Securities Law & Instruments


Mutual Reliance Review System for ExemptiveRelief Applications -- relief from prospectus and registrationrequirements for spin-off by a publicly traded US company toinvestors by issuing shares of spun off entity as dividends- reorganization technically not covered by prescribed reorganizationexemptions - technical relief - no policy issues.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 35(1)12(ii), 35(1)15, 53, 72(1)(f)(ii), 72(1)(i), 74(1).
















WHEREAS the securities regulatory authorityor regulator (collectively, the "Decision Makers")in each of British Columbia, Alberta, Saskatchewan, Manitoba,Ontario, Quebec, New Brunswick, Prince Edward Island, Nunavut,Nova Scotia and Newfoundland and Labrador (collectively, the"Jurisdictions") has received an applicationfrom Merck & Co., Inc. ("Merck") for adecision, pursuant to the securities legislation (the "Legislation")of each of the Jurisdictions that the prospectus and dealerregistration requirements (respectively, the "ProspectusRequirements" and the "Registration Requirements")shall not apply to the proposed distribution of all issued andoutstanding common shares (the "Medco Shares")of Medco Health Solutions Inc. ("Medco") toholders of common shares of Merck (the "Merck Shareholders")resident in Canada (the "Merck Canadian Shareholders")by way of pro rata dividend in kind, provided that the firsttrade of Medco Shares shall be deemed to be a distribution orprimary distribution to the public unless certain conditionsare met;

AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Application (the "System"),the Commission des valeurs mobilières du Québec(the "CVMQ") is the Principal Regulator forthis application;

AND WHEREAS, unless otherwise defined,the terms herein have the same meaning set out in National Instrument14-101 Definitions or in CVMQ Notice 14-101;

AND WHEREAS Merck has represented tothe Decision Makers that:

1. Merck is a corporation constituted pursuantto the law of the State of New Jersey. Merck discovers, develops,manufactures and markets a broad range of products to improvehuman and animal health, directly and through its joint ventures.Its headquarters are located in Whitehouse Station, New Jersey.

2. Medco, a wholly-owned subsidiary of Merck,is the largest U.S. provider of pharmacy benefit managementservices based on 2002 revenues.

3. Merck's direct or indirect wholly-ownedCanadian subsidiaries are Merck Frosst Canada & Co., MerckEnterprises Canada, Ltd. and Merck Frosst Canada Ltd., whichcollectively carry on business through offices located inQuébec, British Columbia, Alberta, Saskatchewan, Manitoba,Ontario, and Nova Scotia.

4. Merck is not a reporting issuer under thesecurities laws of any province or territory of Canada andMerck has no intention of becoming a reporting issuer underthe securities laws of any province or territory of Canada.

5. The common shares of Merck (the "MerckShares") are listed on the New York and Philadelphiastock exchanges. The Merck Shares are not listed on any Canadianstock exchange and Merck has no intention of listing its securitieson any Canadian stock exchange.

6. As of June 15, 2003, Merck had 1,353 MerckCanadian Shareholders of record (584 in Ontario, 323 in Québec,94 in Alberta, 232 in British Columbia, 23 in Manitoba, 50in Nova Scotia, 17 in New Brunswick, 22 in Saskatchewan, 3in Newfoundland, 4 in Prince Edward Island and 1 in Nunavut),which constituted approximately 0.557% of the approximately242,692 holders of record of Merck Shares worldwide on June6, 2003. As of June 15, 2003, persons resident in Canada collectivelyheld 832,663 Merck Shares, constituting approximately 0.0371%of the approximately 2,239,647,140 issued and outstandingMerck Shares on June 6, 2003. As such, the proportion of issuedand outstanding Merck Shares held by Canadian residents isde minimis.

7. Subject to obtaining necessary approvals,on a distribution date to be fixed by Merck's board of directors,the separation of Medco from Merck will be accomplished througha pro rata distribution of all of Medco Shares to Merck Shareholders(the "Spin-Off"). The Spin-Off consists ofthe following steps:

(a) the general terms and conditions relatingto the distribution will be set forth in a master separationand distribution agreement between Merck and Medco.

(b) as a result of the distribution, eachMerck Shareholder will receive one Medco Share for a numberof Merck Shares to be fixed by Merck's board of directors.

(c) Merck Shareholders will not be requiredto pay for Medco Shares received in the distribution orto surrender or exchange Merck Shares in order to receiveMedco Shares or to take any other action in connection withthe distribution.

(d) fractional shares of a Medco Share willnot be issued to Merck Shareholders as part of the distributionnor credited to book-entry accounts. Instead, Medco's distributionagent will aggregate Medco fractional shares into wholeshares, sell them into the open market at the prevailingmarket prices and then distribute the aggregate sale proceedsratably to Merck Shareholders who would otherwise be entitledto receive fractional shares.

8. The board of directors of Merck has determinedthat the spin-off of Medco from Merck will enhance the successof both Merck and Medco, and thereby maximize stockholdervalue over the long term for each company, by:

    • enablingeach company to continue to pursue its unique and focusedstrategy; and

    • enablinginvestors to evaluate the financial performance, strategiesand other characteristics of each of Merck and Medco separatelyin comparison to companies within their respective industries.

9. After the Spin-Off, Merck Shares will continueto be listed and traded on the New York Stock Exchange (the"NYSE") and Medco Shares will be a separately-tradedpublic company listed and traded on the NYSE.

10. It is not intended that Medco will listits shares on any stock exchange in Canada.

11. It is not intended that Medco will becomea reporting issuer in any province of Canada.

12. Medco has no and will, immediately afterthe Spin-Off, have no employees in Canada.

13. The dividend and Spin-Off will be effectedin compliance with the laws of the State of New Jersey.

14. In May 2003, Medco filed a Form 10 RegistrationStatement with the United States Securities and ExchangeCommission (the "SEC") detailing theplanned Spin-Off.

15. After the SEC has completed its review,Merck Shareholders will receive a copy of the informationstatement included in the Form 10 (the "InformationStatement").

16. Because the Spin-Off of Medco Shares willbe by way of dividend to the Merck Shareholders, no shareholderapproval of the proposed transaction is required under thelaw of the State of New Jersey.

17. All materials relating to the Spin-Offand the dividend sent by or on behalf of Merck or Medco inthe United States (including the Information Statement) haveand will be sent, concurrently to the Merck Canadian Shareholders.

18. Following the Spin-Off, each of Medcoand Merck respectively will send, concurrently to the MerckCanadian Shareholders, the same disclosure materials thatit sends to holders of Medco Shares and Merck Shares withaddresses, as shown on its books to be, in the United States.

19. The Merck Canadian Shareholders who receiveMedco Shares as a dividend pursuant to the Spin-Off will havethe benefit of the same rights and remedies in respect ofthe disclosure documentation received in connection with thedividend and Spin-Off that are available under the laws ofthe United States to Medco and Merck Shareholders with addressesin the United States.

20. The proposed distribution of Medco Sharespursuant to the Spin-Off to the Merck Canadian Shareholderswould be exempt from the Prospectus Requirements and RegistrationRequirements (in all Jurisdictions except Québec whereexemptions would be available upon the filing of the prescribedinformation and the non-objection of the CVMQ within 15 daysof filing such information) but for the fact that Medco isnot a reporting issuer or equivalent under the Legislation.

AND WHEREAS under the System, this MRRSDecision document evidences the decision of each of DecisionMakers (collectively, the "Decision");

AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers underthe Legislation is that the Prospectus Requirements and RegistrationRequirements shall not apply to trades by Merck of Medco Sharesin connection with the Spin-Off provided that the first tradeof Medco Shares acquired under this Decision in a Jurisdictionshall be deemed to be a distribution or primary distributionto the public under the Legislation of such Jurisdiction unless:

(a) except in Québec, the conditionsin section 2.14(1) of Multilateral Instrument 45-102 Resaleof Securities are satisfied; or

(b) in Québec, the alienation is madethrough an exchange, or a market, outside of Canada or toa person or company outside of Canada.

August 15, 2003.

"Daniel Laurion"