Document:

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                                                              Exhibit 10.12
                                                              -------------

                                     FORM OF

                        DATA FLOW CONTINUATION AGREEMENT

                                     BETWEEN

                                MERCK & CO., INC.

                                       AND

                           MEDCOHEALTH SOLUTIONS, INC.

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                        DATA FLOW CONTINUATION AGREEMENT

     THIS DATA FLOW CONTINUATION AGREEMENT, dated as of _______, 2002, is
entered into among Merck & Co., Inc., a New Jersey corporation ("Merck")
and MedcoHealth Solutions, Inc., a Delaware corporation ("Medco"). Merck
and Medco are referred to collectively as the "Parties."

                                    RECITALS

     A. Medco currently provides (directly or through a subsidiary) certain
non-patient identifiable and non plan identifiable data to IMS Health
Incorporated ("IMS"), pursuant to an agreement dated January 1, 2000 which
requires Medco to continue to provide data to IMS through December 31, 2002 and
consistent with applicable laws.

     B. IMS currently provides certain data and information services to Merck
pursuant to an Information Services Agreement between IMS and Merck dated
January 1, 2000, as amended (the "Information Services Agreement"). The
Information Services Agreement requires IMS to continue to provide data and
services through the December 31, 2004 data month.

     C. Medco is a Data Supplier (as defined in section 6 of the Information
Services Agreement) and allows information that it furnishes to IMS ("Medco
Data") to be included in Data (as defined in the Information Services Agreement)
that IMS in turn furnishes to Merck.

     D. Merck and Medco are undergoing a change in corporate structure which is
not intended to affect the performance of either of the referenced agreements,
and the Parties wish to preserve the flow of information that currently exists
between them under those agreements.

ACCORDINGLY, the Parties agree as follows:

                                    ARTICLE I

                               DATA TO BE PROVIDED

     1.1 Medco agrees that it will continue to provide information to IMS
consistent with the information it has provided since January 1, 2000, and

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that for so long as it remains a Data Supplier to IMS, Medco Data may continue
to be provided to Merck under the terms of the Information Services Agreement
and consistent with the way such Data has been provided by IMS to Merck since
January 1, 2000.

     1.2 In the event that Medco ceases to be a Data Supplier to IMS at any time
prior to December 31, 2004, Medco agrees that it will provide Medco Data to
Merck directly through the data month ending December 31, 2004.

     1.3 Medco agrees that from the date of this Agreement through December 31,
2004, it shall continue to provide to Merck, either directly or through IMS, the
data listed in Schedule 1A, subject to the restrictions contained in that
Schedule.

                                   ARTICLE II

                          COMPENSATION AND TERMINATION

     2.1 Merck shall pay Medco the fees set forth in Schedule 2A.

     2.2 Merck may terminate this Agreement for any reason or no reason,
effective January 1, 2003 or at any later date, upon at least 90 days prior
written notice to Medco. In the event of termination, the fees payable under
Section 2.1 shall be reduced pro rata for the number of months left in the year
if the services are terminated mid-year.

                                   ARTICLE III

                        RELATIONSHIP BETWEEN THE PARTIES

     3.1 The relationship between the Parties established under this Agreement
is that of independent contractors and neither Party is an employee, agent,
partner, or joint venturer of or with the other.

                                   ARTICLE IV

                                 PATIENT PRIVACY

     4.1 Medco represents and warrants that it will perform all of its duties
under this Agreement in compliance with all applicable federal, state, local and
foreign laws and regulations and licensing requirements, including but not
limited to those related to patient notification, authorization and consent,
privacy of medical records and medical information. By way of example, Medco is
required under the Standards adopted pursuant to the Health Insurance
Portability and Accountability Act of 1996, either directly as a covered entity
or in its role as a business associate of its health plan clients, to assure
that protected health information (all as defined in such Standards) is used or
disclosed only in accordance with such Standards.

                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

     5.1 Intellectual Property. Medco represents and warrants that it has the
right to provide the Medco Data, and that its provision of Medco Data shall not
infringe the intellectual property rights of any third party.

                                   ARTICLE VI

                                 INDEMNIFICATION

     6.1 Indemnification. Medco shall indemnify and hold harmless the Merck

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Indemnitees (as defined in the Indemnification Agreement) in respect of all
Liabilities (as defined in the Indemnification Agreement) related to, arising
from, asserted against or associated with Medco's providing data hereunder. Such
indemnification obligation shall be a Medco Liability for purposes of the
Indemnification Agreement, and the provisions of Article I thereof with respect
to indemnification shall govern with respect thereto.

     6.2 Additional Indemnification. In addition to, and not in limitation of,
the indemnification provided under Section 6.1, Medco shall indemnify and hold
harmless the Merck Indemnitees from and against any and all loss, damage or
expense, including reasonable attorneys' fees, that Merck may sustain or incur
as a result of any claim, suit or proceeding arising out of or in connection
with: (1) any actual or alleged negligent or willful act or omission of Medco,
or any of its employees, agents or subcontractors; (2) any actual or alleged
violation by Medco, or any of its employees, agents or subcontractors of any
law, statute, ordinance or regulation; (3) any failure to obtain necessary
consents, authorizations, approvals or releases for use of the Medco Data and
any violation or alleged violation of any third party or individual's privacy
right by the Medco Data provided to Merck under this Agreement; (4) any
infringement or alleged infringement by the Medco Data provided to Merck under
this Agreement upon any intellectual property right of any third party; or (5)
any failure to perform any obligation under this Agreement. Such indemnification
obligation shall be a Medco Liability for purposes of the Indemnification
Agreement, and the provisions of Article I of that agreement with respect to
indemnification shall govern with respect to that liability.

                                   ARTICLE VII

                               DISPUTE RESOLUTION

     7.1 Any dispute, controversy or claim arising between the Parties relating
to the interpretation, validity or performance of this Agreement shall be
resolved in accordance with the provisions of Article III of the Indemnification
Agreement.

     7.2 Injunctive Relief. Notwithstanding the provisions of Section 7.1, Medco
acknowledges that any violation of Article I of this Agreement will cause Merck
immediate and irreparable harm that monetary damages cannot adequately remedy.
The parties agree that, upon any actual or impending violation of Article I of
this Agreement, in addition to any money damages or other legal remedy that
Merck may have, Merck shall also be entitled to equitable relief, including
injunctive relief and specific performance (and Medco shall not plead in defense
thereto that there would be an adequate remedy at law), without bond or proof of
damages. Such equitable relief may be sought in an arbitration proceeding
pursuant to Section 3.1(c) of the Indemnification Agreement (without first
complying with the negotiation provisions of Section 3.1(a) thereof) or in a
court, subject to Section 8.2. In the event of litigation relating to this
Agreement, if a court of competent jurisdiction determines that Medco has
breached Article I of this Agreement, Medco shall be liable and pay to Merck the
reasonable legal fees and costs incurred in connection with such litigation,
including any appeal from such litigation.

                                  ARTICLE VIII

                                  MISCELLANEOUS

     8.1 Entire Agreement. This Agreement and any other agreements specifically
referred to in this Agreement constitute the entire agreement

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between the Parties with respect to the subject matter of this Agreement and
shall supersede all prior or contemporaneous written or oral agreements or
understandings with respect to the same subject matter.

     8.2 Governing Law; Forum. This Agreement shall be construed in accordance
with, and all Disputes hereunder shall be governed by, the procedural (except to
the extent inconsistent with the procedures set forth in Article III of the
Indemnification Agreement) and substantive laws of the State of New York as to
all matters regardless of the laws that might otherwise govern under principles
of conflicts of laws applicable thereto. Under no circumstances may any party
seek or be awarded punitive damages under this Agreement. Any state court
sitting in New York county, New York and/or the United States District Court for
the Southern District of New York shall have exclusive jurisdiction and venue,
and each party hereto hereby submits to such jurisdiction and venue and
irrevocably waives, to the fullest extent permitted by applicable law, any
objection it may now or hereafter have to such jurisdiction or the laying of
such venue over any Disputes between the parties that are permitted to be
brought in a court, or the enforcement of any decision of an arbitrator,
pursuant to Article III of the Indemnification Agreement. Each of the parties
hereby irrevocably waives any right to a jury trial with respect to a Dispute.

     8.3 Interpretation. The headings contained in this Agreement, including its
Schedules and table of contents, are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. Any
capitalized term used in any Schedule but not otherwise defined therein, shall
have the meaning assigned to such term in this Agreement. When a reference is
made in this Agreement to an Article or a Section, such reference shall be to an
Article or Section of this Agreement unless otherwise indicated.

     8.4 Notices. All notices and other communications required or permitted to
be given by either Party pursuant to the terms of this Agreement shall be in
writing to and shall be deemed to have been duly given when delivered in person,
by express or overnight mail delivery by a nationally recognized courier
(delivery charges prepaid), or by registered or certified mail (postage prepaid,
return receipt requested), as follows:

          if to Merck:

                    Merck & Co., Inc.
                    One Merck Drive
                    P.O. Box 100
                      Whitehouse Station, New Jersey 08889

                    Attention: General Counsel

          if to Medco:

                    MedcoHealth Solutions, Inc.
                    100 Parsons Pond Road

                        Franklin Lakes, New Jersey 07417

                    Attention: General Counsel

or to such other address as the Party to whom notice is given may have
previously furnished to the other in writing in the manner set forth above. All
notices and other communication shall be deemed to have been given and received
on the date of actual delivery.

     8.5 Binding Effect; Assignment; Third-Party Beneficiaries. Medco may not,
directly or indirectly, in whole or in part, whether by operation of law or
otherwise, assign or transfer this Agreement or its rights or obligations
hereunder, without Merck's prior written consent and, except as otherwise
permitted hereby, any attempted assignment, transfer or

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delegation without such prior written consent shall be voidable at the sole
option of Merck. Nothing in this Agreement shall restrict any transfer of this
Agreement by Merck, whether by operation of law or otherwise. Without limiting
the foregoing, this Agreement shall be binding upon Merck and the other members
of the Merck Group and Medco and the other members of the Medco Group and their
respective legal representatives, successors and permitted assigns, and nothing
in this Agreement, express or implied, is intended to confer upon any other
Person any rights or remedies of any nature whatsoever under or by reason of
this Agreement.

     8.6 Offset. In addition to, and not in limitation of, any other remedies
any member of the Merck Group or any Merck Indemnitee (as defined in the
Indemnification Agreement) may be entitled to under the Separation Agreement,
any Ancillary Agreement (including this Agreement) or any Intercompany Agreement
(as defined in the Indemnification Agreement) , any member of the Merck Group or
any Merck Indemnitee may satisfy any amounts owed to such member of the Merck
Group or Merck Indemnitee by any member of the Medco Group by means of an offset
against any amounts any member of the Merck Group may from time to time owe to
any member of the Medco Group or an Medco Indemnitee, whether under the
Separation Agreement, any Ancillary Agreement (including this Agreement), any
Intercompany Agreement, any other agreement or arrangement existing between any
member of the Merck Group and any member of the Medco Group, or otherwise.

     8.7 Severability. If any term or other provision of this Agreement is
determined by a court, administrative agency or arbitrator, by any court or in
any binding arbitration, to be invalid, illegal or incapable of being enforced
by any rule of law or public policy, all other conditions and provisions of this
Agreement will nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any Party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the Parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the Parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are fulfilled
to the fullest extent possible. If the Parties are unable to reach an agreement
on any such modification, the arbitrator selected in accordance with Article III
of the Indemnification Agreement shall have the authority to determine such
modification.

     8.8 Failure or Indulgence Not Waiver. No failure or delay on the part of
either Party hereto in the exercise of any right hereunder shall impair such
right or be construed to be a waiver of, or acquiescence in, any breach of any
representation, warranty or agreement herein, nor shall any single or partial
exercise of any such right preclude other or further exercise thereof or of any
other right.

     8.9 Amendment. No change or amendment will be made to this Agreement except
by an instrument in writing signed on behalf of each of the Parties hereto.

     8.10 Counterparts. This Agreement and the other documents referred to
herein may be executed in counterparts, each of which shall be deemed an
original but all of which, taken together, shall constitute one and the same
instrument.

IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed
in duplicate originals by its duly authorized representatives.

MERCK & CO., INC.                        MEDCOHEALTH SOLUTIONS, INC.

By:                                      By:
    ------------------------------           ----------------------------
Name:                                    Name:
Title:                                   Title:<PAGE>

                                                                   Exhibit 10.13

                                     FORM OF

                           EMPLOYEE MATTERS AGREEMENT

                          DATED AS OF __________, 2002

                                 BY AND BETWEEN

                                MERCK & CO., INC.

                                       AND

                           MEDCOHEALTH SOLUTIONS, INC.

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                           EMPLOYEE MATTERS AGREEMENT

                  This EMPLOYEE MATTERS AGREEMENT, is made as of ______, 2002
(the "Employee Matters Agreement"), by and between Merck & Co., Inc. ("Merck")
and MedcoHealth Solutions, Inc. ("Medco") (each of Merck and Medco, a "Party,"
and, collectively, the "Parties"). Capitalized terms used herein and not
otherwise defined shall have the meaning ascribed to such terms in Section 1
hereof.

                                    RECITALS

                  WHEREAS, the Parties have entered into a Master Separation and
Distribution Agreement (the "MSDA"), dated as of ____________, 2002, relating to
the separation of the "Medco Group" (as defined in the MSDA) from the Merck
Group (as defined in the MSDA) (the "Separation");

                  WHEREAS, in connection with the Separation, a number of shares
of common stock, par value $.01 per share of Medco ("Medco Common Stock") held
by Merck will be sold to the public in an initial public offering (the "IPO")
pursuant to a registration statement on Form S-1 (Registration No. 333-___) (the
"IPO Registration Statement"), reducing Merck's ownership of Medco by less than
20%;

                  WHEREAS, Merck currently contemplates that, within twelve
months following the consummation of the IPO, Merck will distribute to the
holders of its common stock, by means of a pro rata distribution, an exchange
offer for outstanding shares of common stock of Merck or a combination of both
(the "Distribution"), all of the shares of Medco Common Stock then owned by
Merck; and

                  WHEREAS, the MSDA contemplates that the Parties will enter
into this Employee Matters Agreement to allocate between themselves the
responsibilities, obligations and liabilities relating to employee compensation
and benefits.

                  NOW, THEREFORE, in consideration of the covenants and
agreements set forth below, the Parties agree as follows:

          1. DEFINITIONS As used in this Employee Matters Agreement, the
following terms will have the following meanings, applicable both to the
singular and the plural forms of the terms described:

          (a) "Ancillary Agreements" shall have the meaning set forth in the
MSDA but, for purposes of this Employee Matters Agreement, shall exclude this
Employee Matters Agreement.

          (b) "COBRA" shall mean the continuation coverage requirements of
Section 4980B(f) of the Code and Section 601 of ERISA.

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          (c) "Code" shall mean the Internal Revenue Code of 1986, as amended.

          (d) "Distribution" shall have the meaning set forth in the MSDA.

          (e) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.

          (f) "ERISA Affiliate" shall mean with respect to any Person (as
defined in the MSDA), each business or entity which is a member of a "controlled
group of corporations," under "common control" or a member of an "affiliated
service group" with such Person within the meaning of Sections 414(b), (c) or
(m) of the Code, or required to be aggregated with such Person under Section
414(o) of the Code, or under "common control" with such Person, within the
meaning of Section 4001(a)(14) of ERISA.

          (g) "Former Sourced Employees" shall mean employees of Merck who on
January 29, 2002 (a) performed services for and served in the workforce of the
Medco Business (as defined in the MSDA) but whose employment with Merck ended on
or after January 29, 2002 but prior to the "Effective Date" of the Leasing
Agreement (as hereinafter defined) and who, but for such termination of
employment would have been Sourced Employees (as defined in the Leasing
Agreement), or (b) were former employees of the Medco Group on assignment with a
member of the Merck Group but whose employment with the Merck Group ended on or
after January 29, 2002 but prior to the date of this Employee Matters Agreement
and who, but for such termination of employment would have been Foreign
Assignment Employees (as hereinafter defined).

          (h) "Medco Benefit Arrangements" shall mean any and all pension,
supplemental pension, accidental death and dismemberment, life and health
insurance and benefits (including medical, dental, vision, life insurance,
hospitalization, prescription drug, behavioral health and short- and long-term
disability), savings, bonus, deferred compensation, incentive compensation,
equity compensation, holiday, vacation, severance pay, salary continuation,
tuition reimbursement, service award, company car, scholarship, relocation,
patent award, fringe benefit and other employee benefit plans, programs,
policies, agreements and arrangements, including, but not limited to, each
"employee benefit plan" (as defined in Section 3(3) of ERISA), in each case,
established, sponsored or maintained by any member of the Medco Group.

          (i) "Medco Employees" shall mean all persons who are employees of any
member of the Medco Group.

          (j) "Merck Benefit Arrangements" shall mean any and all pension,
supplemental pension, accidental death and dismemberment, life and health
insurance and benefits (including medical, dental, vision, life insurance,
hospitalization, prescription drug, behavioral health and short- and long-term
disability), savings, bonus, deferred

                                       -2-

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compensation, incentive compensation, equity compensation, holiday, vacation,
severance pay, salary continuation, tuition reimbursement, service award,
company car, scholarship, relocation, patent award, fringe benefit and other
employee benefit plans, programs, policies, agreements and arrangements,
including, but not limited to, each "employee benefit plan" (as defined in
Section 3(3) of ERISA), in each case, established, sponsored or maintained by
any member of the Merck Group.

          (k) "Merck Employees" shall mean all persons who are employees of any
member of the Merck Group.

          (l) "Merck Transferees" shall mean those Sourced Employees,
Medco-Dedicated Employees (as hereinafter defined) and Foreign Assignment
Employees who accept employment with Medco.

          (m) "Separation Date" shall have the meaning set forth in the MDSA.

          2. ASSUMPTION BY MEDCO OF RESPONSIBILITIES, OBLIGATIONS AND
LIABILITIES RELATING TO THE MEDCO EMPLOYEES

         (a) Except as expressly set forth in this Employee Matters Agreement
(and subject to Section 2(b) hereof) or as otherwise required by applicable law
or as otherwise provided in any of the Ancillary Agreements, as of the
Separation Date, (x) the Merck Group shall be solely responsible for its
obligation to provide benefits under the Merck Benefit Arrangements in
accordance with the terms thereof (including any litigation relating to such
obligation) whether arising before, on or after the Separation Date, and (y) the
Medco Group shall be solely responsible for all other obligations and
liabilities relating to, or arising from, the employment, compensation and
employee benefits of the Medco Employees, Former Sourced Employees, Foreign
Assignment Employees (other than those Foreign Assignment Employees who are
hired into a non-temporary assignment with a member of the Merck Group before
January 1, 2003) and the former or future employees of any member of the Medco
Group including, without limitation, all obligations and liabilities relating to
the Medco Benefit Arrangements (including, without limitation, any failure
thereof to comply in form and in operation with ERISA, the Code, the federal
securities laws and other applicable law) and any litigation by any Medco
Employee, Former Sourced Employee, Foreign Assignment Employee (other than a
Foreign Assignment Employee who is hired into a non-temporary assignment with a
member of the Merck Group before January 1, 2003) or former or future employee
of any member of the Medco Group relating to employment, termination of
employment, compensation (including, without limitation, equity compensation and
the subject matter of Section 3(a)(iv)) or employee benefits, whether or not
arising from the treatment of the subject matter hereof and whether arising
before, on or after the Separation Date, other than claims or suits brought by
any Medco Employee (or former employee of Medco), Former Sourced Employee or
Foreign Assignment Employee who was employed in

                                       -3-

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Merck's Finance, Legal, Public Affairs, Information Services or Human Resources
department under any state or federal civil rights law based on the action of a
Merck Employee, other than a Sourced Employee.

         (b) Except as expressly set forth in this Employee Matters Agreement
(including as set forth in clause (x) of paragraph 2(a) hereof) or as otherwise
required by applicable law or any of the Ancillary Agreements, as of the
applicable Transfer Date, the Medco Group shall be solely responsible for all
obligations and liabilities relating to, or arising from, the employment,
compensation and employee benefits of the Merck Transferees including, without
limitation, all obligations and liabilities relating to the Medco Benefit
Arrangements (including, without limitation, any failure thereof to comply in
form and in operation with ERISA, the Code, the federal securities laws and
other applicable law) and any litigation by any Merck Transferee relating to
employment, termination of employment, compensation (including, without
limitation, equity compensation and the subject matter of Section 3(a)(iv)) or
employee benefits, whether or not arising from the treatment of the subject
matter hereof and whether arising before, on or after the applicable Transfer
Date, other than claims or suits brought by any Merck Transferee who was
employed in Merck's Finance, Legal, Public Affairs, Information Services or
Human Resources department under any state or federal civil rights law based on
the actions of a Merck Employee, other than a Sourced Employee.

         (c) Medco shall indemnify the Merck Group and hold the Merck Group
harmless from and against any damages, liabilities, costs or expenses which may
be incurred or suffered by any member of the Merck Group as a result of any such
entity being held jointly and/or severally liable, on, before or after the date
the Distribution is completed, under Code Sections 412, 4971 or 4980B, ERISA
Sections 302 or 601 through 609 or Title IV of ERISA, by reason of being
considered to have been an ERISA Affiliate with any member of the Medco Group on
or before the date the Distribution is completed, including, without limitation,
for any withdrawal liability (within the meaning of Section 4201 of ERISA)
incurred with respect to any "multi-employer plan" within the meaning of
Sections 3(37) or 4001(a)(3) of ERISA.

         (d) Merck shall indemnify the Medco Group and hold the Medco Group
harmless from and against any damages, liabilities, costs or expenses which may
be incurred or suffered by any member of the Medco Group as a result of any such
entity being held jointly and/or severally liable, on, before or after the date
the Distribution is completed, under Code Sections 412, 4971 or 4980B, ERISA
Sections 302 or 601 through 609 or Title IV of ERISA, by reason of being
considered to have been an ERISA Affiliate with any member of the Merck Group on
or before the date the Distribution is completed, including, without limitation,
for any withdrawal liability (within the meaning of Section 4201 of ERISA)
incurred with respect to any "multi-employer plan" within the meaning of
Sections 3(37) or 4001(a)(3) of ERISA.

                                       -4-

<PAGE>

         (e) Medco shall promptly reimburse the Merck Group, upon Merck's
reasonable request, for the cost of any obligations or liabilities satisfied by
the Merck Group that are or have been made the responsibility of the Medco Group
whether pursuant to this Employee Matters Agreement or otherwise.

         (f) Merck shall promptly reimburse the Medco Group, upon Medco's
reasonable request, for the cost of any obligations or liabilities satisfied by
the Medco Group that are or have been made the responsibility of the Merck Group
whether pursuant to this Employee Matters Agreement or otherwise.

          3.        ESTABLISHMENT OF MEDCO BENEFIT ARRANGEMENTS

          (a) Medco shall establish the following Medco Benefit Arrangements on
or before such times as are set forth below:

          (i) Equity Incentive Plan. Prior to the Separation Date, Medco shall
have adopted an equity incentive plan for the purpose of making equity-based
incentive awards relating to the common stock of Medco. Subject to Section 3(f),
equity awards shall be made thereunder as of and at such times, in such amounts
and to such persons as Medco shall determine.

          (ii) Medco Annual Incentive Program. Effective for the performance
year of Medco commencing January 1, 2003, Medco shall adopt an annual cash
incentive program for the benefit of the Medco Employees and the Merck
Transferees. Such plan shall contain such terms as Medco shall determine. The
Medco Employees and the Merck Transferees shall be eligible to participate in
such plan as Medco shall determine with respect to such performance year. Medco
shall reimburse Merck for bonuses paid to Medco Employees and Merck Transferees
(other than the Sourced Employees, to whom the Leasing Agreement (as hereinafter
defined) shall apply) in respect of 2002 under the Merck Annual Incentive
Program, to the extent that Merck pays such bonuses. Such reimbursement shall be
made within five days of the date on which such bonuses are paid or in
accordance with such other procedures agreed to by the Parties. Except with
respect to their benefits under the Merck Annual Incentive Program in respect of
performance year 2002, effective December 31, 2002, the Medco Employees and the
Merck Transferees shall cease to participate in the Merck Annual Incentive
Program.

          (iii) Retiree Health Plan. On or prior to the date the Distribution is
completed, Medco shall amend the Merck-Medco Medchoice Retiree Health Benefits
Plan (the "Medco Retiree Health Plan") to provide retiree medical benefits to
union Medco Employees on the same terms applicable to non-union Medco Employees
under the Medco Retiree Health Plan as in effect on such date or on such other
terms as may be required by any applicable collective bargaining agreement. As
of the date the amendment is completed, Medco shall be responsible for and shall
assume all liabilities,

                                       -5-

<PAGE>

responsibilities and obligations for all post-retirement medical benefits
under the Merck & Co., Inc. Medical, Dental and Long-Term Disability Plan for
Union Employees (the "Merck Union Retiree Health Plan") in respect of union
Medco Employees and former union employees of any member of the Medco Group.
Until the date the amendment is completed, Medco shall continue to fulfill its
obligations to Merck under all existing arrangements (and any subsequent changes
thereto agreed to by the Parties) pursuant to which Medco has obligations to
Merck by reason of provision of benefits under the Merck Union Retiree Health
Plan to union Medco Employees and former union employees of any member of the
Medco Group.

          (iv) Medco Deferral Plan. On or before September 1, 2002, Medco shall
establish an unfunded plan for the benefit of certain of the Medco Employees and
the Merck Transferees for the purpose of providing deferred compensation for a
select group of management or highly compensated employees (the "Medco Deferral
Plan"). The terms of the Medco Deferral Plan shall contain such terms as Medco
shall determine, but shall be subject to prior approval by Merck (which shall
not be unreasonably withheld). As soon as practicable after deferrals are
credited to accounts under the Merck & Co., Inc. Deferral Program (the "Merck
Deferral Plan") in respect of performance year 2002, Medco shall assume all
liability for the accounts of those Medco Employees and Merck Transferees who
participate in the Merck Deferral Plan and who, on or prior to September 1, 2002
(or such later date as Merck may determine, but in no event later than the date
the Distribution is completed), execute a release agreement releasing Merck from
its obligations under the Merck Deferral Plan (such Medco Employees and Merck
Transferees, the "Merck Deferral Plan Transferees"). The terms of such release
agreement shall be determined by Merck in its sole discretion (the "Release
Agreement"). Those Medco Employees and Merck Transferees who participate in the
Merck Deferral Plan and who do not timely execute the Release Agreement shall be
treated as having terminated employment with Merck due to separation for
purposes of the Merck Deferral Plan as of the date the Distribution is
completed, provided they have not otherwise terminated employment with the Merck
Group and the Medco Group on or prior to such date. The total of each account in
the Merck Deferral Plan as of the date of such assumption of each Merck Deferral
Plan Transferee shall become the opening balance of such Deferral Plan
Transferee's account in the Medco Deferral Plan. No deferral elections shall be
made in respect of performance year 2003 or any subsequent performance year
under the Merck Deferral Plan by Medco Employees or Merck Transferees, whether
or not they execute a Release Agreement. Nothwithstanding the foregoing, the
Parties may mutually agree that no Release Agreement shall be offered to the
Medco Employees or Merck Transferees who participate in the Merck Deferral Plan
and that all Medco Employees and Merck Transferees who participate in the Merck
Deferral Plan shall be treated as having terminated employment with Merck due to
separation for purposes of the Merck Deferral Plan as of the date the
Distribution is completed, provided they have not otherwise terminated
employment with the Merck

                                       -6-

<PAGE>

Group and the Medco Group on or prior to such date. Following the
assumption of liabilities described in this Section 3(a)(iv), the Medco Group
shall be solely responsible for all obligations and liabilities relating to, or
arising from, the Merck Deferral Plan in respect of Merck Deferral Plan
Transferees, and except for Merck's obligation to provide benefits attributable
to deferral elections prior to performance year 2003 to those Medco Employees
and Merck Transferees who do not execute a Release Agreement, Medco shall
indemnify the Merck Group and hold the Merck Group harmless from and against any
damages, liabilities, costs or expenses which may be incurred or suffered by any
member of the Merck Group in connection with the subject matter of this Section
3(a)(iv).

          (b) In addition to the Medco Benefit Arrangements to be adopted and
established pursuant to Section 3(a), Medco shall establish such other Medco
Benefit Arrangements and such other practices and policies relating thereto as
it deems necessary and appropriate for the purpose of providing compensation and
employee benefits to the Medco Employees and the Merck Transferees.

          (c) Medco shall cause each Medco Benefit Arrangement in which a Merck
Transferee participates to grant each such Merck Transferee credit for all
service with the Merck Group for all purposes other than (i) accruals of
benefits under any defined benefit pension plan maintained by the Medco Group
and (ii) any Medco Benefit Arrangement adopted after the Separation Date to the
extent that the prior service of similarly situated Medco Employees is not so
credited. With respect to Medco Benefit Arrangements in which Medco Employees or
Merck Transferees participate, Medco shall use its best efforts to cause its
insurance carriers to waive all applicable proof of insurability requirements.

          (d) Except as set forth in this Section 3, nothing in this Employee
Matters Agreement shall prohibit Medco from amending, modifying or terminating
any Medco Benefit Arrangement following the Separation Date or Merck from
amending, modifying or terminating any Merck Benefit Arrangement following the
Separation Date.

          (e) The Parties shall take all steps necessary such that all
compensation paid to Medco Employees and Merck Transferees, including equity
awards granted under the Medco equity incentive plan prior to the date the
Distribution is completed, shall constitute qualified performance-based
compensation under Section 162(m) of the Code.

          (f) Except as expressly agreed otherwise by the Parties, the Parties
shall take all steps necessary such that no issuance of Medco Common Stock shall
be made, no Medco stock-based equity award shall be granted and no other action
shall be taken if such issuance, grant or other action would preclude the
Distribution from being tax-free to Merck and Merck's shareholders. Without
limiting the generality of the foregoing, until such time as expressly agreed
otherwise by the Parties, Medco agrees that (i) it shall not grant any shares of
Medco Common Stock as compensation, or permit any restricted

                                       -7-

<PAGE>

stock units to be converted into Medco Common Stock, until after the date the
Distribution is completed, (ii) it shall not permit any options to purchase
Medco Common Stock to be exercised prior to the date the Distribution is
completed and (iii) it shall not permit any offering period for the purchase of
Medco stock under any Medco employee stock purchase plan to end prior to the
date the Distribution is completed.

          4.        CESSATION OF PARTICIPATION IN MERCK BENEFIT PLANS AND
                    ARRANGEMENTS

         Except in the case of the Merck Annual Incentive Program, the Merck
Deferral Plan and as may be required by applicable law or any of the Ancillary
Agreements or with respect to the options to purchase Merck stock held by the
Medco Employees and the Merck Transferees after the date the Distribution is
completed, effective as of (i) the date the Distribution is completed (or such
earlier date as Merck and Medco shall agree), the Medco Employees shall cease to
participate in, be covered by, receive benefits under or have any rights under
the Merck Benefit Arrangements and (ii) December 31, 2002, the Merck Transferees
shall cease to participate in, be covered by, receive benefits under or have any
rights under the Merck Benefit Arrangements, except for benefits and rights
relating to their participation therein prior to December 31, 2002.

          5.        MEDCO CASH BALANCE PLAN ASSET TRANSFER

          (a) Prior to the date the Distribution is completed, Medco shall
establish, or cause to be established, a trust qualified under Section 501(a) of
the Code (the "Successor Trust"). Merck shall cause the trustee of the master
trust in which the Medco Cash Balance Retirement Plan (the "MCBP") participates
(the "Master Trust"), as of the Master Trust's valuation date next following the
date the Successor Trust is established (the "Valuation Date"), to value, in a
manner consistent with its prior practice, the MCBP's allocable share of the
assets of the Master Trust (the "MCBP Asset Value"). As soon as practicable
after the determination of the MCBP Asset Value, Merck shall cause the trustee
of the Master Trust to transfer to the trustee of the Successor Trust an amount
in cash (or if mutually agreed by Merck and Medco in a combination of cash and
securities) equal to the MCBP Asset Value (i) increased by interest during the
period from the Valuation Date to the date of transfer (the "Interim Period") at
an interest rate equal to the interest rate credited from time to time during
such period on short-term investments held in the Master Trust (the "Short-Term
Rate") and (ii) reduced by (A) benefit payments to employees or their
beneficiaries made in accordance with the provisions of the MCBP during the
Interim Period plus interest on such benefit payments at the Short-Term Rate
from the date of payment until the transfer date and (B) an allocable share of
fees and expenses paid by the Master Trust during the Interim Period; provided,
however, that no transfer pursuant to this Section 5 shall be made until Medco
demonstrates to the reasonable satisfaction of Merck that the MCBP and the
Successor Trust satisfy the requirements for qualification under Section 401(a)
and Section 501(a) of the Code,

                                       -8-

<PAGE>

which evidence Medco shall provide to Merck promptly after the Successor Trust
is established.

          (b) Effective as of the date of the transfer of cash or cash and
securities described in Section 5(a), the Medco Group shall be solely
responsible for all obligations and liabilities relating to, or arising from,
the MCBP, and Medco shall indemnify the Merck Group and the Master Trust and
hold the Merck Group and the Master Trust harmless from and against any such
damages, liabilities, costs or expenses which may be incurred or suffered by any
member of the Merck Group or the Master Trust in connection with the subject
matter of this Section 5.

          6.        MEDCO 401(k) PLAN ASSET TRANSFER

          (a) Prior to the date the Distribution is completed, Medco shall
establish, or cause to be established, a trust (the "Medco 401(k) Trust")
qualified under Section 501(a) of the Code forming a part of the Merck-Medco
Managed Care 401(k) Savings Plan (the "Medco 401(k) Plan"). As soon as
practicable after the date that Medco demonstrates to the satisfaction of Merck
that the Medco 401(k) Plan and the Medco 401(k) Trust satisfy the requirements
for qualification under Section 401(k) and Section 501(a) of the Code (the
"Qualification Assurances"), Merck shall cause the trustee of the Merck master
trust in which the Medco 401(k) Plan participates (the "MSRT") to transfer, to
the Medco 401(k) Trust, assets having a fair market value equal to the portion
of the MSRT allocable to the Medco 401(k) Plan. No transfer shall be made unless
Medco provides Merck with the Qualification Assurances. The transfer shall be
made in cash (or if mutually agreed by Merck and Medco in a combination of cash
and securities) and, in the case of any participant loans in respect of Medco
Employees, shall include promissory notes or other documentation evidencing such
loans. To the extent reasonably necessary for administrative purposes and
consistent with applicable law and the fiduciary standards of ERISA, during a
period of limited duration, transactions may be suspended under the Medco 401(k)
Plan.

          (b) Effective as of the date of the transfer of cash or cash and
securities described in Section 6(a), the Medco Group shall be solely
responsible for all obligations and liabilities relating to, or arising from,
the Medco 401(k) Plan, and Medco shall indemnify the Merck Group and the MSRT
and hold the Merck Group and the MSRT harmless from and against any such
damages, liabilities, costs or expenses which may be incurred or suffered by any
member of the Merck Group or the MSRT in connection with the subject matter of
this Section 6.

          7.        TRANSFER OF MERCK TRANSFEREE 401(K) ACCOUNTS

                                       -9-

<PAGE>

          (a) As soon as practicable after the applicable Transfer Date, the
account balances of the Merck Transferees shall be transferred to the Medco
401(k) Plan. The Parties shall cooperate to effect the transfer of any
participant loans held by the Merck Transferees (including, without limitation,
promissory notes or other documentation evidencing such loans). Any outstanding
balances of plan loans in the Merck 401(k) Plan of the Merck Transferees shall
be transferred with the underlying accounts.

          (b) Effective as of the date of the transfer described in Section
7(a), the Medco 401(k) Plan shall be solely responsible for all obligations and
liabilities relating to, or arising from, the Medco 401(k) Plan in respect of
the Merck Transferees and their beneficiaries, and Medco shall indemnify the
Merck Group and the Merck 401(k) Plan and hold the Merck Group and the Merck
401(k) Plan harmless from and against any such damages, liabilities, costs or
expenses which may be incurred or suffered by any member of the Merck Group or
the Merck 401(k) Plan in connection with the subject matter of this Section 7.

          (c) Medco agrees that, at all times on and after the Transfer Date,
the Merck Transferees shall be fully vested in their benefits accrued under the
Medco 401(k) Plan.

          8.        ESTABLISHMENT OF STOCK FUND

          Effective as of the date the Distribution is completed or such earlier
date as the Parties shall agree, Medco shall establish a Merck Stock Fund under
the Medco 401(k) Plan that is not commingled for investment purposes with a
Merck Stock Fund under any benefit plans of the Merck Group. After the date the
Distribution is completed, Medco shall allow participants in the Medco 401(k)
Plan to retain their investment in shares of Merck Common Stock in the Merck
Stock Fund under the Medco 401(k) Plan for such period as Medco shall determine.
Participants shall be permitted to transfer investments out of the Merck Stock
Fund under the Medco 401(k) Plan, but no new contributions may be invested in
and no investments may be transferred into the Merck Stock Fund under the Medco
401(k) Plan. If Medco decides to liquidate the Merck Stock Fund under the Medco
401(k) Plan, Medco shall, after informing Merck in writing at least ten days
prior to any such sale, cause the Medco 401(k) Plan to dispose of the Merck
Common Stock therein, on the open market, in an orderly manner designed to avoid
any disruption of the market for such shares, and in accordance with applicable
law and the fiduciary standards of ERISA.

          9.        SOURCED EMPLOYEES, MEDCO-DEDICATED EMPLOYEES AND FOREIGN
                    ASSIGNMENT EMPLOYEES

          (a) Medco-Dedicated Employees and Foreign Assignment Employees. On or
prior to October 1, 2002, Merck shall identify and list on Exhibit I hereto
those Merck Employees (other than the "Sourced Employees" as defined in the
Employee Leasing

                                       -10-

<PAGE>

Agreement by and between Merck and Medco, dated as of __________, 2002 (the
"Leasing Agreement")) who work in the Merck Group but whose services are
primarily dedicated to the business of a member of the Medco Group (the
"Medco-Dedicated Employees"). Effective as of January 1, 2003 or such other date
as the Parties shall mutually agree (the "Transfer Date"), Medco shall offer to
employ, subject to Merck's approval on a case-by-case basis, none, some or all
of the Medco-Dedicated Employees and, none, some or all of the Merck Employees
listed on Exhibit II hereto (the "Foreign Assignment Employees") on the same
terms as set forth in Section 2.5 of the Leasing Agreement but applied with
respect to the Medco-Dedicated Employees and the Foreign Assignment Employees;
provided, however, that for purposes of such offer, the term "Medco-Dedicated
Employees" and "Foreign Assignment Employees" shall (i) exclude any Merck
Employees who prior to the Transfer Date voluntarily terminate their employment
with Merck or secure another position with Merck in which their service is not
primarily dedicated to the business of a member of the Medco Group, (ii) exclude
any Merck Employees whose employment is terminated by Merck prior to the
Transfer Date, (iii) exclude any Merck Employees who, as of the Transfer Date
meet the requirements to receive benefits due to total disability under the
Merck & Co., Inc. Long Term Disability Plan for Non-Union Employees and (iv)
include, in the case of inter-company employment transfers and employee hirings
occurring on or after October 1, 2002, Merck Employees who work for a member of
the Merck Group but whose services are primarily dedicated to the business of a
member of the Medco Group that are identified by Merck after October 1, 2002 but
prior to the Transfer Date; and, provided further however, that Medco shall use
commercially reasonable efforts to offer to employ those Medco Dedicated
Employees and Foreign Assignment Employees whose qualifications and skills meet
the requirements for any open position with any member of the Medco Group that
is available prior to January 1, 2003, or such other date as the Parties shall
mutually agree. With respect to those Medco Dedicated Employees and Foreign
Assignment Employees who accept employment with Medco pursuant to the
immediately preceding proviso, "Transfer Date" shall mean the corresponding
effective date of such employment with Medco.

          During the period in which Merck is required to provide services to
members of the Medco Group under the Transition Services Agreement, Medco shall,
following the Transfer Date and for so long as Merck shall request, lease to
Merck any Medco-Dedicated Employees who accept employment with Medco pursuant to
the preceding paragraph that Merck determines are necessary to fulfill its
obligations thereunder. Such employees will be leased to Merck pursuant to an
agreement between the Parties containing terms substantially comparable to the
terms of the Leasing Agreement.

          Except as expressly set forth in this Section 9 or in Section 2(a) of
this Employee Matters Agreement, the Medco Group shall have no liability or
obligation with respect to the Medco Dedicated Employees or the Foreign
Assignment Employees who do not

                                       -11-

<PAGE>

become Merck Transferees; provided, however, that Medco shall be solely
responsible for all claims or suits brought by any Medco Dedicated Employee or
Foreign Assignment Employee under any state or federal civil rights law based on
Medco's offer to employ (or failure to offer to employ, provided such failure
was not as a result of Merck's withholding its approval of the offer) any Medco
Dedicated Employee or Foreign Assignment Employee.

          (b) Open Enrollment. The Sourced Employees, the Medco-Dedicated
Employees and the Foreign Assignment Employees shall participate in all
applicable Medco open enrollment periods in 2002 under the Medco Benefit
Arrangements for coverage beginning on the Transfer Date; it being understood
that any such employee who (i) becomes a Merck Transferee shall not be entitled
to coverage under the Merck Benefit Arrangements by reason of having
participated in open enrollment periods under both the Merck Benefit
Arrangements and the Medco Benefit Arrangements or (ii) does not become a Merck
Transferee shall not be entitled to coverage under the Medco Benefit
Arrangements by reason of having participated in open enrollment periods under
both the Merck Benefit Arrangements and the Medco Benefit Arrangements.

          (c) Disabled Employees. As of the Transfer Date, Medco shall amend its
short-term disability plan to provide to Merck Transferees who are receiving
short-term disability benefits as of the Transfer Date coverage during 2003
equivalent to that provided to such Merck Transferees immediately prior to the
Transfer Date under the Merck Benefit Arrangements which provided such benefits.
Any such employee shall, if he or she becomes totally disabled (as defined under
the LTD Plan) during 2003, become a Merck Employee on the date he or she is
determined to be totally disabled, and Merck shall amend the LTD plan to credit
any service or period of disability while employed by Medco during 2003 for
purposes of eligibility to receive benefits thereunder.

          (d) COBRA. Merck shall retain all responsibilities, obligations and
liabilities under COBRA and state workers' compensation statutes relating to any
Merck Transferee (and, in the case of COBRA benefits, any qualified beneficiary
of a Merck Transferee) who becomes entitled to benefits under either of such
statutes on or before the Transfer Date.

          (e) Incurred Claims. Merck shall retain all responsibilities,
obligations and liabilities for claims arising or incurred on or before the
Transfer Date relating to any Merck Transferee under any medical, dental,
vision, life insurance, hospitalization, prescription drug, behavioral health or
short-term disability plan of Merck. For purposes of this Section 9(e), a claim
shall be deemed to have arisen or to have been incurred upon the incurrence of a
qualified expense for which reimbursement or payment is sought.

          (f) Employment Bidding Policy. The Parties agree to abide by the terms
of the Merck-Medco Transition Employee Bidding Policy attached hereto as Exhibit
III hereto.

                                       -12-

<PAGE>

          (g) Severance Costs. Severance related responsibilities for Sourced
Employees shall be determined in accordance with the provisions of the Leasing
Agreement, and severance related responsibilities for Medco-Dedicated Employees
and Foreign Assignment Employees shall be determined in accordance with the
provisions hereof.

          10.       MERCK CAPITAL VENTURES EMPLOYEES

          Not later than the date the Distribution is completed, Merck shall, or
shall cause Merck Capital Ventures, LLC ("MCV") to, make offers of employment to
those individuals who are employees of Medco and provide services primarily to
MCV (the "MVC Offerees"). Such offer of employment by Merck or MCV shall be made
at the same corresponding salary as in effect for the MVC Offerees immediately
prior to the date of such offer and with participation in Merck Benefit
Arrangements determined in the sole discretion of Merck. As of the date of
acceptance, Medco shall fully vest those MVC Offerees who accept employment with
the Merck Group in their accrued benefits under all applicable Medco Benefit
Arrangements. As applicable, Medco shall indemnify and hold harmless the Merck
Group for all compensation, benefit and other employment-related liabilities
relating to those MVC Offerees (i) who do not accept such employment with the
Merck Group or (ii) arising on or prior to date that they become employees of
Merck or MCV.

          11.       TREATMENT OF EQUITY AWARDS

          (a) As of the date the Distribution is completed, all outstanding
stock options granted prior to February 26, 2002 held by Medco Employees and
Merck Transferees under the Merck & Co., Inc. 2001 Incentive Plan (the "Merck
2001 Plan"), the Merck & Co., Inc. 1996 Incentive Plan (the "Merck 1996 Plan")
and the Merck & Co., Inc. 1991 Incentive Plan (the "Merck 1991 Plan") shall
remain options to purchase Merck stock subject to their terms; provided, that,
for purposes of this Section 11(a), such holders shall be considered separated
and the corresponding "Separation" provision of the rules and regulations of the
foregoing plans applicable to such grants (each a "Separation Provision") shall
be applied to such options. Adjustments to the economic terms of such options
shall be made in accordance with the corresponding adjustment provisions of the
foregoing plans. The formula used in this adjustment will be prescribed by
accounting rules and will be designed to put the option holders in the same
financial position immediately following the adjustment as existed immediately
before the adjustment. In addition, each such option the per share exercise
price of which is greater than $57.00 has been amended as of April 1, 2002 to
permit, subject to the expiration of the term of the option, each holder thereof
who remains employed with a member of the Medco Group following the end of the
exercise period prescribed by the corresponding Separation Provision to exercise
his or her option until three (3) months following the date he or she ceases to
be employed by a member of the Medco Group.

                                       -13-

<PAGE>

          (b) As of the date the Distribution is completed, all outstanding
stock options granted on March 1, 2002 held by Medco Employees and Merck
Transferees under the Merck 2001 Plan shall be converted into options to
purchase Medco stock in accordance with the terms of, and the rules and
regulations thereof applicable to, such grants, and, for purposes of this
Section 11(b), such holders shall not be considered separated. As of the date
the Distribution is completed, all outstanding stock options granted on or after
February 26, 2002 held by Medco Employees and Merck Transferees under the Merck
2001 Plan shall, unless otherwise provided by the Compensation and Benefits
Committee of the Board of Directors of Merck (the "Committee") or it delegee
likewise be converted, and, unless otherwise provided by the Committee at the
time of grant, such holders shall likewise not be considered separated. The
formula used in this conversion will be prescribed by accounting rules and will
be designed to put the option holders in the same financial position immediately
following the conversion as existed immediately before the conversion.

          (c) All outstanding stock options to purchase Merck stock held by
Medco Employees and Merck Transferees under plans other than the Merck 2001
Plan, the Merck 1996 Plan and the Merck 1991 Plan shall remain options on Merck
stock and shall continue in accordance with their terms, it being understood
that, for purposes of such plans, the employment of such holders shall not be
considered terminated as a result of the Distribution or, in the case of the
Merck Transferees, due to transfer of employment to the Medco Group and, in any
case, shall be considered terminated only if their employment with the Medco
Group terminates. Adjustments to the economic terms of such options shall be
made in accordance with the corresponding adjustment provisions of the plans.

          (d) Merck shall provide administration functions with respect to
options to purchase Merck stock held by employees of the Medco Group, the Merck
Transferees and the Foreign Assignment Employees on and after the date the
Distribution is completed ("Optionees"). Medco shall notify Merck in writing of
(i) the termination of any Optionee's employment with the Medco Group, and
whether such termination is due to gross misconduct or death or otherwise,
within five (5) business days thereafter and (ii) any other information, on such
basis as Merck shall request in its discretion, for purposes of Merck's
administration of such options. Without Merck's prior written consent, Medco
shall not communicate with the Optionees regarding the terms of their options on
Merck stock, including but not limited to communication regarding the impact a
change in their employment status with the Medco Group or the Merck Group may
have on such options. Any breach by Medco of this Section 11(d) shall, in
addition to any other remedies Merck may have, entitle Merck to the amount of
any attorneys' fees incurred by Merck in connection with such breach. Without
limiting the foregoing, if Medco fails to timely and correctly notify Merck of
the termination of an Optionee's employment with the Medco Group or communicates
(or has communicated ) incorrect or misleading information to

                                       -14-

<PAGE>

the Optionee on the status of an option to purchase Merck stock and the
Optionee exercises Merck Options that had expired as a result of such
termination or that they were not otherwise eligible to exercise, then Medco
shall pay Merck the sum of (x) the "spread," which is the product of (i) the
number of shares subject to such options and (ii) the difference between the
Fair market value of the underlying shares at the time of exercise and the
exercise price of such options, plus (y) a fee equal to the lesser of 25% of the
spread and $25,000.

          (e) Merck shall indemnify the Medco Group and hold the Medco Group
harmless from and against any damages, liabilities, costs or expenses which may
be incurred or suffered by any member of the Medco Group in connection with the
subject matter of this Section 11, other than (x) those arising as a result of
Medco's breach under Section 11(d) hereof or for which Medco is otherwise
obligated under Section 11(d) hereof or (y) that arise as a result of incorrect
or misleading information provided by Medco (without the consent of Merck) to
the Optionees or other Medco Employees regarding options to purchase Merck
stock.

          12.       POST-SEPARATION ADMINISTRATION OF PLANS

          Subject to the Transition Services Agreement, the Parties shall
administer their respective employee benefit plans consistently herewith, and to
the extent necessary amend such plans accordingly, and each Party shall bear all
costs and expenses, including but not limited to legal and actuarial fees,
incurred from and after the Separation Date in the administration, design,
drafting and implementation of any and all plans and compensation structures
which it maintains, establishes or creates and the amendment of its existing
plans or compensation structures. Medco shall indemnify the Merck Group and hold
the Merck Group harmless from and against any damages, liabilities, costs or
expenses which may be incurred or suffered by any member of the Merck Group in
connection with the subject matter of this Section 12 as it relates to any of
the Medco Benefit Arrangements. Except as contemplated by Section 11 hereof,
Merck shall indemnify the Medco Group and hold the Medco Group harmless from and
against any damages, liabilities, costs or expenses which may be incurred or
suffered by any member of the Medco Group in connection with the subject matter
of this Section 12 as it relates to any of the Merck Benefit Arrangements.

          13.       SURVIVAL OF AGREEMENTS

         Except as otherwise provided herein, each covenant and agreement of the
Parties contained in this Employee Matters Agreement shall survive the date the
Distribution is completed until such time as neither party shall have any
obligation or be entitled to any benefit thereunder.

          14.       EFFECT IF DISTRIBUTION DOES NOT OCCUR

                                       -15-

<PAGE>

          If the Distribution is not completed, then all actions and events that
are, under this Employee Matters Agreement, to be taken or occur effective as of
the date the Distribution is completed, after the date the Distribution is
completed or otherwise in connection with the Distribution, shall not be taken
or occur except to the extent specifically agreed by the Parties.

          15.       INCORPORATION OF INDEMNIFICATION AND INSURANCE MATTERS
                    AGREEMENT

         Article V of the Indemnification and Insurance Matters Agreement, dated
as of _______, 2002, to which Merck and Medco are parties (the "Indemnification
Agreement") is hereby incorporated into this Employee Matters Agreement by
reference as if set forth fully herein.

          16.       DISPUTE RESOLUTION

         ANY DISPUTE, CONTROVERSY OR CLAIM BETWEEN THE PARTIES HERETO ARISING
OUT OF OR RELATING TO THIS EMPLOYEE MATTERS AGREEMENT, INCLUDING, WITHOUT
LIMITATION, DISPUTES CONCERNING THE VALIDITY, INTERPRETATION OR PERFORMANCE OF
OR UNDER THIS EMPLOYEE MATTERS AGREEMENT OR ANY TERM OR PROVISION HEREOF, SHALL
BE EXCLUSIVELY GOVERNED BY AND SETTLED IN ACCORDANCE WITH THE PROVISIONS OF
ARTICLE III OF THE INDEMNIFICATION AGREEMENT.

          17.       ORDER OF PRECEDENCE

         The Parties agree that, if any terms of this Employee Matters Agreement
conflict with the terms in the MSDA, the terms of this Employee Matters
Agreement shall govern with respect to the resolution of such conflict.

          18.       EFFECTIVE TIME

         This Employee Matters Agreement shall become effective upon the
Separation Date.

         IN WITNESS WHEREOF, the Parties hereto have executed this Employee
Matters Agreement, effective as of the date first written above.

MERCK & CO., INC.                                    MEDCOHEALTH SOLUTIONS, INC.

-----------------------------------   ------------------------------------------
By:                                   By:
Its:                                  Its:

                                       -16-

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