its
reasonable commercial efforts to take
all such action as may be necessary or
appropriate under state securities and
blue sky laws of the United States (and any
comparable Laws under any foreign
jurisdictions) in connection with the Notes
Offering.
(e) Indenture. In connection with the
Notes Offering, Medco shall duly
execute and deliver an indenture with
respect to the Notes in form and substance
acceptable to Merck.
(f) Credit Facility. Medco shall enter
into the Credit Facility in form
and substance acceptable to Merck and shall
borrow at least the amount necessary
so that, together with the proceeds from
the Notes Offering and the Intercompany
Payment, Medco will have sufficient funds
to pay the Merck Dividend.
(g) Merck Dividend. Medco shall have
declared, and not taken any action to
revoke or rescind, the Merck Dividend. On
or prior to the Distribution Date,
Medco shall have paid to Merck $2 billion
in respect of the Merck Dividend.
Section 1.6.
Conditions Precedent
to the Closing of the Notes Offering .
Medco shall use its best efforts to satisfy
the conditions listed below to the
Notes Offering. The closing of the Notes
Offering (the "Notes Offering
Closing"), which is intended to occur on or
prior to the Distribution Date,
shall be conditioned on the satisfaction,
or waiver by Merck, of the following
conditions:
(a) Registration Statements. The Notes
Registration Statement shall have
been declared effective by the Commission,
with no stop order in effect with
respect thereto.
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<PAGE>
(b) Blue Sky. All necessary and
appropriate actions and filings in
connection with the Notes Offering with
regard to state securities and blue sky
laws of the United States (and any
comparable Laws under any foreign
jurisdictions) shall have been taken or
made and, where applicable, have become
effective or been accepted.
(c) Underwriting Agreement. Medco
shall have duly executed and delivered
the Notes Underwriting Agreement in form
and substance acceptable to Merck;
Medco shall have complied with its
obligations under, and shall not have amended
the Notes Underwriting Agreement or waived
any provision or condition contained
therein; and all conditions to the
obligations of Medco and the Notes
Underwriters required by the Notes
Underwriting Agreement shall have been
satisfied or waived.
(d) Governmental Approvals. Any
material Governmental Approvals necessary
to consummate the Notes Offering shall have
been obtained and be in full force
and effect.
(e) No Legal Restraints. No order,
injunction or decree issued by any
court or agency of competent jurisdiction
or other legal restraint or
prohibition preventing the consummation of
the Notes Offering shall be in
effect.
(f) Comfort Letters. Medco shall have
caused the auditors who are
delivering comfort letters (including
"bring down" comfort letters) to the Notes
Underwriters in connection with the Notes
Registration Statement to deliver to
Merck copies of such comfort letters
(including "bring down" comfort letters)
addressed to Merck.
(g) Indenture. Medco shall have duly
executed and delivered an indenture
with respect to the Notes in form and
substance acceptable to Merck.
(h) No Inadvisable Event. The Merck
Board shall have not determined that
any events or developments shall have
occurred that make it inadvisable to
effect the Notes Offering.
(i) Other Actions. Such other actions
as the parties hereto may, based
upon the advice of counsel, reasonably
request to be taken prior to the Notes
Offering Closing in order to assure the
successful completion of the Notes
Offering shall have been taken.
The foregoing
conditions are for the sole benefit of Merck and shall not
give rise to or create any duty on the part
of Merck or the Merck Board to waive
or not waive such conditions or in any way
limit Merck's right to terminate this
Agreement as set forth in Section 4.3 or
alter the consequences of any such
termination from those specified in such
Section. Any determination made by the
Merck Board prior to the Notes Offering
Closing concerning the satisfaction or
waiver of any or all of the conditions set
forth in this Section 1.6 shall be
conclusive.
ARTICLE II
THE DISTRIBUTION
Section 2.1.
The Distribution.
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<PAGE>
(a) Cooperation. Medco shall cooperate
with Merck to accomplish the
Distribution and shall, at Merck's
direction, promptly take any and all actions
necessary or desirable to effect the
Distribution. Merck may select any
investment bank or manager in connection
with the Distribution, as well as any
financial printer, solicitation and/or
exchange agent and financial, legal,
accounting and other advisors for Merck;
provided, that, nothing herein shall
prohibit Medco from engaging (at its own
expense) its own financial, legal,
accounting and other advisors in connection
with the Distribution. Medco and
Merck, as the case may be, will provide to
the distribution or exchange agent to
be appointed by Merck (the "Distribution
Agent") all share certificates and any
information required in order to complete
the Distribution.
(b) Distribution Mechanics.
(i) Subject to
Sections 2.3, 2.4, and 2.5, on or prior to the
Distribution Date, Merck will deliver to
the Distribution Agent for the benefit
of holders of Merck Common Stock on the
Record Date, a single stock certificate,
endorsed by Merck in blank, representing
all of the outstanding shares of Medco
Common Stock then owned by Merck, and shall
cause the transfer agent for the
Merck Common Stock to instruct the
Distribution Agent to distribute on or as
soon as practicable after the Distribution
Date the appropriate number of such
shares of Medco Common Stock to each such
holder or designated transferee or
transferees of such holder of Merck Common
Stock. The Distribution shall be
effective at 11:59 pm Eastern Standard Time
on the Distribution Date.
(ii) Subject to Sections 2.3, 2.4 and 2.5, each holder of Merck
Common
Stock on the Record Date (or such holder's
designated transferee or transferees)
will be entitled to receive in the pro-rata
distribution a number of shares of
Medco Common Stock equal to the number of
shares of Merck Common Stock held by
such holder on the Record Date multiplied
by the distribution ratio determined
by the Merck Board when it declares the
Distribution. Merck and Medco, as the
case may be, will provide to the
Distribution Agent all share certificates and
any information required in order to
complete the Distribution on the basis
specified above.
Section 2.2.
Actions In Connection
with the Distribution.
(a) Form 10. Medco shall file such
amendments and supplements to the Form
10, and such amendments as may be necessary
in order to cause the same to become
and remain effective as required by Law,
including filing such amendments and
supplements to the Form 10 as may be
required by the Commission or federal,
state or foreign securities Laws. Medco
shall mail to the holders of Merck
Common Stock, at such time on or prior to
the Distribution Date as Merck shall
determine, the Information Statement
included in the Form 10, as well as any
other information concerning Medco, its
business, operations and management, the
Distribution and such other matters as
Merck shall reasonably determine are
necessary and as may be required by
Law.
(b) Other Documentation. Merck and
Medco shall also cooperate in
preparing, filing with the Commission and
causing to become effective
registration statements or amendments
thereof which are required to reflect the
establishment of, or amendments to, any
employee benefit and other plans
necessary or appropriate in connection with
the Distribution or other
- 6 -
<PAGE>
transactions contemplated by this Agreement
and the Ancillary Agreements,
including the Employee Matters Agreement.
Promptly after receiving a request to
do so from Merck, to the extent requested
by Merck, Medco shall prepare and, to
the extent required under applicable Law,
file with the Commission any such
documentation that Merck determines are
necessary or desirable to effectuate the
Distribution, and Merck and Medco shall
each use its reasonable commercial
efforts to obtain all necessary approvals
from the Commission with respect
thereto as soon as practicable.
(c) Blue Sky. Promptly after receiving
a request to do so from Merck,
Medco shall take all such actions as may be
necessary or appropriate under the
securities or blue sky laws of the United
States (and any comparable Laws under
any foreign jurisdiction) in connection
with the Distribution.
(d) NYSE Listing. Promptly after
receiving a request to do so from Merck,
Medco shall prepare and file, and shall use
its reasonable commercial efforts to
have approved and made effective, an
application for the original listing of the
Medco Common Stock to be distributed in the
Distribution on the NYSE, subject to
official notice of distribution.
(e) Resignation of Directors and
Officers. Immediately prior to the final
consummation of the Distribution, (i) each
person who is an officer, director or
employee of any member of the Merck Group
and an officer, director or employee
of any member of the Medco Group
immediately prior to the Distribution Date
(each a "Shared Employee") and who is to
continue as an officer, director or
employee of any member of the Merck Group
after the Distribution Date shall
resign from each of such person's positions
with each member of the Medco Group,
and (ii) each such Shared Employee who is
to continue as an officer, director or
employee of any member of the Medco Group
after the Distribution Date, shall
resign from each of such person's positions
with each member of the Merck Group;
(f) Conditions. Medco shall take all
reasonable steps necessary and
appropriate to cause the conditions set
forth in Section 2.4 to be satisfied and
to effect the Distribution, or any portion
thereof, on the terms, in the manner
and on the Distribution Date.
Section 2.3.
Sole Discretion of
Merck. Merck shall, in its sole and
absolute discretion, determine the date of
the consummation of the Distribution
and all terms of the Distribution,
including, without limitation, the form,
structure and terms of any transaction(s)
and/or offering(s) to effect the
Distribution and the timing of and
conditions to the consummation thereof. In
addition, Merck may at any time and from
time to time until the completion of
the Distribution decide to abandon the
Distribution or modify or change the
terms of the Distribution, including,
without limitation, by accelerating or
delaying the timing of the consummation of
all or part of the Distribution.
Section 2.4.
Conditions To
Distribution. Subject to Section 2.3, the
following are conditions to the
consummation of any part of the Distribution.
The conditions are for the sole benefit of
Merck and shall not give rise to or
create any duty on the part of Merck or the
Merck Board to waive or not waive
any such condition.
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<PAGE>
(a) Effective Form 10. The Form 10
shall have been declared effective
under the Exchange Act, with no stop order
in effect with respect thereto, and
the Information Statement shall have been
mailed to the holders of Merck Common
Stock.
(b) Blue Sky Laws. The actions and
filings with regard to state securities
and blue sky laws of the United States (and
any comparable Laws under any
foreign jurisdictions) described in Section
2.2(c) shall have been taken and,
where applicable, have become effective or
been accepted.
(c) NYSE Listing. The Medco Common
Stock to be delivered in the
Distribution shall have been approved for
listing on the NYSE, subject to
official notice of issuance.
(d) IRS Ruling. Merck shall have
obtained a private letter ruling from the
Internal Revenue Service in form and
substance satisfactory to Merck (in its
sole discretion), and such ruling shall
remain in effect, to the effect that (i)
the distribution by Merck to the holders of
Merck Common Stock on the Record
Date of all the Medco Common Stock in the
manner determined by Merck will
qualify as a tax-free distribution for
United States federal income tax purposes
under Section 355 of the Code and a
tax-free reorganization under Section
368(a)(1)(D) of the Code; (ii) no gain or
loss will be recognized by (and no
amount will otherwise be included in the
income of) Merck as a result of the
Distribution; and (iii) no gain or loss
will be recognized by (and no amount
will otherwise be included in the income
of) the holders of Merck Common Stock
on the Record Date upon their receipt of
shares of Medco Common Stock pursuant
to the Distribution, other than in
connection with the receipt of cash in lieu
of fractional shares.
(e) Charter and Bylaws. Medco's
Amended and Restated Certificate of
Incorporation and Amended and Restated
Bylaws in substantially the forms
attached hereto as Exhibits A and B,
respectively, shall be in effect.
(f) Ancillary Agreements. Each of the
Ancillary Agreements shall have been
duly executed and delivered by the parties
thereto and shall be in full force
and effect.
(g) Financing. Medco shall have
consummated the Notes Offering and the
Credit Facility on terms satisfactory to
Merck and have sufficient proceeds and
capital to pay the Merck Dividend to
Merck.
(h) Merck Dividend. The Merck Dividend
shall have been paid, on or prior
to the Distribution Date, by Medco to
Merck, as the sole holder of the Medco
Common Stock.
(i) Governmental Approvals. Any
material Governmental Approvals necessary
to consummate the Distribution or any
portion thereof shall have been obtained
and be in full force and effect.
(j) No Legal Restraints. No order,
injunction or decree issued by any
court or agency of competent jurisdiction
or other legal restraint or
prohibition preventing the consummation of
all or any portion of the
Distribution shall be in effect, and no
other event outside the control of Merck
shall have occurred or failed to occur that
prevents the consummation of all or
any portion of the Distribution.
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<PAGE>
(k) No Inadvisable Event. The Merck
Board shall have approved the
Distribution and shall have not determined
that any events or developments shall
have occurred that make it inadvisable to
effect the Distribution.
Section 2.5.
Fractional Shares. No
certificates representing fractional
shares of Medco Common Stock will be
distributed in the Distribution. As soon as
practicable after the consummation of any
portion of the Distribution, Merck
shall direct the Distribution Agent to
determine the number of whole shares and
fractional shares of Medco Common Stock
allocable to each holder of record or
beneficial owner of Merck Common Stock
otherwise entitled to fractional shares
of Medco Common Stock, to aggregate all
such fractional shares and sell the
whole shares obtained thereby at the
direction of Merck, in open market
transactions or otherwise, in each case at
then prevailing trading prices, and
to cause to be distributed to each such
holder or for the benefit of each such
beneficial owner to which a fractional
share shall be allocable such holder or
owner's ratable share of the proceeds of
such sale, after making appropriate
deductions for any amount required to be
withheld for United States federal
income tax purposes and to repay expenses
reasonably incurred by the
Distribution Agent, including all brokerage
charges, commissions and transfer
taxes, in connection with such sale. Merck
and the Distribution Agent shall use
their reasonable commercial efforts to
aggregate the shares of Merck Common
Stock that may be held by any beneficial
owner thereof through more than one
account in determining the fractional share
allocable to such beneficial owner.
ARTICLE III
COVENANTS AND OTHER MATTERS
Section 3.1.
Release of Merck from
Credit Support Arrangements. (a) Medco
shall use commercially reasonable efforts
to cause the obligations of members of
the Merck Group under each guarantee,
letter of credit, keepwell or support
agreement or other credit support document,
instrument or other similar
arrangement issued for the benefit of any
Person in the Medco Group by or on
behalf of Merck (the "Credit Support
Arrangements") on or prior to the
Distribution Date to be assumed by Medco,
and for Merck to be unconditionally
released therefrom as of the Distribution
Date or as promptly as practicable
thereafter, and shall execute and deliver
any and all such instruments of
substitution and such other instruments or
agreements as shall be necessary in
connection with the discharge by Medco of
its obligations under this sentence.
Medco shall not modify or renew, or amend
the terms of any agreement, instrument
or obligation underlying any of the Credit
Support Arrangements in any manner
that could increase, extend or give rise to
liability of a member of the Merck
Group under any such Credit Support
Arrangements. If any member of the Merck
Group shall not have been fully released
from its obligations under any Credit
Support Arrangement as of the first day of
any calendar month, within ten days
after the completion of such calendar
month, Medco shall notify Merck in writing
of the amounts for which Merck could become
liable under each such Credit
Support Arrangements as of the last day of
such calendar month. Such notice
shall be accompanied by information and
documentation (including such
information and documentation requested by
Merck) supporting the calculation of
any amounts
