10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

X	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2004.
	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________

Commission File Number: 0-20199

EXPRESS SCRIPTS, INC.
(Exact name of registrant as specified in its charter)

Delaware	43-1420563
(State of Incorporation)	(I.R.S. employer identification no.)
13900 Riverport Dr., Maryland Heights, Missouri	63043
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (314) 770-1666

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   X         No ___

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes  X        No ___

Common stock outstanding as of September 30, 2004:                                                             75,983,714 Shares

EXPRESS SCRIPTS, INC.

INDEX

Part I	Financial Information
	Item 1.     Financial Statements (unaudited)
	a)    Unaudited Consolidated Balance Sheet
	b)    Unaudited Consolidated Statement of Operations
	c)    Unaudited Consolidated Statement of Changes
	in Stockholders ’ Equity
	d)    Unaudited Consolidated Statement of Cash Flows
	e)    Notes to Unaudited Consolidated Financial Statements
	Item 2.    Management’s Discussion and Analysis of Financial
	Condition and Results of Operations
	Item 3.    Quantitative and Qualitative Disclosures About
	Market Risk
	Item 4.    Controls and Procedures
Part II	Other Information
	Item 1.    Legal Proceedings
	Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
	Item 3.    Defaults Upon Senior Securities – (Not Applicable)
	Item 4.    Submission of Matters to a Vote of Security Holders – (Not Applicable)
	Item 5.    Other Information – (Not Applicable)
	Item 6.     Exhibits

Signatures

Index to Exhibits

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EXPRESS SCRIPTS, INC.
Unaudited Consolidated Balance Sheet

(in thousands, except share data)	September 30, 2004			December 31, 2003
Assets
Current assets:
Cash and cash equivalents	$	161,161		$	396,040
Receivables, net		1,073,726			1,011,154
Inventories		151,581			116,375
Deferred taxes		18,424			15,346
Prepaid expenses and other current assets		23,610			21,220
Total current assets		1,428,502			1,560,135
Property and equipment, net		177,764			177,312
Goodwill, net		1,706,842			1,421,493
Other intangible assets, net		244,630			232,059
Other assets		34,837			18,175
Total assets	$	3,592,575		$	3,409,174
Liabilities and Stockholders' Equity
Current liabilities:
Claims and rebates payable	$	1,178,120		$	1,145,028
Accounts payable		306,547			265,875
Accrued expenses		218,540			216,505
Current maturities of long-term debt		22,056			--
Total current liabilities		1,725,263			1,626,408
Long-term debt		417,607			455,018
Other liabilities		176,824			133,755
Total liabilities		2,319,694			2,215,181
Stockholders' equity:
Preferred stock, $0.01 par value per share, 5,000,000 shares authorized,
and no shares issued and outstanding		--			--
Common Stock, $0.01 par value per share, 275,000,000 and 181,000,000
shares authorized, respectively, and 79,770,000 and 79,795,000 shares
issued and outstanding, respectively		797			798
Additional paid-in capital		468,635			484,663
Unearned compensation under employee compensation plans		(22,051	)		(23,302	)
Accumulated other comprehensive income		5,975			3,638
Retained earnings		1,061,850			864,550
		1,515,206			1,330,347
Common Stock in treasury at cost, 3,786,000 and 2,223,000
shares, respectively		(242,325	)		(136,354	)
Total stockholders' equity		1,272,881			1,193,993
Total liabilities and stockholders' equity	$	3,592,575		$	3,409,174

See accompanying Notes to Unaudited Consolidated Financial Statements

EXPRESS SCRIPTS, INC.
Unaudited Consolidated Statement of Operations

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share data)	2004			2003			2004			2003
Revenues 1	$	3,767,690		$	3,248,602		$	11,175,010		$	9,806,780
Cost of revenues 1		3,532,280			3,041,825			10,494,291			9,173,155
Gross profit		235,410			206,777			680,719			633,625
Selling, general and administrative		130,806			93,286			322,773			302,027
Operating income		104,604			113,491			357,946			331,598
Other (expense) income:
Undistributed loss from joint venture		(954	)		(1,436	)		(3,754	)		(4,520	)
Interest income		867			756			2,492			2,345
Interest expense		(4,248	)		(8,430	)		(37,118	)		(33,172	)
		(4,335	)		(9,110	)		(38,380	)		(35,347	)
Income before income taxes		100,269			104,381			319,566			296,251
Provision for income taxes		38,352			39,839			122,266			113,054
Income before cumulative effect of accounting change		61,917			64,542			197,300			183,197
Cumulative effect of accounting change, net of tax		--			--			--			(1,028	)
Net income	$	61,917		$	64,542		$	197,300		$	182,169
Basic earnings per share:
Before cumulative effect of accounting change	$	0.81		$	0.82		$	2.57		$	2.34
Cumulative effect of accounting change		--			--			--			(0.01	)
Net income	$	0.81		$	0.82		$	2.57		$	2.33
Weighted average number of common shares
Outstanding during the period - Basic EPS		76,126			78,666			76,902			78,197
Diluted earnings per share:
Before cumulative effect of accounting change	$	0.80		$	0.81		$	2.53		$	2.30
Cumulative effect of accounting change		--			--			--			(0.01	)
Net income	$	0.80		$	0.81		$	2.53		$	2.29
Weighted average number of common shares
Outstanding during the period - Diluted EPS		77,176			80,023			78,071			79,401

¹ Excludes estimated retail pharmacy co-payments of $1,363,991 and $1,326,022 for the three months ended September 30, 2004 and 2003, respectively, and $4,148,590 and $3,995,580 for the nine months ended September 30, 2004 and 2003, respectively. These are amounts we instructed retail pharmacies to collect from members. We have no information regarding actual co-payments collected.

See accompanying Notes to Unaudited Consolidated Financial Statements

EXPRESS SCRIPTS, INC.
Unaudited Consolidated Statement of Changes in Stockholders’ Equity

	Number of Shares			Amount
(in thousands)	Common Stock			Common Stock			Additional Paid-in Capital			Unearned Compensation Under Employee Compensation Plans			Accumulated Other Comprehensive Income		Retained Earnings		Treasury Stock			Total
Balance at December 31, 2003		79,795		$	798		$	484,663		$	(23,302	)	$	3,638	$	864,550	$	(136,354	)	$	1,193,993
Comprehensive income:
Net income		--			--			--			--			--		197,300		--			197,300
Other comprehensive income:
Foreign currency
translation adjustment		--			--			--			--			1,206		--		--			1,206
Realized and unrealized gains
on derivative financial
instruments, net of taxes		--			--			--			--			1,131		--		--			1,131
Comprehensive income		--			--			--			--			2,337		197,300		--			199,637
Treasury stock acquired		--			--			--			--			--		--		(160,286	)		(160,286
Changes in stockholders' equity
related to employee stock plans		(25	)		(1	)		(16,028	)		1,251			--		--		54,315			39,537
Balance at September 30, 2004		79,770		$	797		$	468,635		$	(22,051	)	$	5,975	$	1,061,850	$	(242,325	)	$	1,272,881	)

          See accompanying Notes to Unaudited Consolidated Financial Statements

EXPRESS SCRIPTS, INC.

Unaudited Consolidated Statement of Cash Flows

	Nine Months Ended September 30,
(in thousands)	2004			2003
Cash flows from operating activities:
Net income	$	197,300		$	182,169
Adjustments to reconcile net income to net cash
provided by operating activities, excluding
the effect of the acquisition:
Depreciation and amortization		50,477			39,687
Non-cash adjustments to net income		57,081			65,548
Net changes in operating assets and liabilities		(1,582	)		(6,008	)
Net cash provided by operating activities		303,276			281,396
Cash flows from investing activities:
Purchases of property and equipment		(33,387	)		(32,012	)
Acquisition, net of cash acquired, and investment in joint venture		(331,136	)		3,560
Loan to Pharmacy Care Alliance		(14,050	)		--
Other		103			15
Net cash used in investing activities		(378,470	)		(28,437	)
Cash flows from financing activities:
Proceeds from long-term debt		675,564			50,000
Repayment of long-term debt		(740,455	)		(160,430	)
Proceeds from revolving credit line, net		50,000			--
Treasury stock acquired		(160,286	)		(79,073	)
Deferred financing fees		(6,036	)		--
Net proceeds from employee stock plans		21,256			35,908
Net cash used in financing activities		(159,957	)		(153,595	)
Effect of foreign currency translation adjustment		272			2,292
Net (decrease) increase in cash and cash equivalents		(234,879	)		101,656
Cash and cash equivalents at beginning of period		396,040			190,654
Cash and cash equivalents at end of period	$	161,161		$	292,310

See accompanying Notes to Unaudited Consolidated Financial Statements

EXPRESS SCRIPTS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Summary of significant accounting policies

        Certain of our significant accounting policies are described below. Other financial statement note disclosures, normally included in financial statements prepared in conformity with generally accepted accounting principles, have been omitted from this Form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission. However, we believe the disclosures contained in this Form 10-Q are adequate to make the information presented not misleading when read in conjunction with the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2003, filed with the Securities and Exchange Commission on February 25, 2004. For a full description of our accounting policies, please refer to the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2003.

        We believe the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Unaudited Consolidated Balance Sheet at September 30, 2004, the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2004 and 2003, the Unaudited Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2004, and the Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2004 and 2003. Operating results for the three and nine months ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.

REVENUE RECOGNITION

        Revenues from our pharmacy benefit management (“PBM”) segment are earned by dispensing prescriptions from our mail pharmacies, processing claims for prescriptions filled by retail pharmacies in our networks, and by providing services to drug manufacturers, including administration of discount programs (see also “—Rebate Accounting”).

        Revenues from dispensing prescriptions from our mail pharmacies, which include the co-payment received from members of the health plans we serve, are recorded when prescriptions are shipped. At the time of shipment, our earnings process is complete: the obligation of our customer to pay for the drugs is fixed, and, due to the nature of the product, the member may not return the drugs nor receive a refund.

        Revenues related to the sale of prescription drugs by retail pharmacies in our networks consist of the amount the client has contracted to pay us (which excludes the co-payment) for the dispensing of such drugs together with any associated administrative fees. These revenues are recognized when the claim is processed. When we independently have a contractual obligation to pay our network pharmacy providers for benefits provided to our clients’ members, we act as a principal in the arrangement and we include the total payments we have contracted to receive from these clients as revenue, and payments we make to the network pharmacy providers as cost of revenue in compliance with Emerging Issues Task Force (“EITF”) Issue No. 99-19, “Reporting Gross Revenue as a Principal vs. Net as an Agent.” When a prescription is presented by a member to a retail pharmacy within our network, we are solely responsible for confirming member eligibility, performing drug utilization review, reviewing for drug-to-drug interactions, performing clinical intervention, which may involve a call to the member’s physician, communicating plan provisions to the pharmacy, directing payment to the pharmacy and billing the client for the amount they are contractually obligated to pay us for the prescription dispensed, as specified within our client contracts. We also provide benefit design and formulary consultation services to clients. We have separately negotiated contractual relationships with our clients and with network pharmacies, and under our contracts with pharmacies we assume the credit risk of our clients’ ability to pay for drugs dispensed by these pharmacies to clients’ members. Our clients are not obligated to pay the pharmacies as we are primarily obligated to pay retail pharmacies in our network the contractually agreed upon amount for the prescription dispensed, as specified within our provider contracts. In addition, under most of our client contracts, we realize a positive or negative margin represented by the difference between the negotiated ingredient costs we will receive from our clients and the separately negotiated ingredient costs we will pay to our network pharmacies. These factors indicate we are a principal as defined by EITF 99-19 and, as such, we record ingredient cost billed to clients in revenue and the corresponding ingredient cost paid to network pharmacies in cost of revenues.

        If we merely administer a client’s network pharmacy contracts, to which we are not a party and under which we do not assume credit risk, we record only our administrative fees as revenue. For these clients, we earn an administrative fee for collecting payments from the client and remitting the corresponding amount to the pharmacies in the client’s network. In these transactions we act as a conduit for the client. Because we are not the principal in these transactions, drug ingredient cost is not included in our revenues or in our cost of revenues.

        In retail pharmacy transactions, amounts paid to pharmacies and amounts charged to clients are always exclusive of the applicable co-payment. Under our pharmacy agreements, the pharmacy is solely obligated to collect the co-payment from the member based on the amount we advise them to collect. We have no information regarding actual co-payments collected. As such, we do not include member co-payments to retail pharmacies in our revenue or in our cost of revenue. Retail pharmacy co-payments, which we instructed retail pharmacies to collect from members, of $1.4 billion and $1.3 billion for the three months ended September 30, 2004 and 2003, respectively, and $4.1 billion and $4.0 billion for the nine months ended September 30, 2004 and 2003, respectively, are excluded from revenues and cost of revenues.

        We bill our clients based upon the billing schedules established in client contracts. At the end of a period, any unbilled revenues related to the sale of prescription drugs that have been adjudicated with retail pharmacies are estimated based on the amount we will pay to the pharmacies and historical gross margin. Those amounts due from our clients are recorded as revenue as they are contractually due to us for past transactions. Adjustments are made to these estimated revenues to reflect actual billings at the time clients are billed; historically, these adjustments have not been material.

        Certain implementation and other fees paid to clients upon the initiation of a contractual agreement are considered an integral part of overall contract pricing and are recorded as a reduction of revenue. Where they are refundable upon early termination of the contract, these payments are capitalized and amortized as a reduction of revenue on a straight-line basis over the life of the contract.

        Revenues from our non-PBM segment, Pharma Business Solutions (“PBS”), are derived from the distribution of pharmaceuticals requiring special handling or packaging where we have been selected by the pharmaceutical manufacturer as part of a limited distribution network, the distribution of pharmaceuticals through Patient Assistance Programs where we receive a fee from the pharmaceutical manufacturer for administrative and pharmacy services for the delivery of certain drugs free of charge to doctors for their indigent patients, sample fulfillment and sample accountability services. Revenues earned by PBS include administrative fees received from pharmaceutical manufacturers for dispensing or distributing consigned pharmaceuticals requiring special handling or packaging and administrative fees for verification of practitioner licensure and distribution of consigned drug samples to doctors based on orders received from pharmaceutical sales representatives. We also administer sample card programs for certain manufacturers and include the ingredient costs of those drug samples dispensed from retail pharmacies in PBS revenues, and the associated costs for these sample card programs in cost of revenues. Because manufacturers are independently obligated to pay us and we have an independent contractual obligation to pay our network pharmacy providers for free samples dispensed to patients under sample card programs, we include the total payments from these manufacturers (including ingredient costs) as revenue, and payments to the network pharmacy provider as cost of revenue. These transactions require us to assume credit risk.

REBATE ACCOUNTING

        We administer two rebate programs through which we receive rebates and administrative fees from pharmaceutical manufacturers. Rebates earned for the administration of these programs, performed in conjunction with claim processing and mail pharmacy services provided to clients, are recorded as a reduction of cost of revenue and the portion of the rebate payable to customers is treated as a reduction of revenue. When we earn rebates and administrative fees in conjunction with formulary management services, but do not process the underlying claims, we record rebates received from manufacturers, net of the portion payable to customers, in revenue. We record rebates and administrative fees receivable from the manufacturer and payable to clients when the prescriptions covered under contractual agreements with the manufacturers are dispensed; these amounts are not dependent upon future pharmaceutical sales.

        With respect to rebates based on actual market share performance, we estimate rebates and the associated receivable from pharmaceutical manufacturers quarterly based on our estimate of the number of rebatable prescriptions and the rebate per prescription. The portion of rebates payable to clients is estimated quarterly based on historical and/or anticipated sharing percentages and our estimate of rebates receivable from pharmaceutical manufacturers. These estimates are adjusted to actual when amounts are received from manufacturers and the portion payable to clients is paid.

        With respect to rebates that are not based on market share performance, no estimation is required because the manufacturer billing amounts and the client portion are determinable when the drug is dispensed. We pay all or a contractually agreed upon portion of such rebates to our clients.

COST OF REVENUES

        Cost of revenues includes product costs, network pharmacy claims payments and other direct costs associated with dispensing prescriptions, including shipping and handling (see also “—Revenue Recognition” and “—Rebate Accounting”).

CASH AND CASH EQUIVALENTS

        Cash and cash equivalents include cash on hand and investments with original maturities of three months or less. We have banking relationships resulting in certain cash disbursement accounts being maintained by banks not holding our cash concentration accounts. As a result, cash disbursement accounts carry negative book balances (representing outstanding checks not yet presented for payment) have been reclassified to claims and rebates payable or to accounts payable. The reclassification restores balances to cash and current liabilities for liabilities to our vendors which have not been defeased. No overdraft or unsecured short-term loan exists in relation to these negative balances.

RECEIVABLES

        Based on our revenue recognition policies discussed above, certain claims at the end of a period are unbilled. Revenue and unbilled receivables for those claims are estimated each period based on the amount to be paid to network pharmacies and historical gross margin. Estimates are adjusted to actual at the time of billing. In addition, revenue and unbilled receivables for rebates based on market share performance are calculated quarterly based on an estimate of rebatable prescriptions and the rebate per prescription. These estimates are adjusted to actual when the number of rebatable prescriptions and the rebate per prescription have been determined and the billing to the manufacturers has been completed. Historically, adjustments to our estimates have been immaterial.

INVENTORIES

        Inventories consist of prescription drugs and medical supplies that are stated at the lower of first-in first-out cost or market.

PROPERTY AND EQUIPMENT

        Property and equipment is carried at cost and is depreciated using the straight-line method over estimated useful lives of seven years for furniture and five years for equipment and purchased computer software. Leasehold improvements are amortized on a straight-line basis over the term of the lease or the useful life of the asset, if shorter. Expenditures for repairs, maintenance and renewals are charged to income as incurred. Expenditures that improve an asset or extend its estimated useful life are capitalized. When properties are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income. Research and development expenditures relating to the development of software for internal purposes, are charged to expense until technological feasibility is established. Thereafter, the remaining software production costs up to the date placed into production are capitalized and included as Property and Equipment. Amortization of the capitalized amounts commences on the date placed into production, and is computed on a product-by-product basis using the straight-line method over the remaining estimated economic life of the product but not more than five years. Reductions, if any, in the carrying value of capitalized software costs to net realizable value are expensed.

GOODWILL

        Goodwill is evaluated for impairment annually or when events or circumstances occur indicating that goodwill might be impaired. In accordance with the provisions of Financial Accounting Statement No. (“FAS”) 142, “Goodwill and Other Intangible Assets,” we perform our annual impairment testing during the fourth quarter of each year. No impairment test performed to date has indicated any impairment.

OTHER INTANGIBLE ASSETS

        Other intangible assets include, but are not limited to, customer contracts, non-compete agreements, deferred financing fees, trade names and certain advance discounts paid to clients under contractual agreements. Other intangible assets, excluding customer contracts, are recorded at cost. Customer contracts are valued based on discounted cash flows over the expected life of the intangible asset. Excluding trade names, which have an indefinite life, other intangible assets are amortized on a straight-line basis over periods from two to 20 years.

IMPAIRMENT OF LONG-LIVED ASSETS

        We evaluate whether events and circumstances have occurred that indicate the remaining estimated useful life of long–lived assets, including intangible assets and the loan to Pharmacy Care Alliance (described in Note 2), may warrant revision or that the remaining balance of an asset may not be recoverable. The measurement of possible impairment is based on the ability to recover the balance of assets from expected future operating cash flows on an undiscounted basis. Impairment losses, if any, would be determined based on the present value of the cash flows using discount rates that reflect the inherent risk of the underlying business. No such impairment existed as of September 30, 2004 and December 31, 2003. Absent events or circumstances indicating an impairment of goodwill, we perform an annual goodwill impairment test during the fourth quarter.

SELF-INSURANCE RESERVES

        We maintain insurance coverage for claims that arise in the normal course of business. Where insurance coverage is not available, or, in our judgment, is not cost-effective, we maintain self-insurance reserves to reduce our exposure to future legal costs, settlements and judgments. Self-insured losses are accrued based upon estimates of the aggregate liability for claim costs in excess of our insurance coverage using certain actuarial assumptions followed in the insurance industry and our historical experience (See Note 8). It is not possible to predict with certainty the outcome of these claims, and we can give no assurances that any losses, in excess of our insurance and any self-insurance reserves, will not be material.

EMPLOYEE BASED COMPENSATION

        We account for employee stock options in accordance with Accounting Principles Board No. (“APB”) 25, “Accounting for Stock Issued to Employees.” Under APB 25, we apply the intrinsic value method of accounting and, therefore, have not recognized compensation expense for options granted, because we grant options at a price equal to market value at the time of grant. FAS 123, “Accounting for Stock-Based Compensation” prescribes the recognition of compensation expense based on the fair value of options determined on the grant date. However, FAS 123 grants an exception that allows companies currently applying APB 25 to continue using that method. We have, therefore, elected to continue applying the intrinsic value method under APB 25. The following table shows stock-based compensation expense included in net income and pro forma stock-based compensation expense, net income and earnings per share had we elected to record compensation expense based on the estimated fair value of options at the grant date for the nine months ended September 30, 2004 and 2003 (see also Note 9):

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	2004		2003		2004		2003
Net income, as reported(1)	$	61,917	$	64,542	$	197,300	$	182,169
Less: Employee stock-based
compensation expense determined
using fair-value based method for
stock-based awards, net of tax(2)		1,035		1,819		2,387		7,146
Pro forma net income	$	60,882	$	62,723	$	194,913	$	175,023
Basic earnings per share
As reported	$	0.81	$	0.82	$	2.57	$	2.33
Pro forma		0.79		0.80		2.53		2.25
Diluted earnings per share
As reported	$	0.80	$	0.81	$	2.53	$	2.29
Pro forma	$	0.78	$	0.79	$	2.48	$	2.20

⁽¹⁾     Net income, as reported, includes stock-based compensation expense for the three months ended September 30, 2004 and 2003 of $1,122 ($1,818 pre-tax) and $1,359 ($2,198 pre-tax), respectively, and for the nine months ended September 30, 2004 and 2003 of $3,860 ($6,252 pre-tax) and $3,069 ($4,962 pre-tax)), respectively, related to restricted shares of Common Stock awarded to certain of our officers and employees.

⁽²⁾     The decrease in pro forma compensation expense is due to the forfeiture of options during the year which resulted in expense reductions of $283 and $3,473 during the three and nine months ended September 30, 2004, respectively.

NEW ACCOUNTING GUIDANCE

        In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. (“FIN”) 46, “Consolidation of Variable Interest Entities.” FIN 46 requires a variable interest entity be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. The consolidation provisions of FIN 46 were originally effective for financial periods ending after July 15, 2003. In October 2003, the FASB issued Staff Position FIN 46-6, “Effective Date of FIN 46,” which delays the implementation date to financial periods ending after December 31, 2003. In December 2003, the FASB published a revision to FIN 46 (“FIN 46R”) to clarify some of the provisions of FIN 46, and to exempt certain entities from its requirements. We do not have any variable interest entities requiring consolidation under FIN 46 and FIN 46R. Therefore, the adoption of these standards did not have a material impact on our consolidated financial position, consolidated results of operations or our consolidated cash flows.

        In January 2003, we adopted FAS 143, “Asset Retirement Obligations.” FAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. FAS 143 requires the capitalization of the fair value of any legal or contractual obligations associated with the retirement of tangible, long-lived assets in the period in which the liabilities are incurred and the capitalization of a corresponding amount as part of the book value of the related long-lived asset. In subsequent periods, we are required to adjust asset retirement obligations based on changes in estimated fair value, and the corresponding increases in asset book values will be depreciated over the useful life of the related asset. As required by FAS 143, we recorded an asset retirement obligation ($3.1 million at January 1, 2003) primarily related to equipment and leasehold improvements installed in leased mail-order facilities in which we have a contractual obligation to remove the improvements and equipment upon surrender of the property to the landlord. For certain of our leased facilities, we are required to remove equipment and convert the facilities back to office space upon surrender of the property. We also recorded a net increase in fixed assets (net of accumulated depreciation) of $1.4 million and a $1.7 million ($1.0 million, net of taxes) loss from the cumulative effect of change in accounting principle. The $1.4 million asset is being depreciated, on a straight-line basis, over the remaining term of the leases, which range from seven months to ten years.

Note 2 – Changes in business

        On January 30, 2004, we acquired the outstanding capital stock of CuraScript Pharmacy, Inc. and CuraScript PBM Services, Inc. (collectively, “CuraScript”), for approximately $333.2 million which includes a purchase price adjustment for closing working capital and transaction costs. CuraScript is one of the nation’s largest specialty pharmacy services companies and will enhance our ability to provide comprehensive clinical services to our clients and their members. CuraScript operates seven specialty pharmacies throughout the United States and serves over 175 managed care organizations, 30 Medicaid programs and the Medicare program. The transaction was accounted for under the provisions of FAS 141, “Business Combinations.” The purchase price has been preliminarily allocated based upon the estimated fair value of net assets acquired at the date of the acquisition. A portion of the excess of purchase price over tangible net assets acquired has been preliminarily allocated to intangible assets, consisting of customer contracts in the amount of $28.7 million and non-competition agreements in the amount of $2.7 million, which are being amortized using the straight-line method over estimated useful lives of ten years and three years, respectively. These assets are included in other intangible assets. In addition, the excess of purchase price over tangible net assets and identified intangible assets acquired has been preliminarily allocated to goodwill in the amount of $284.8 million and trade names in the amount of $1.3 million, which are not being amortized. The purchase price allocation is subject to refinement in the future pending finalization of intangible asset valuations and final assessment of deferred taxes at the acquisition date. The $333.2 million purchase price was financed with $210.0 million of cash on hand and the remainder by adding $125.0 million in Term C loans through an amendment of our Bank Credit Facility. Our PBM operating results include those of CuraScript from January 30, 2004, the date of acquisition.

        In January 2004, we entered into an agreement to provide PBM services for the Medicare discount program of Pharmacy Care Alliance, Inc. (“PCA”), a nonstock, not-for-profit entity jointly controlled by the National Association of Chain Drugstores (“NACDS”) and us. Our PBM services include the negotiation of discounts from individual retailers and pharmaceutical manufacturers, the enrollment of cardholders and the processing of prescription claims.

        During the first quarter of 2004, we entered into a lending agreement with PCA, whereby we committed to lend up to $4.0 million to PCA in the form of a revolving line of credit available over the next 18 months. Requests for borrowings on the revolving line of credit require the unanimous consent of PCA’s board of directors, which consists of representatives from NACDS and from our management team, or its designated representatives. PCA will utilize the revolving line of credit to fund its operating expenditures. NACDS has agreed to guarantee the lesser of $2.0 million or 50% of the amounts outstanding on the revolving line of credit.

        In the second quarter of 2004, we signed an amended credit agreement with PCA which increased the revolving line of credit available to PCA from the initial $4.0 million to $17.0 million. The additional $13.0 million will be unsecured and used to fund PCA’s operating expenditures, as well as the start-up expenditures associated with the enrollment of cardholders by PCA and by us. As of September 30, 2004, we have loaned PCA $14.3 million, which is included in other long-term assets on the Unaudited Consolidated Balance Sheet.

         In regard to the extended revolving line of credit, the collectibility of any unsecured borrowings will be a function of PCA’s success in enrolling new members for its Medicare discount program. Through September 30, 2004, enrollment has fallen short of expectations, with approximately 200,000 members enrolled to date. We continue to enroll new members and we believe our enrollment goals can be attained if membership for the Medicare Discount Card program builds, or if the Medicare Discount Card program is extended beyond 2005. However, if enrollment continues to fall short of expectations, it is possible that a portion, or all, of any unsecured borrowings under the line of credit could be written off in future quarters.

Note 3 – Receivables, net

        Included in receivables, net, as of September 30, 2004 and December 31, 2003, is an allowance for doubtful accounts of $32.1 million and $28.6 million, respectively. The increase in the allowance for doubtful accounts is primarily due to the inclusion of CuraScript opening balances as a result of our January 2004 acquisition.

        As of September 30, 2004 and December 31, 2003, unbilled receivables were $592.2 million and $603.5 million, respectively. Unbilled receivables are billed to clients typically within 30 days of the transaction date based on the contractual billing schedule agreed upon with the client.

Note 4 – Goodwill and other intangibles

        The following is a summary of our goodwill and other intangible assets (amounts in thousands).

	September 30, 2004				December 31, 2003
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Goodwill
PBM (1)	$	1,791,641	$	106,935	$	1,506,242	$	106,885
Non-PBM		22,136		--		22,136		--
	$	1,813,777	$	106,935	$	1,528,378	$	106,885
Other intangible assets
PBM (1)
Customer contracts (1)	$	293,740	$	81,243	$	264,831	$	70,180
Other (1)		64,844		37,183		67,592		35,064
		358,584		118,426		332,423		105,244
Non-PBM
Customer contracts		4,000		1,292		4,000		917
Other		1,880		116		1,880		83
		5,880		1,408		5,880		1,000
Total other intangible assets	$	364,464	$	119,834	$	338,303	$	106,244

⁽¹⁾ As a result of our acquisition of the capital stock of CuraScript, we preliminarily recorded PBM goodwill, customer contracts, trade names, and other intangible assets of $284.8 million, $28.7 million, $1.3 million, and $2.7 million, respectively (See Note 2). Write-offs of deferred financing fees due to the redemption of our Senior Notes and the refinancing of our bank credit facility (see Note 6) resulted in changes in other intangible assets from December 31, 2003 to September 30, 2004. Changes in goodwill and accumulated amortization from December 31, 2003 to September 30, 2004 are also a result of changes in foreign currency exchange rates.

        The aggregate amount of amortization expense of other intangible assets was $6.9 million and $5.7 million for the three months ended September 30, 2004 and 2003, respectively, and $27.0 million and $18.9 million for the nine months ended September 30, 2004 and 2003, respectively. The future aggregate amount of amortization expense of other intangible assets is approximately $7.1 million for fourth quarter of 2004, $26.5 million for 2005, $22.9 million for 2006, $17.6 million for 2007, $17.2 million for 2008, and $15.8 million for 2009. The weighted average amortization period of intangible assets subject to amortization is 17 years in total, and by major intangible class is 20 years for customer contracts and six years for other intangible assets.

Note 5 – Earnings per share

        Basic earnings per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed in the same manner as basic earnings per share but adds the number of additional common shares that would have been outstanding for the period if the dilutive potential common shares had been issued. The following is the reconciliation between the number of weighted average shares used in the basic and diluted earnings per share calculation for all periods (amounts in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2004		2003		2004		2003
Weighted average number of common shares
outstanding during the period - Basic EPS		76,126		78,666		76,902		78,197
Outstanding stock options		862		1,149		964		1,018
Executive deferred compensation plan		45		51		46		50
Restricted stock awards		144		157		159		136
Weighted average number of common shares
outstanding during the period - Diluted EPS		77,177		80,023		78,071		79,401

The above shares are all calculated under the “treasury stock” method in accordance with FAS 128, “Earnings per Share.”

Note 6 – Financing

        In early February 2004, we borrowed $50.0 million on the revolving credit facility under our then existing credit agreement and on February 13, 2004, we refinanced our entire credit facility. We negotiated an $800.0 million credit facility with a bank syndicate which includes $200.0 million of Term A loans, $200.0 million of Term B loans and a $400.0 million revolving credit facility. The proceeds from the $800.0 million credit facility were used to prepay borrowings on the revolver, Term B and Term C loans outstanding under our previous credit facility. In June and September 2004, we made scheduled payments on our Term A and Term B loans totaling $10.0 million and $1.0 million, respectively. As of September 30, 2204, we had net borrowings of $50.0 million under our revolving credit facility.

        Our new credit facility requires us to pay interest periodically on the London Interbank Offered Rates (“LIBOR”) or base rate options, plus a margin. The margin on the Term A loans and on amounts outstanding under the revolving credit facility is dependent on our credit rating and our ratio of debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”). The Term B loan interest is based on the LIBOR or alternative base rate options plus a margin of 1.5% or 0.25% per annum, respectively. To alleviate interest rate volatility, we have an interest rate swap arrangement (see Note 7). Under our new credit facility we are required to pay commitment fees on the unused portion of the $400.0 million revolving credit facility ($350.0 million at September 30, 2004). The commitment fee will range from 0.2% to 0.5% depending on our credit rating and our consolidated leverage ratio. The commitment fee is currently 0.25% per annum.

        At September 30, 2004, the weighted average interest rate on the new facility was 3.11%. Our new credit facility contains covenants that limit the indebtedness we may incur, the common shares we may repurchase and dividends we may pay. The covenants also include a minimum interest coverage ratio and a maximum leverage ratio. At September 30, 2004, we are in compliance with all covenants associated with our credit facility.

        During the second quarter of 2004, we redeemed all of our outstanding Senior Notes ($204.4 million) at a redemption price of 104.8125% by using internally generated cash and a portion of our $400 million revolving credit facility. As a result of the redemption, we recorded in interest expense charges of approximately $12.3 million ($7.6 million after-tax) representing a redemption premium of $9.8 million and the write-off of unamortized deferred financing fees.

        The following represents the schedule of current maturities for our long-term debt at September 30, 2004 excluding the deferred gain ($0.1 million at September 30, 2004) from the restructuring of an interest rate swap agreement in 2000 (amounts in thousands):

Year Ended December 31,
2004	$	5,500
2005		22,056
2006		29,556
2007		39,556
2008		79,556
Thereafter		263,339
	$	439,563

Note 7 – Derivative financial instruments

        We use an interest rate swap agreement to manage our interest rate risk on future variable interest payments. At September 30, 2004, our swap agreement fixes the variable interest rate payments on approximately $20.0 million of debt under our credit facility. Under our swap agreement, we agree to receive a variable rate of interest on the notional principal amount of approximately $20.0 million based upon a three month LIBOR rate in exchange for payment of a fixed rate of 6.25% per annum. The swap will mature in April 2005.

        Our present interest rate swap agreement is a cash flow hedge which requires us to pay fixed-rates of interest, and which hedges against changes in the amount of future cash flows associated with variable interest obligations. Accordingly, the fair value of our swap agreement, $0.6 million at September 30, 2004, is reported on the balance sheet in other liabilities. The related deferred loss on our swap agreements, $0.4 million at September 30, 2004, is deferred in shareholders’ equity as a component of other comprehensive income. This deferred loss is then recognized as an adjustment to interest expense over the same period in which the related interest payments being hedged are recorded in income. The loss associated with the ineffective portion of this agreement is immediately recognized as an expense. For the three and nine months ended September 30, 2004 and 2003, the gains and losses on the ineffective portion of our swap agreement were not material to the consolidated financial statements.

Note 8 – Contingencies

         We accrue self-insurance reserves based upon estimates of the aggregate liability of claim costs in excess of our insurance coverage. Reserves are estimated using certain actuarial assumptions followed in the insurance industry and our historical experience (see Note 1, “Self-insurance reserves”). The majority of these claims are legal claims and our liability esimate is primarily related to the cost to defend these claims. We typically do not accrue for settlements, judgments, monetary fines or penalties until such amounts are probable and estimable in compliance with FAS 5, “Accounting for Contingencies.” Under FAS 5, if the range of possible loss is broad, the liability accrual should be based on the lower end of the range.

         As we reported for the second quarter, we are a defendant in litigation involving our contract to provide prescription drug benefits for the State of New York Empire Plan and we have received civil investigative demands from the Attorneys General of 22 states and the District of Columbia. In light of these developments, we previously disclosed that we would increase legal reserves in the third quarter by $15.0 million to $20.0 million. Subsequently, several shareholder class action lawsuits and additional class action lawsuits were filed against the Company (see “—Legal Proceedings”). Based on these developments, we recorded a $25.0 million increase in legal reserves during the third quarter period. We accrue legal reserves for costs in excess of our insurance coverage to defend legal claims. Reserves are estimated using certain actuarial assumptions followed in the insurance industry and our historical experience (see “—Critical Accounting Policies”).

         While we believe that our services and business practices are in compliance with all applicable laws, rules and regulations in all material respects, we cannot predict the outcome of these matters at this time. An unfavorable outcome in one or more of these matters could result in the imposition of judgments, monetary fines or penalties, or injunctive or administrative remedies. We can give no assurance that such judgments, fines and remedies, and future costs associated with these matters would not have a material adverse effect on our financial condition, our consolidated results of operations or our consolidated cash flows.

Note 9 – Stock-based compensation plans

        We apply APB 25 and related interpretations in accounting for our stock-based compensation plans. Accordingly, compensation cost has been recorded based upon the intrinsic value method of accounting for restricted stock and no compensation cost has been recognized for stock options granted as the exercise price of the options was not less than the fair market value of the shares at the time of grant. If compensation cost for stock option grants had been determined based on the fair value at the grant dates consistent with the method prescribed by FAS 123, our net income and earnings per share for the three months ended September 30, 2004 and 2003 would have been $60.9 million, or $0.78 per diluted share and $62.7 million or $0.79 per diluted shares, respectively, and our net income and earnings per share for the nine months ended September 30, 2004 and 2003 would have been $194.9 million or $2.48 per diluted share and $175.0 million or $2.20 per diluted share, respectively (see also Note 1).

        The fair value of options granted (which is amortized over the option-vesting period in determining the pro forma impact) is estimated on the date of grant using the Black-Scholes multiple option-pricing model with the following weighted average assumptions:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2004		2003		2004		2003
Expected life of option		3-7 Years		3-5 years		3-7 years		3-10 years
Risk-free interest rate		3.27%-3.93%		2.14%-3.07%		1.97%-4.18%		1.23%-3.71%
Expected volatility of stock		44%		53%		44%-47%		53%
Expected dividend yield		None		None		None		None

        A summary of the status of our fixed stock option plans as of September 30, 2004 and 2003, and changes during the periods ending on those dates are presented below.

	Nine Months Ended September 30, 2004						Nine Months Ended September 30, 2003
(share data in thousands)	Shares			Weighted- Average Exercise Price			Shares			Weighted- Average Exercise Price
Outstanding at beginning of year		4,016		$	35	.96		5,594		$	31	.50
Granted		720		$	73	.08		99		$	65	.18
Exercised		(697	)	$	31	.71		(1,516	)	$	22	.50
Forfeited/Cancelled		(214	)	$	50	.27		(56	)	$	42	.37
Outstanding at end of period		3,825		$	42	.92		4,121		$	35	.47
Options exercisable at period end		2,260						2,099
Weighted-average fair value of
options granted during the year	$	32.93					$	31.24

        The following table summarizes information about fixed stock options outstanding at September 30, 2004:

	Options Outstanding							Options Exercisable
Range of Exercise Prices (share data in thousands)	Number Outstanding at 9/30/04		Weighted-Average Remaining Contractual Life		Weighted-Average Exercise Price			Number Exercisable at 9/30/04		Weighted-Average Exercise Price
$   7.44 - 19.47		475		3.8	$	16	.44		464	$	16	.37
21.20 – 33.69		895		4.8		28	.16		778		28	.43
35.08 – 46.62		924		4.4		40	.08		696		40	.21
47.55 – 61.80		738		4.8		49	.67		285		50	.11
63.20 – 79.36		793		6.0		72	.45		37		66	.20
		3,825		4.8	$	42	.92		2,260	$	32	.93

Note 10 – Segment reporting

        We report segments on the basis of services offered and have determined that we have two reportable segments: PBM services and non-PBM services. Our PBM operating results include those of CuraScript from January 30, 2004, the date of acquisition. Our domestic and Canadian PBM operating segments have similar characteristics and as such have been aggregated into a single PBM reporting segment. Effective in December 2003, our self-injectibles business unit became part of our domestic PBM operating segment and our remaining service lines (Specialty Distribution Services (“SDS”) and Phoenix Marketing Group (“PMG”)) merged into a single Non-PBM operating segment, Pharma Business Solutions. Our 2003 data has been recast to reflect the change in our operations and reporting segments.

        Operating income is the measure used by our chief operating decision maker to assess the performance of each of our operating segments. The following table presents information about our reportable segments, including a reconciliation of operating income to income before income taxes, for the three and nine months ended September 30, 2004 and 2003:

(in thousands)	PBM		Non-PBM		Total
Three months ended September 30, 2004
Product revenues
Network revenues	$	2,283,010	$	--	$	2,283,010
Mail revenues		1,395,336		--		1,395,336
Other revenues		--		29,035		29,035
Service revenues		28,661		31,648		60,309
Total revenues		3,707,007		60,683		3,767,690
Depreciation and amortization expense		16,411		1,241		17,652
Operating income		94,259		10,345		104,604
Undistributed loss from joint venture						(954	)
Interest income						867
Interest expense						(4,248	)
Income before income taxes						100,269
Capital expenditures		14,328		1,704		16,032
Three months ended September 30, 2003
Product revenue:
Network revenues	$	2,201,301	$	--	$	2,201,301
Mail revenues		984,468		--		984,468
Other revenues		--		21,829		21,829
Service revenues		14,922		26,082		41,004
Total revenues		3,200,691		47,911		3,248,602
Depreciation and amortization expense		12,540		754		13,294
Operating income		104,146		9,345		113,491
Undistributed loss from joint venture						(1,436	)
Interest income						756
Interest expense						(8,430	)
Income before income taxes						104,381
Capital expenditures		10,449		--		10,449
Nine Months Ended September 30, 2004
Product revenues
Network revenues	$	6,985,738	$	--	$	6,985,738
Mail revenues		3,945,653		--		3,945,653
Other revenues		--		84,128		84,128
Service revenues		69,648		89,843		159,491
Total revenues		11,001,039		173,971		11,175,010
Depreciation and amortization expense		47,195		3,282		50,477
Operating income		327,972		29,974		357,946
Undistributed loss from joint venture						(3,754	)
Interest income						2,492
Interest expense						(37,118	)
Income before income taxes						319,566
Capital expenditures		26,906		6,481		33,387
Nine Months Ended September 30, 2003
Product revenue:
Network revenues	$	6,692,821	$	--	$	6,692,821
Mail revenues		2,920,841		--		2,920,841
Other revenues		--		59,086		59,086
Service revenues		51,520		82,512		134,032
Total revenues		9,665,182		141,598		9,806,780
Depreciation and amortization expense		37,464		2,223		39,687
Operating income		303,751		27,847		331,598
Undistributed loss from joint venture						(4,520	)
Interest income						2,345
Interest expense						(33,172	)
Income before income taxes						296,251
Capital expenditures		30,350		1,662		32,012
As of September 30, 2004
Total assets	$	3,455,868	$	136,707	$	3,592,575
Investment in equity method investees		958		--		958
As of December 31, 2003
Total assets	$	3,286,700	$	122,474	$	3,409,174
Investment in equity method investees		1,971		--		1,971

        PBM product revenue consists of revenues from the dispensing of prescription drugs from our mail pharmacies and revenues from the sale of prescription drugs by retail pharmacies in our retail pharmacy networks. Non-PBM product revenues consist of revenues from certain specialty distribution activities. PBM service revenue includes administrative fees associated with the administration of retail pharmacy networks contracted by certain clients, market research programs and informed decision counseling services. Non-PBM service revenue includes revenues from certain specialty distribution services, and sample distribution and accountability services.

        Revenues earned by our Canadian PBM totaled $6.2 million and $5.4 million for the three months ended September 30, 2004 and 2003, respectively, and $19.2 million and $15.6 million for the nine months ended September 30, 2004 and 2003, respectively. All other revenues are earned in the United States. Long-lived assets of our Canadian PBM (consisting primarily of fixed assets and goodwill) totaled $34.2 million and $33.9 million as of September 30, 2004 and December 31, 2003, respectively. All other long-lived assets are domiciled in the United States.

Item 2.             Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

        Information that we have included or incorporated by reference in this Quarterly Report on Form 10-Q, and information that may be contained in our other filings with the Securities and Exchange Commission (“SEC”) and our press releases or other public statements, contain or may contain forward-looking statements. These forward-looking statements include, among others, statements of our plans, objectives, expectations or intentions.

        Our forward-looking statements involve risks and uncertainties. Our actual results may differ significantly from those projected or suggested in any forward-looking statements. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Factors that might cause such a difference to occur include, but are not limited to:

• costs of and adverse results in litigation, including a number of pending class action and other cases that challenge certain of our business practices

• risks arising from investigations of certain PBM practices and pharmaceutical pricing, marketing and distribution practices currently being conducted by the U.S. Attorney offices in Philadelphia and Boston, and by other regulatory agencies including the Department of Labor, and various state attorneys general

• risks and uncertainties regarding the implementation and the ultimate terms of the Medicare prescription drug benefit, including financial risks to us if we participate in the program on a risk-bearing basis

• risks associated with our acquisitions (including our acquisition of CuraScript) which include integration risks and costs, risks of client retention and repricing of client contracts, and risks associated with the operations of acquired businesses

• risks associated with our ability to maintain growth rates, or to control operating or capital costs

• continued pressure on margins resulting from client demands for lower prices, enhanced service offerings and/or higher service levels, and the possible termination of, or unfavorable modification to, contractswith key clients or providers

• competition in the PBM industry, and our ability to consummate contract negotiations with prospective clients, as well as competition from new competitors offering services that may in whole or in part replace services that we now provide to our customers

• adverse results in regulatory matters, the adoption of new legislation or regulations (including increased costs associated with compliance with new laws and regulations, more aggressive enforcement of existing legislation or regulations, or a change in the interpretation of existing legislation or regulations

• increased compliance risks relating to our contracts with the DoD TRICARE Plan and various state governments and agencies

• the possible loss, or adverse modification of the terms, of relationships with pharmaceutical manufacturers, or changes in pricing, discount or other practices of pharmaceutical manufacturers

• risks associated with the use and protection of the intellectual property we use in our business

• risks associated with our leverage and debt service obligations, including the effect of certain covenants in our borrowing agreements

• risks associated with our ability to continue to develop new products, services and delivery channels

• general developments in the health care industry, including the impact of increases in health care costs, changes in drug utilization and cost patterns and introductions of new drugs

• increase in credit risk relative to our clients due to adverse economic trends

• risks associated with our inability to attract and retain qualified personnel

• other risks described from time to time in our filings with the SEC

        See the more comprehensive description of risk factors under the captions “Forward Looking Statements and Associated Risks” contained in Item 1 – “Business” of our Annual Report on Form 10-K for the year ended December 31, 2003.

OVERVIEW

        As one of the largest full-service pharmacy benefit management (“PBM”) companies, we provide health care management and administration services on behalf of our clients, which include health maintenance organizations, health insurers, third-party administrators, employers, union-sponsored benefit plans and government health programs. Our integrated PBM services include network claims processing, mail pharmacy services, specialty mail pharmacy claim fulfillment, benefit design consultation, drug utilization review, formulary management, disease management, and drug data analysis services. We also provide non-PBM services, through our Pharma Business Solutions unit, which include distribution of specialty pharmaceuticals requiring special handling or packaging where we have been selected by the pharmaceutical manufacturer as part of a limited distribution network; distribution of pharmaceuticals through Patient Assistance Programs where we receive a fee from pharmaceutical manufacturers for administrative and pharmacy services for the delivery of certain drugs free of charge to doctors for their indigent patients and verifying practitioner licensure and distribution of drug samples.

        We report two segments, PBM and non-PBM. We derive revenues primarily from the sale of PBM services in the United States and Canada. Revenue generated by our segments can be classified as either tangible product revenue or service revenue. We earn tangible product revenue from the sale of prescription drugs by retail pharmacies in our retail pharmacy networks and from dispensing prescription drugs from our mail pharmacies. Service revenue includes administrative fees associated with the administration of retail pharmacy networks contracted by certain clients, market research programs, informed decision counseling services, certain specialty distribution services, and sample fulfillment and sample accountability services. Tangible product revenue generated through both our PBM and non-PBM segments represented 98.4% of revenues for the three months ended September 30, 2004 as compared to 98.7% for the same period of 2003 and 98.6% for the nine months ended September 30, 2004 and 2003.

        On January 30, 2004, we acquired the outstanding capital stock of CuraScript Pharmacy, Inc. and CuraScript PBM Services, Inc. (collectively, “CuraScript”), for approximately $333.2 million which includes a purchase price adjustment for closing working capital and transaction costs. Consequently, our PBM operating results include those of CuraScript from January 30, 2004.

RECENT DEVELOPMENTS

        During the quarter, we were named a defendant in litigation involving our contract to provide prescription drug benefits for the State of New York Empire Plan and we received civil investigative demands from 22 states and the District of Columbia. In addition, several shareholder class action lawsuits and additional class action lawsuits were filed against the Company (see “—Legal Proceedings”). We have, accordingly, re-evaluated the adequacy of our legal reserves and recorded an additional charge of $25.0 million in the third quarter for the estimated cost of defense of our legal proceedings.

CRITICAL ACCOUNTING POLICIES

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our estimates and assumptions are based upon a combination of historical information and various other assumptions believed to be reasonable under the particular circumstances. Actual results may differ from our estimates. Certain of the accounting policies that most impact our consolidated financial statements and that require our management to make difficult, subjective or complex judgments are described below. This should be read in conjunction with Note 1, “Summary of Significant Accounting Policies” and with the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2003, filed with the SEC on February 25, 2004.

REBATE ACCOUNTING

ACCOUNTING POLICY
We administer a rebate program based on actual market share performance in which rebates and the associated receivable from pharmaceutical manufacturers are estimated quarterly based on our estimate of the number of rebatable prescriptions and the rebate per prescription. The portion of rebates payable to clients is estimated quarterly based on historical and/or anticipated allocation percentages and our estimate of rebates receivable from pharmaceutical manufacturers. With respect to our market share rebate program, estimates are adjusted to actual when amounts are received from manufacturers and the portion payable to clients is paid.

FACTORS AFFECTING ESTIMATE
The factors that could impact our estimates of rebates, rebates receivable and rebates payable are as follows:

• Differences between the actual and the estimated number of rebatable prescriptions;

• Differences between estimated aggregate allocation percentages and actual rebate allocation percentages calculated on a client-by-client basis;

• Differences between actual and estimated market share of a manufacturer’s brand drug for our clients as compared to the national market share; and

• Drug patent expirations.

UNBILLED REVENUE AND RECEIVABLES

ACCOUNTING POLICY
We bill our clients based upon the billing schedules established in client contracts. At the end of a period, any unbilled revenues related to the sale of prescription drugs that have been adjudicated with retail pharmacies are estimated based on the amount we will pay to the pharmacies and historical gross margin.

FACTORS AFFECTING ESTIMATE
Unbilled amounts are estimated based on historical margin. Historically, adjustments to our original estimates have been immaterial. Significant differences between actual and estimated margin could impact subsequent adjustments.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

ACCOUNTING POLICY
We provide an allowance for doubtful accounts equal to estimated uncollectible receivables. This estimate is based on the current status of each customer’s receivable balance.

FACTORS AFFECTING ESTIMATE
We record allowances for doubtful accounts based on a variety of factors including the length of time the receivables are past due, the financial health of the customer and historical experience. Our estimate could be impacted by changes in economic and market conditions as well as changes to our customer’s financial conditions.

SELF–INSURANCE RESERVES

ACCOUNTING POLICY
We accrue self-insurance reserves based upon estimates of the aggregate liability of claim costs in excess of our insurance coverage. Reserves are estimated using certain actuarial assumptions followed in the insurance industry and our historical experience. The majority of these claims are legal claims and our liability esimate is primarily related to the cost to defend these claims. We typically do not accrue for settlements, judgments, monetary fines or penalties until such amounts are probable and estimable, in compliance with Financial Accounting Standard No. (“FAS”) 5, “Accounting for Contingencies.” Under FAS 5, if the range of possible loss is broad, the liability accrual should be based on the lower end of the range.

FACTORS AFFECTING ESTIMATE
Self-insurance reserves are based on management’s estimates of the aggregate liability of the costs of legal claims, consisting primarily of the estimated costs to defend such claims. We do not have significant experience with certain of these types of cases. As such, differences between actual costs and management’s estimates could be significant. In addition, actuaries do not have a significant history with the PBM industry. Changes to assumptions used in the development of these reserves can affect net income in a given period. In addition, changes in the legal environment and number and nature of claims could impact our estimate.

OTHER ACCOUNTING POLICIES

In addition, we consider the following information about our accounting policies important for an understanding of our results of operations:

• Revenues from dispensing prescriptions from our mail pharmacies are recorded when prescriptions are shipped. These revenues include the co-payment received from members of the health plans we serve.

• Revenues from the sale of prescription drugs by retail pharmacies are recognized when the claim is processed. We do not include member co-payments to retail pharmacies in revenue or cost of revenue.

• When we independently have a contractual obligation to pay our network pharmacy providers for benefits provided to our clients’ member, we act as a principal in the arrangement and we include the total payments we have contracted to receive from these clients as revenue and the total payments we make to the network pharmacy providers as cost of revenue.

• When we merely administer a client’s network pharmacy contracts, to which we are not a party and under which we do not assume credit risk, we earn an administrative fee for collecting payments from the client and remitting the corresponding amount to the pharmacies in the client’s network. In these transactions, drug ingredient cost is not included in our revenues or in our cost of revenues.

• We administer two rebate programs through which we receive rebates and administrative fees from pharmaceutical manufacturers.

• Gross rebates and administrative fees earned for the administration of our rebate programs, performed in conjunction with claim processing services provided to clients, are recorded as a reduction of cost of revenue and the portion of the rebate payable to customers is treated as a reduction of revenue.

• When we earn rebates and administrative fees in conjunction with formulary management services, but do not process the underlying claims, we record rebates received from manufacturers, net of the portion payable to customers, in revenue.

• We distribute pharmaceuticals in connection with our management of patient assistance programs and earn a fee from the manufacturer for administrative and pharmacy services for the delivery of certain drugs free of charge to doctors for their indigent patients.

• We earn a fee for the distribution of consigned pharmaceuticals requiring special handling or packaging where we have been selected by the pharmaceutical manufacturer as part of a limited distribution network.

• Non-PBM product revenues include revenues earned through administering sample card programs for certain manufacturers. We include ingredient cost of those drug samples dispensed from retail pharmacies in our Non-PBM revenues and the associated costs for these sample card programs in cost of revenues.

• Non-PBM service revenues include administrative fees for the verification of practitioner licensure and the distribution of consigned drug samples to doctors based on orders received from pharmaceutical sales representatives.

RESULTS OF OPERATIONS

PBM OPERATING INCOME

	Three Months Ended September 30,							Nine Months Ended September 30,
(in thousands)	2004		Increase/ (Decrease)			2003		2004		Increase/ (Decrease)			2003
Product revenues
Network revenues	$	2,283,010		3	.7%	$	2,201,301	$	6,985,738		4	.4%	$	6,692,821
Mail revenues		1,395,336		41	.7%		984,468		3,945,653		35	.1%		2,920,841
Service revenues		28,661		92	.1%		14,922		69,648		35	.2%		51,520
Total PBM revenues		3,707,007		15	.8%		3,200,691		11,001,039		13	.8%		9,665,182
Cost of PBM revenues		3,484,928		15	.9%		3,008,075		10,357,941		14	.2%		9,070,537
PBM Gross Profit		222,079		15	.3%		192,616		643,098		8	.1%		594,645
PBM SG&A expenses		127,820		44	.5%		88,470		315,126		8	.3%		290,894
PBM operating income	$	94,259		(9	.5)%	$	104,146	$	327,972		8	.0%	$	303,751

        Network claims increased by 11.4 million and 7.9 million claims, respectively, in the three and nine months ended September 30, 2004 over the three and nine months ended September 30, 2003. The increase in network claims for the third quarter of 2004 as compared to 2003 is primarily due to the implementation of our contract with the DoD TRICARE Retail Pharmacy (“TRICARE”) program in June 2004. Note that revenues for the TRICARE program are included in service revenue (see discussion below). For the nine months ended September 30, 2004 as compared to the same period of 2003, the increase in network claims due to the implementation of our TRICARE contract was partially offset by client specific reductions from the third quarter of 2003. One client, emerging from bankruptcy, discontinued providing retiree benefits, one client was lost through a competitive bidding process, and a one-year contract with a state agency expired, as expected, as future claims will be processed by the state.

        Mail order claims increased by 1.8 million and 5.3 million claims, respectively, in the three and nine months ended September 30, 2004 over the three and nine months ended September 30, 2003 due to the acquisition of CuraScript in January 2004, the implementation of new clients and due to the increased usage of our mail order pharmacies by members of existing clients. In addition, the increase in claim counts for the nine months ended September 30, 2004 as compared to the same period in 2003 is also due to the implementation of our contract with the DoD TRICARE Management Activity Program in March 2003.

         Network pharmacy revenues increased $81.7 million, or 3.7%, during the three months ended September 30, 2004 as compared to the same period of 2003, primarily due to net increases in the average revenue per network pharmacy claim. Increases in average revenue per network pharmacy claim were caused by drug price inflation and by the transition of one of our clients from use of their network to an ESI retail pharmacy network in the first quarter of 2004. As mentioned in our Critical Accounting Policies, when we merely administer a client’s network pharmacy contracts, drug ingredient cost is not included in our revenues or in our cost of revenues. These increases were partially offset by a higher mix of generic claims and an increase in the average co-payment per retail pharmacy claim. Generic claims made up 52.6% of total network claims(excluding TRICARE claims for which revenues are included in service revenues rather than network pharmacy revenues) for the three months ended September 30, 2004 as compared to 48.0% of total network claims for the same period of 2003. The average co-payment per retail pharmacy claim increased by 3.2% in the third quarter of 2004 as compared to the same quarter of 2003. As mentioned in our Critical Accounting Policies above, we do not include member co-payments to retail pharmacies in revenue or cost of revenue.

         Network pharmacy revenues increased $292.9 million, or 4.4%, during the nine months ended September 30, 2004 as compared to the same period of 2003. Among the factors affecting the increase in network pharmacy revenues are the following:

• For the nine months ended September 30, 2004, the average revenue per network pharmacy claim increased 5.6% over the same period of 2003 resulting in a $368.1 million increase in overall network pharmacy revenues. Increases in average revenue per network pharmacy claims due to inflation and due to the transition of one of our clients from use of their network to an ESI retail pharmacy network in the first quarter of 2004 (as discussed above) were partially offset by a higher mix of generic claims and an increase in the average co-payment per retail pharmacy claim. Generic claims made up 51.2% of total network claims (excluding TRICARE claims for which revenues are included in service revenues rather than network pharmacy revenues) for the nine months ended September 30, 2004 as compared to 47.8% of total network claims for the same period of 2003. The average co-payment per retail pharmacy claim increased by 7.3% in the nine months ended September 30, 2004 as compared to the same period of 2003.

• For the nine months ended September 30, 2004, network pharmacy claims included in network pharmacy revenues decreased slightly as compared to the same period in 2003, resulting in a $75.2 million decrease in network pharmacy revenues. The decrease in network pharmacy claims volume is mainly due to client specific reductions from the third quarter of 2003. One client, emerging from bankruptcy, discontinued providing retiree benefits, one client was lost through a competitive bidding process, and a one-year contract with a state agency expired, as expected, as future claims will be processed by the state. These decreases were partially offset by new business which started during the third quarter of 2004.

        The $410.9 million, or 41.7%, increase in mail pharmacy revenues for the third quarter of 2004 as compared to the third quarter of 2003 is attributable primarily to the following factors:

• The acquisition of CuraScript resulted in additional mail order claims of 0.3 million and a $187.4 million increase in mail order revenues in the third quarter of 2004 as compared to the third quarter of 2003.

• Excluding CuraScript, we processed an additional 1.5 million claims in the third quarter of 2004 as compared to the third quarter of 2003. The increase in mail order claim volume is partially due to new clients and greater usage of our mail order pharmacies by members of existing clients. This increase in volume resulted in an $185.0 million increase in mail order revenues.

• Excluding CuraScript, average revenue per mail order claim increased by approximately 3.3% in the third quarter of 2004 as compared to the same period of 2003, representing additional mail pharmacy revenue of $38.5 million. The increase in mail pharmacy revenue is primarily due to inflation which was partially offset by an increase in our generic fill rate from 37.0% in the third quarter of 2003 to 40.8% for the current quarter. Our mail order generic fill rate is lower than the retail generic fill rate as fewer generic substitutes are available among maintenance medications commonly dispensed from mail order pharmacies compared to acute medications that are dispensed primarily by pharmacies in our retail networks.

        The $1,024.8 million, or 35.1%, increase in mail pharmacy revenues for the nine months ended September 30, 2004 as compared to the same period of 2003 is attributable primarily to the following factors:

• Excluding CuraScript, we processed an additional 4.6 million claims in the nine months ended September 30, 2004 as compared to the same period in 2003, resulting in a $562.9 million increase in mail pharmacy revenues. The increase in mail order claim volume is primarily due to the implementation of new clients, including the contract with the DoD TRICARE Management Activity Program in March 2003, as well as increased usage of our mail order pharmacies by members of existing clients.

• The acquisition of CuraScript resulted in additional mail order claims of 0.7 million and a $419.1 million increase in mail order revenues in the nine months ended September 30, 2004 as compared to the same period of 2003.

• Excluding CuraScript, average revenue per mail order claim increased by approximately 1.2% in the nine months ended September 30, 2004 as compared to the same period of 2003, representing additional mail pharmacy revenue of $42.8 million. Increases in mail order revenue per claim from inflation was almost completely offset by the impact of our contract with the DoD TRICARE Management Activity Program and by increases in our generic fill rate to 39.6% for the nine months ended September 30, 2004 from 37.1% for the same period of 2003. Under our contract with the DoD we earn a fee per prescription filled by our mail order facility. Revenues and cost of revenues from the DoD contract do not include ingredient cost as inventory is replenished by the DoD through agreements with its suppliers. As a result, these claims have a dilutive effect on the average revenue per mail pharmacy claim.

        PBM service revenues include amounts received from clients for therapy management services such as prior authorization and step therapy protocols and administrative fees earned for processing claims for clients utilizing their own retail pharmacy networks. The $13.7 million, or 92.1%, increase in PBM service revenues in the third quarter of 2004 as compared to the third quarter of 2003 is primarily due to the implementation of our contract with the DoD TRICARE Retail Pharmacy (“TRICARE”) program in June 2004. The increase from the implementation of the TRICARE contract was partially offset by the elimination of revenues from pharmaceutical manufacturers in support of certain clinical programs. This funding was completely phased out as of October 1, 2003.

        The $18.1 million, or 35.2%, increase in PBM service revenues in the nine months ended September 30, 2004 as compared to the nine months ended September 30, 2003 is partially due to a payment of $5.5 million received in the first quarter of 2004 in connection with the early termination by a client in 2001 as well as the implementation of the TRICARE contract in June 2004. These increases were partially offset by elimination of revenues from pharmaceutical manufacturers in support of certain clinical programs, as mentioned above.

        PBM cost of revenues increased $476.9 million, or 15.9% and $1,287.4 million, or 14.2%, in the three and nine months ended September 30, 2004 as compared to the same periods in 2003 primarily as a result of the following:

• Net increases in the average cost per claim, mainly due to inflation and to the transition of one of our clients from their network to an ESI retail pharmacy network in the first quarter of 2004 (as discussed above), increased cost of revenues by approximately $248.6 million and $859.5 million in the three and nine months ended September 30, 2004, respectively, as compared to the same periods of 2003.

• The addition of CuraScript’s specialty mail pharmacy in January 2004 resulted in increases of $173.3 million and $386.8 million for the three and nine months ended September 30, 2004, respectively, as compared to the same periods of 2003.

• Excluding CuraScript, increases in network and mail order claims volume (on an unadjusted basis), resulted in higher PBM cost of revenues of $54.8 million and $41.0 million, respectively, for the three and nine months ended September 30, 2004 over the same periods of 2003.

        Our PBM gross profit increased $29.5 million, or 15.3%, and $48.5 million, or 8.1%, respectively, for the three and nine months ended September 30, 2004. Increases in revenues from network inflation and higher mail order volumes were partially offset by inflationary increases in cost of revenues and margin pressures arising from the current competitive environment. Gross profit for the nine months ended September 30, 2003 was negatively impacted by a non-recurring reduction of $15.0 million relating to previously collected pharmaceutical manufacturer fund which we decided to share with our clients.

        Selling, general and administrative expenses (“SG&A”) increased $39.4 million, or 44.5%, and $24.2 million, or 8.3%, respectively, in the three and nine months ended September 30, 2004 over the same periods of 2003, primarily due to a $25.0 million increase in legal reserves recorded during the third quarter of 2004 (see below) and due to the acquisition of CuraScript in January 2004 which increased SG&A by $7.6 million and $18.8 million in the three and nine months ended September 30, 2004, respectively, as compared to the same periods of 2003. SG&A for the third quarter of 2004 as compared to the third quarter of 2003 also increased as a result of higher bad debt expense. In the third quarter of 2003, we reversed a portion of a reserve established during 2002, which had been recorded for a large client then in bankruptcy. As of the third quarter of 2003, we had received payment on this client’s obligations to us and determined such reserve was no longer necessary. These increases in SG&A for the three and nine months ended September 30, 2004 were partially offset by cost saving measures implemented during 2003 and 2004 which reduced SG&A by approximately $9.7 million and $28.8 million for the three and nine months ended September 30, 2004. In addition, the nine months ended September 30, 2003 was negatively impacted by $4.8 million in costs incurred to facilitate start-up of our operations supporting the DoD TRICARE Management Activity mail pharmacy service.

        As we reported in our Form 10-Q for the second quarter of 2004, we are a defendant in litigation involving our contract to provide prescription drug benefits for the State of New York Empire Plan and we have received civil investigative demands from the Attorneys General of 22 states and the District of Columbia. In light of these developments, we previously disclosed that we would increase legal reserves in the third quarter by $15.0 million to $20.0 million. Subsequently, several shareholder class action lawsuits and additional class action lawsuits were filed against the Company (see “—Legal Proceedings”). Based on these developments, we recorded a $25.0 million increase in legal reserves during the third quarter period (see “—Critical Accounting Policies”).

        PBM operating income decreased $9.9 million, or 9.5% in the three months ended September 30, 2004 over the same period of 2003, and increased $24.2 million, or 8.0%, respectively, in the nine months ended September 30, 2004 over the same period of 2003.

NON-PBM OPERATING INCOME

	Three Months Ended September 30,							Nine Months Ended September 30,
(in thousands)	2004		Increase/ (Decrease)			2003		2004		Increase/ (Decrease)			2003
Product revenues	$	29,035		33	.0%	$	21,829	$	84,128		42	.4%	$	59,086
Service revenues		31,648		21	.3%		26,082		89,843		8	.9%		82,512
Total Non-PBM revenues		60,683		26	.7%		47,911		173,971		22	.9%		141,598
Non-PBM cost of revenues		47,352		40	.3%		33,750		136,350		32	.9%		102,618
Non-PBM Gross Profit		13,331		(5	.9)%		14,161		37,621		(3	.5)%		38,980
Non-PBM SG&A expense		2,986		(38	.0)%		4,816		7,647		(31	.3)%		11,133
Non-PBM operating income	$	10,345		10	.7%	$	9,345	$	29,974		7	.6%	$	27,847

        Non-PBM product revenues increased $7.2 million, or 33.0%, and $25.0 million, or 42.4%, respectively, for the three and nine months ended September 30, 2004 over the same periods of 2003. This is mainly due to a higher mix of specialty distribution volumes in which we include ingredient cost of pharmaceuticals dispensed in our revenues. Non-PBM service revenues increased $5.6 million, or 21.3%, and $7.3 million, or 8.9%, respectively, for the three and nine months ended September 30, 2004. The increase reflects new eligibility and service programs initiated during the first quarter of 2004. This increase for the nine months ended September 30, 2004, over the same period in 2003, was partially offset by the discontinuance, during the third quarter of 2003, of two patient assistance programs where we received fees for the delivery of certain drugs to doctors for their indigent patients.

        Non-PBM cost of revenues increased $13.6 million, or 40.3%, and $33.7 million, or 32.9%, respectively, in the three and nine months ended September 30, 2004 as compared to the same periods of 2003, mainly due to the additional volume in sample card programs where we include the ingredient costs of pharmaceuticals dispensed from retail pharmacies in our Non-PBM revenues and cost of revenues (as discussed above). Gross profit for the three and nine months ended September 30, 2004 changed only slightly as compared to the same periods of 2003.

        Non-PBM SG&A decreased $1.8 million, or 38.0%, and $3.5 million, or 31.3%, respectively, for the three and nine months ended September 30, 2004 as compared to the same time periods of 2003. The decrease is a result of efforts to control costs by integrating certain functions within our PMG and SDS operations.

        Non-PBM operating income increased $1.0 million, or 10.7%, and $2.1 million, or 7.6%, respectively, during the three and nine months ended September 30, 2004 as compared to the same periods of 2003.

OTHER (EXPENSE) INCOME

        In February 2001, we entered into an agreement with AdvancePCS (now owned by CareMark, Inc.) and Medco Health Solutions, Inc. (formerly, “Merck-Medco, L.L.C.”) to form RxHub, an electronic exchange enabling physicians who use electronic prescribing technology to link to pharmacies, PBMs and health plans. We own one-third of the equity of RxHub (as do each of the other two founders) and have committed to invest up to $20 million over five years, with approximately $16.8 million invested through September 30, 2004. We have recorded our investment in RxHub under the equity method of accounting, which requires our percentage interest in RxHub’s results to be recorded in our Unaudited Consolidated Statement of Operations. Our percentage of RxHub’s loss for the three and nine months ended September 30, 2004 was $1.0 million ($0.6 million, net of tax) and $3.8 million ($2.3 million, net of tax), respectively, compared to $1.4 million ($0.9 million net of tax) and $4.5 million ($2.8 million net of tax) for the same periods of 2003.

        Net interest expense decreased $4.3 million, or 55.9%, in the third quarter of 2004, and increased $3.8 million, or 12.3% for the nine months ended September 30, 2004, as compared to the same periods in 2003. The decrease in interest expense in the third quarter of 2004 as compared to the third quarter of 2003 is primarily due to the redemption of our Senior Notes in June 2004 and the favorable effects of a lower interest rate on outstanding principal balances. The redemption of the Senior Notes is also the primary reason for the increase in interest expense for the nine months ended September 30, 2004, as compared to the same period in 2003. As a result of the Senior Note Redemption in June 2004, we recorded an additional $12.3 million charge to interest expense for the redemption premium and the write-off of deferred financing fees. In addition, we wrote-off $3.6 million in deferred financing fees as a result of refinancing our entire credit facility during the first quarter of 2004 (see “—Liquidity and Capital Resources”).

        The redemption of the Senior Notes will result in annual interest expense savings of approximately $13.5 million ($8.4 million after-tax).

PROVISION FOR INCOME TAXES

        Our effective tax rate for the three months ended September 30, 2004 and 2003 remained constant at 38.2% and for the nine months ended September 30, 2004, our effective tax rate increased only slightly to 38.3% from 38.2% for the nine months ended September 30, 2003.

NET INCOME AND EARNINGS PER SHARE

        Net income for the three months ended September 30, 2004 decreased $2.6, or 4.1%, over the same period of 2003. Net income increased $15.1 million, or 8.3%, for the nine months ended September 30, 2004 over the same period of 2003. During 2003, we recorded a cumulative effect of change in accounting principle of $1.0 million, net of tax, related to our implementation of FAS 143, “Asset Retirement Obligations,” (see “—Other Matters”).

        Basic and diluted earnings per share decreased 1.2% for the third quarter of 2004 over the third quarter of 2003. For the nine months ended September 30, 2004, basic and diluted earnings per share increased 10.3% and 10.5%, respectively, over the nine months ended September 30, 2003.

        We account for employee stock options in accordance with Accounting Principles Board No. 25, “Accounting for Stock Issued to Employees.” We use the intrinsic value method to account for stock options and have not recognized compensation expense for options granted. Had we used the fair value method and recognized compensation expense based on the fair value of options determined on the grant date, our net income and earnings per share for the three and nine months ended September 30, 2004 would have been $60.9 million, or $0.78 per diluted share, and $194.9 million, or $2.48 per diluted share, respectively, and would have been $62.7 million, or $0.79 per diluted share, and $175.0 million, or $2.20 per diluted share, respectively, for the three and nine months ended September 30, 2003. Our pro forma stock based compensation expense for 2004 reflects the impact of stock option forfeitures in the 2004 which reduced expense by $0.3 million and $3.5 million for the three and nine months ended September 30, 2004.

LIQUIDITY AND CAPITAL RESOURCES

OPERATING CASH FLOW AND CAPITAL EXPENDITURES

        For the nine months ended September 30, 2004, net cash provided by operations increased $21.9 million to $303.3 million from $281.4 million during the nine months ended September 30, 2003. This increase reflects increased earnings of $15.1 million, a $10.8 million increase in depreciation and amortization, partially due to the acquisition of CuraScript in January 2004, and a $4.4 million increase from net changes in our working capital components. The increase from changes in our working capital components primarily consists of an $88.8 million increase resulting from the timing of payments to vendors partially offset by decreases of $55.5 million and $28.1 million from higher inventory and accounts receivable balances, respectively. Net cash provided by operations was also negatively impacted by an $8.5 million decrease in non-cash adjustments to net income mainly due to lower tax benefits from the exercise of employee stock options during the nine months ended September 30, 2004 as compared to the nine months ended September 30, 2003.

        Our capital expenditures for the nine months ended September 30, 2004 increased $1.4 million, or 4.3%, as compared to the same period of 2003. The increase is partially due to the development of a new Patient Care Contact Center in St. Marys, Georgia. The project was initiated in June and completed in the third quarter of 2004, with approximately $8.3 million capitalized. The increase from the expenditures for our St. Marys call center was partially offset by a decrease resulting from first quarter 2003 expenditures to complete our mail order facility in Tempe which provides mail order service under our contract with the DoD TRICARE Management Activity Program.

        In order to manage growth and to maintain strong customer service, we intend to continue to invest in technology that we believe will provide efficiencies in operations and facilitate growth and enhance the service we provide to our clients. We expect future anticipated capital expenditures will be funded primarily from operating cash flow or, to the extent necessary, with borrowings under our revolving credit facility, discussed below.

STOCK REPURCHASE PROGRAM

        We have a stock repurchase program, announced on October 25, 1996, under which our Board of Directors has approved the repurchase of a total of 10.0 million shares. In July 2004, our Board of Directors authorized a 4.0 million share increase to the existing 10.0 million share repurchase program, which increased shares available for repurchase under the program to 5.2 million. There is no limit on the duration of the program. During the three and nine months ended September 30, 2004, we used internally generated cash to repurchase 1.7 million and 2.4 million shares for $108.1 million and $160.3 million, respectively. Approximately 10.6 million of the 14.0 million total shares have been repurchased through September 30, 2004. Additional purchases, if any, will be made in such amounts and at such times as we deem appropriate based upon prevailing market and business conditions, subject to restrictions on the amount of stock repurchases contained in our bank credit facility.

CHANGES IN BUSINESS

        On January 30, 2004, we acquired the outstanding capital stock of CuraScript, for approximately $333.2 million which includes a purchase price adjustment for closing working capital and transaction costs. CuraScript is one of the nation’s largest specialty pharmacy services companies and will enhance our ability to provide comprehensive pharmaceutical management services to our clients and their members. CuraScript operates seven specialty pharmacies throughout the United States and serves over 175 managed care organizations, 30 Medicaid programs and the Medicare program. The transaction was accounted for under the provisions of FAS 141, “Business Combinations.” The purchase price has been preliminarily allocated based upon the estimated fair value of net assets acquired at the date of the acquisition. A portion of the excess of purchase price over tangible net assets acquired has been preliminarily allocated to intangible assets, consisting of customer contracts in the amount of $28.7 million and non-competition agreements in the amount of $2.7 million, which are being amortized using the straight-line method over estimated useful lives of ten years and three years, respectively. These assets are included in other intangible assets. In addition, the excess of purchase price over tangible net assets and identified intangible assets acquired has been preliminarily allocated to goodwill in the amount of $284.8 million and trade names in the amount of $1.3 million, which are not being amortized. The purchase price allocation is subject to refinement in the future pending finalization of intangible asset valuations and final assessment of deferred taxes at the acquisition date. The $333.2 million purchase price was financed with $210.0 million of cash on hand and the remainder by adding $125.0 million in Term C loans through an amendment of our Bank Credit Facility. Our PBM operating results include those of CuraScript from January 30, 2004, the date of acquisition.

        We regularly review potential acquisitions and affiliation opportunities. We believe available cash resources, bank financing or the issuance of additional common stock could be used to finance future acquisitions or affiliations. There can be no assurance we will make new acquisitions or establish new affiliations in 2004 or thereafter.

        In January 2004, we entered into an agreement to provide PBM services for the Medicare discount program of Pharmacy Care Alliance, Inc. (“PCA”), a nonstock, not-for-profit entity jointly controlled by the National Association of Chain Drugstores (“NACDS”) and us. Our PBM services include the negotiation of discounts from individual retailers and pharmaceutical manufacturers, the enrollment of cardholders and the processing of prescription claims. We began processing claims under the program in June 2004.

        During the first quarter of 2004, we entered into a lending agreement with PCA, whereby we committed to lend up to $4.0 million to PCA in the form of a revolving line of credit available over the next 18 months. Requests for borrowings on the revolving line of credit require the unanimous consent of PCA’s board of directors, which consists of representatives from NACDS and from our management team, or its designated representative. PCA will utilize the revolving line of credit to fund its operating expenditures. NACDS has agreed to guarantee the lesser of $2.0 million or 50% of the amounts outstanding on the revolving line of credit.

        In the second quarter of 2004, we signed an amended credit agreement with PCA which increased the revolving line of credit available to PCA from the initial $4.0 million to $17.0 million. The additional $13.0 million will be unsecured and used to fund PCA’s operating expenditures, as well as the start-up expenditures associated with the enrollment of cardholders by PCA and by us. As of September 30, 2004, we have loaned PCA $14.3 million, which is included in other long-term assets on the Unaudited Consolidated Balance Sheet.

        In regard to the extended revolving line of credit, the collectibility of any unsecured borrowings will be a function of PCA’s success in enrolling new members for its Medicare discount program. Through September 30, 2004, enrollment has fallen short of expectations, with approximately 200,000 members enrolled to date. We continue to enroll new members and we believe our enrollment goals can be attained if membership for the Medicare Discount Card program builds, or if the Medicare Discount Card program is extended beyond 2005. However, if enrollment continues to fall short of expectations, it is possible that a portion, or all, of any unsecured borrowings under the line of credit could be written off in future quarters.

BANK CREDIT FACILITY

        In early February 2004, we borrowed $50.0 million on the revolving credit facility under our then existing credit agreement and on February 13, 2004, we refinanced our entire credit facility. We negotiated an $800.0 million credit facility with a bank syndicate which includes $200.0 million of Term A loans, $200.0 million of Term B loans and a $400.0 million revolving credit facility. The proceeds from the $800.0 million credit facility were used to prepay borrowings on the revolver, Term B and Term C loans outstanding under our previous credit facility. In June and September 2004, we made scheduled payments on our Term A and Term B loans totaling $10.0 million and $1.0 million, respectively. We had net borrowings of $50.0 million under our revolving credit facility during the six months ended September 30, 2004.

        Our new credit facility requires us to pay interest periodically on the London Interbank Offered Rates (“LIBOR”) or base rate options, plus a margin. The margin on the Term A loans and on amounts outstanding under the revolving credit facility is dependent on our credit rating and our ratio of debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”). The Term B loan interest is based on the LIBOR or alternative base rate options plus a margin of 1.5% or 0.25% per annum, respectively. Under our new credit facility we are required to pay commitment fees on the unused portion of the $400.0 million revolving credit facility ($350.0 million at September 30, 2004). The commitment fee will range from 0.2% to 0.5% depending on our credit rating and our consolidated leverage ratio. Currently, the commitment fee is 0.25% per annum.

        At September 30, 2004, the weighted average interest rate on the new facility was 3.11%. Our new credit facility contains covenants that limit the indebtedness we may incur, the common shares we may repurchase and dividends we may pay. The covenants also include a minimum interest coverage ratio and a maximum leverage ratio. At September 30, 2004, we are in compliance with all covenants associated with our credit facility.

        To alleviate interest rate volatility on our variable rate loans, we have entered into interest rate swap arrangements, which are discussed in “—Market Risk” below.

BONDS

        On June 15, 2004, we redeemed all of our outstanding Senior Notes ($204.4 million) at a redemption price of 104.8125% by using internally generated cash and a portion of our $400 million revolving credit facility. As a result of the redemption, we recorded in interest expense, charges of approximately $12.3 million ($7.6 million after-tax) representing a redemption premium of $9.8 million and the write-off of unamortized deferred financing fees.

CONTRACTUAL OBLIGATIONS

        The following table sets forth our schedule of maturities of our long-term debt, excluding the deferred interest rate swap gain of $0.1 million, and future minimum lease payments due under noncancellable operating leases and capital leases as of September 30, 2004 (in thousands):

	Payments Due by Period as of September 30,
Contractual obligations	Total		2004		2005 - 2006		2007 - 2008		After 2008
Long-term debt	$	439,563	$	5,500	$	51,612	$	119,112	$	263,339
Future minimum lease
payments (1)		105,577		5,709		42,154		32,971		24,743
Total contractual cash
obligations	$	545,140	$	11,209	$	93,766	$	152,083	$	288,082

         ⁽¹⁾ In July 2004, we entered into a capital lease with the Camden County Joint Development Authority in association with the development of our new Patient Care Contact Center in St. Marys, Georgia. At September 30, 2004, our lease obligation is $7.6 million. In accordance with FASB Interpretation Number 39, “Offsetting of Amounts Related to Certain Contracts,” our lease obligation has been offset against $7.6 million of industrial revenue bonds issued to us by the Camden County County Joint Development Authority.

OTHER MATTERS

        In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. (“FIN”) 46, “Consolidation of Variable Interest Entities.” FIN 46 requires a variable interest entity be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. The consolidation provisions of FIN 46 were originally effective for financial periods ending after July 15, 2003. In October 2003, the FASB issued Staff Position FIN 46-6, “Effective Date of FIN 46,” which delays the implementation date to financial periods ending after December 31, 2003. In December 2003, the FASB published a revision to FIN 46 (“FIN 46R”) to clarify some of the provisions of FIN 46, and to exempt certain entities from its requirements. We do not have any variable interest entities requiring consolidation under FIN 46 and FIN 46R. Therefore, adoption of these standards did not have a material impact on our consolidated financial position, consolidated results of operations or our consolidated cash flows.

        In January 2003, we adopted FAS 143, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. FAS 143 requires the capitalization of the fair value of any legal or contractual obligations associated with the retirement of tangible, long-lived assets in the period in which the liabilities are incurred and the capitalization of a corresponding amount as part of the book value of the related long-lived asset. In subsequent periods, we are required to adjust asset retirement obligations based on changes in estimated fair value, and the corresponding increases in asset book values are depreciated over the useful life of the related asset. As required by FAS 143, we recorded an asset retirement obligation ($3.1 million at January 1, 2003) primarily related to equipment and leasehold improvements installed in leased, mail-order facilities in which we have a contractual obligation to remove the improvements and equipment upon surrender of the property to the landlord. For certain of our leased facilities, we are required to remove equipment and convert the facilities back to office space upon surrender of the property. We also recorded a net increase in fixed assets (net of accumulated depreciation) of $1.4 million and a $1.7 million ($1.0 million, net of tax) loss from the cumulative effect of change in accounting principle. The $1.4 million asset is being depreciated, on a straight-line basis, over the remaining term of the leases, which range from seven months to ten years.

        We make available through our website (www.express-scripts.com), access to our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, all amendments to those reports (when applicable), and other filings with the SEC. Such access is free of charge and is available as soon as reasonably practicable after such information is filed with the SEC. In addition, the SEC maintains an internet site (www.sec.gov) containing reports, proxy and information statements, and other information regarding issuers filing electronically with the SEC (which includes us).

IMPACT OF INFLATION

        Changes in prices charged by manufacturers and wholesalers for pharmaceuticals affect our revenues and cost of revenues. Most of our contracts provide that we bill clients based on a generally recognized price index for pharmaceuticals, and accordingly we have been able to recover price increases from our clients under the terms of our agreements.

MARKET RISK

        We use an interest rate swap agreement to manage our interest rate risk on future variable interest payments. At September 30, 2004, our swap agreement fixes the variable interest rate payments on approximately $20.0 million of debt under our credit facility. Under our swap agreement, we agree to receive a variable rate of interest on the notional principal amount of approximately $20.0 million based upon a three month LIBOR rate in exchange for payment of a fixed rate of 6.25% per annum. Our swap agreement matures in April 2005.

        Our present interest rate swap agreement is a cash flow hedge which requires us to pay fixed-rates of interest, and which hedges against changes in the amount of future cash flows associated with variable interest obligations. Accordingly, the fair value of our swap agreement, $0.6 million at September 30, 2004, is reported on the balance sheet in other liabilities. The related deferred loss on our swap agreements, $0.4 million at September 30, 2004, is deferred in shareholders’ equity as a component of other comprehensive income. This deferred loss is then recognized as an adjustment to interest expense over the same period in which the related interest payments being hedged are recorded in income. The loss associated with the ineffective portion of this agreement is immediately recognized as an expense. For the nine months ended September 30, 2004 and 2003, the gains and losses on the ineffective portion of our swap agreement were not material to the consolidated financial statements.

        A sensitivity analysis is used to determine the impact interest rate changes will have on the fair value of the interest rate swap, measuring the change in the net present value arising from the change in the interest rate. The fair value of the swap is then determined by calculating the present value of all cash flows expected to arise thereunder, with future interest rate levels implied from prevailing mid-market yields for money-market instruments, interest rate futures and/or prevailing mid-market swap rates. Anticipated cash flows are then discounted on the assumption of a continuously compounding zero-coupon yield curve. A 10 basis point decline in interest rates at September 30, 2004 would have caused an immaterial change in the fair value of the swap.

Item 3.      Quantitative and Qualitative Disclosures About Market Risk

        Response to this item is included in Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Market Risk” above.

Item 4.      Controls and Procedures

        We maintain a comprehensive set of disclosure controls and procedures (as defined in Rules 13a-15(e) and under the Securities Exchange Act of 1934 (“Exchange Act”)) designed to provide reasonable assurance that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported accurately and within the time periods specified in the SEC’s rules and forms. Under the supervision and with the participation of our management, including our Chairman and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation, the Chairman and Chief Executive Officer and the Senior Vice President and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures are effective in providing reasonable assurance of the achievement of the objectives described above.

        During the fiscal quarter ended September 30, 2004, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.      Legal Proceedings

        We and/or the Company’s subsidiary, National Prescription Administrators, Inc. (“NPA”), are defendants in several lawsuits that purport to be class actions. With the exception of the new matters reported below, these lawsuits are described in our Annual Report on Form 10-K for the year ended December 31, 2003, as updated in our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2004 and March 31, 2004. Each case seeks damages in an unspecified amount, and the allegations are such that the Company cannot at this time estimate with any certainty the damages that the plaintiffs seek to recover. However, we have been able to estimate costs to defend such cases and have accrued these costs in our self-insurance reserves. None of the cases has yet been certified by the court as a class action. We are unable to evaluate the effect that unfavorable outcomes might have on our financial condition or consolidated results of operations. The following developments have occurred since the previous Quarterly Report:

• Jerry Beeman, et al. v. Caremark, et al. (Cause No. 021327, United States District Court for the Central District of California).  On December 12, 2002, we were served with a complaint against us and several other pharmacy benefit management companies.  The complaint, filed by several California pharmacies as a putative class action, alleged that we, and the other defendants, failed to comply with statutory obligations under California Civil Code Section 2527 to provide our California clients with the results of a bi-annual survey of retail drug prices.   On July 12, 2004, the case was dismissed with prejudice on the grounds that the plaintiffs lacked standing to bring the action. Plaintiffs have filed an appeal.

• Anthony Bradley, et al v. First Health Services Corporation, et al (Cause No. BC319292, Superior Court for the State of California, County of Los Angeles) On July 30, 2004, plaintiffs filed a complaint against us and several other pharmacy benefit management companies.  The complaint, filed by several California pharmacies as a putative class action, alleged rights to sue as a private attorney general under California law.  The complaint alleged that we, and the other defendants, failed to comply with statutory obligations under California Civil Code Section 2527 to provide our California clients with the results of a bi-annual survey of retail drug prices. Plaintiffs request injunctive relief, unspecified monetary damages and attorney's fees. Several of the plaintiffs are the same as in Beeman, et al v. Caremark, et al, and the relief sought is substantially the same as that sought in Beeman.

• On July 21, 2004, we received a Civil Investigative Demand from the Attorney General of the State of Vermont.  A total of 22 states and the District of Columbia have now issued substantially identical civil investigative demands.  The civil investigative demands received to date seek documents regarding a wide range of our business practices.  We are cooperating with this multi-state investigation.

• People of the State of New York, et al v. Express Scripts, Inc. (Cause No. 4669-04, Supreme Court of the State of New York, County of Albany) On August 4, 2004 the State of New York filed a complaint against ESI and Cigna Life Insurance Co.  The complaint alleges certain breaches of contracts and violations of civil law in connection with the management of the prescription drug plan for the State of New York and its employees.  The complaint also alleges certain violations of civil law in connection with the Company’s therapeutic interchange programs. Plaintiffs request injunctive relief, unspecified monetary damages and attorney's fees. We have filed a motion to dismiss the complaint.

• Correction Officers’ Benevolent Association of the City of New York, et al v. Express Scripts, Inc. (Cause No. 04-602517, Supreme Court for the State of New York, County of Albany) On August 5, 2004, plaintiffs filed a complaint against Express Scripts. The complaint alleges that certain business practices violate duties owed to the class members including fiduciary duties, breach of covenant of good faith and fair dealing, deceptive trade practices, breach of contract, and unjust enrichment. The complaint purports to be a class action filed on behalf of all non-ERISA health plans with members who are employees of the City of New York and the members of those plans. Plaintiffs request unspecified compensatory and punitive damages, equitable relief and attorney's fees.

• Shareholder lawsuits: Sylvia Childress, et al v. Express Scripts, Inc., et al (Cause No. 04-CV-01191, United States District Court for the Eastern District of Missouri) Lidia Garcia, et al v. Express Scripts, Inc., et al (Cause No. 04-CV-1009, United States District Court for the Eastern District of Missouri); Robert Espriel, et al v. Express Scripts, Inc., et al (Cause No. 04-CV-01084, United States District Court for the Eastern District of Missouri); Raymond Hoffman, et al v. Express Scripts, Inc., et al (Cause No. 04-CV-01054, United States District Court for the Eastern District of Missouri); John R. Nicholas, et al v. Express Scripts, Inc., et al (Cause No. 04-CV-1295, United States District Court for the Eastern District of Missouri); John Keith Tully, et al v. Express Scripts, Inc., et al (Cause No. 04-CV-01338, United States District Court for the Eastern District of Missouri). All of these suits are brought against Express Scripts and certain of its officers alleging violations of federal securities law. The complaints allege that ESI failed to disclose certain alleged improper business practices and issued false and misleading statements. The complaints allege that they are brought on behalf of purchasers of Express Scripts stock during the period October 29, 2003 to August 3, 2004. The complaints request unspecified compensatory damages, equitable relief and attorney's fees.

• Derivative lawsuits: Scott Rehm, Derivatively on behalf of nominal Defendant, Express Scripts, Inc. v. Stuart Bascomb, et al (Cause No 044-1960, Missouri Circuit Court, City of St. Louis) (filed 8/27/04); Charles Manzione, Derivatively on Behalf of Express Scripts, Inc. v. Barrett Toan et al (Cause No. 04CC-4510, Missouri Circuit Court, St. Louis County) (filed 10/22/04); Gary Miller Derivatively on behalf of nominal Defendant, Express Scripts, Inc. v. Stuart Bascomb, et al (Cause No 042-08632, Missouri Circuit Court, City of St. Louis) (filed 10/29/04). Plaintiffs have filed shareholder derivative lawsuits against current and former directors and officers of Express Scripts. The cases make various allegations including that the defendants caused Express Scripts to issue false and misleading statements, insider selling, breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment. Plaintiffs demand unspecified compensatory damages, equitable relief and attorney’s fees. We have or will be filing motions to remove these cases to federal court

• United Food and Commercial Workers Unions and Employers Midwest Health Benefits Fund, et al v. National Prescription Administrators, Inc., et al (Cause No. 04-CV-7472, United States District Court for the Southern District of New York) On September 21, 2004, plaintiffs filed a complaint against NPA and Express Scripts. The complaint alleges that certain of our business practices violate duties to the class members including duties under ERISA, state common law and state consumer protection statutes. The complaint purports to be a class action filed on behalf of all current former self-funded ERISA and non-ERISA funds for which ESI or NPA served as the PBM. Plaintiffs request unspecified compensatory damages, equitable relief and attorney's fees.

• Central Laborers’ Welfare Fund, et al v. Express Scripts, Inc., et al (Cause No. 04-L-554, Twentieth Judicial Circuit Court, St. Clair County, Illinois) On September 27, 2004, plaintiffs filed a complaint against Express Scripts and NPA. The complaint alleges that certain of our business practices constitute a breach of contract, breach of covenant of good faith and fair dealing, breach of fiduciary duty and unjust enrichment. The complaint purports to be a class action filed on behalf of all former and current self-funded private and governmental health plans that contracted with ESI or NPA since January 1, 1997. Plaintiffs request unspecified compensatory damages, equitable relief and attorney's fees.

        While we believe that our services and business practices are in compliance with all applicable laws, rules and regulations in all material respects, we cannot predict the outcome of these matters at this time. An unfavorable outcome in one or more of these matters could result in the imposition of judgments, monetary fines or penalties, or injunctive or administrative remedies. We can give no assurance that such judgements, fines and remedies, and future costs associated with these matters would not have a material adverse effect on our financial condition, our consolidated results of operations or our consolidated cash flows.

Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds

(e) The following is a summary of our stock repurchasing activity during the three months ended September 30, 2004 (share data in thousands):

Period	Shares purchased		Average price paid per share			Shares purchased as part of a publicly announced program		Maximum shares that may yet be purchased under the program
7/1/2004 - 7/31/2004		--	$	--			--		5,151
8/1/2004 - 8/31/2004		1,737		62	.25		1,737		3,414
9/1/2004 - 9/30/2004		--		--			--		3,414
Third quarter 2004 total		1,737	$	62	.25		1,737

        We have a stock repurchase program, announced on October 25, 1996, under which our Board of Directors has approved the repurchase of a total of 10.0 million shares. In July 2004, our Board of Directors authorized a 4.0 million share increase to the existing 10.0 million share repurchase program, which increased our total shares to 14.0 million and shares available for repurchase under the program to 5.2 million. There is no limit on the duration of the program. During the three and nine months ended September 30, 2004, we used internally generated cash to repurchase 1.7 million and 2.4 million shares for $108.1 million and $160.3 million, respectively. Approximately 10.6 million of the 14.0 million total shares have been repurchased through September 30, 2004. Additional purchases, if any, will be made in such amounts and at such times as we deem appropriate based upon prevailing market and business conditions, subject to restrictions on the amount of stock repurchases contained in our bank credit facility.

Item 6.      Exhibits

See Index to Exhibits below.

SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	EXPRESS SCRIPTS, INC.
	(Registrant)
Date: November 3, 2004	By: /s/ Barrett A. Toan
	Barrett A. Toan, Chairman of the Board,
	and Chief Executive Officer
Date: November 3, 2004	By:/s/ Edward Stiften
	Edward Stiften, Senior Vice President and
	Chief Financial Officer

INDEX TO EXHIBITS
(Express Scripts, Inc. – Commission File Number 0-20199)

Exhibit Number	Exhibit
2.11	Stock Purchase Agreement, dated December 19, 2003, by and among the Company, CPS Holdings, LLC, CuraScript Pharmacy, Inc. and CuraScript PBM Services, Inc, incorporated by reference to Exhibit No. 2.1 to the Company's Current Report on Form 8-K filed December 24, 2003
3.1	Amended and Restated Certificate of Incorporation of the Company, incorporated by reference to the Company's Annual Report on Form 10-K for the year ending December 31, 2001.
3.2	Certificate of Amendment to the Certificate of Incorporation of the Company dated June 2, 2004, incorporated by reference to Exhibit No. 3.2 to the Company’s Quarterly Report on Form 10-K for the quarter ending June 30, 2004.
3.3	Third Amended and Restated Bylaws, incorporated by reference to Exhibit No. 3.3 to the Company’s Quarterly Report on Form 10-K for the quarter ending June 30, 2004.
4.1	Form of Certificate for Common Stock, incorporated by reference to Exhibit No. 4.1 to the Company's Registration Statement on Form S-1 filed June 9, 1992 (No. 33-46974) (the "Registration Statement").
4.2	Stockholder and Registration Rights Agreement dated as of October 6, 2000 between the Company and New York Life Insurance Company, incorporated by reference to Exhibit No. 4.2 to the Company's Amendment No. 1 to Registration Statement on Form S-3 filed October 17, 2000 (Registration Number 333-47572).
4.3	Asset Acquisition Agreement dated October 17, 2000, between NYLIFE Healthcare Management, Inc., the Company, NYLIFE LLC and New York Life Insurance Company, incorporated by reference to Exhibit No. 4.3 to the Company's amendment No. 1 to the Registration Statement on Form S-3 filed October 17, 2000 (Registration Number 333-47572).
4.4	Rights Agreement, dated as of July 25, 2001, between the Corporation and American Stock Transfer & Trust Company, as Rights Agent, which includes the Certificate of Designations for the Series A Junior Participating Preferred Stock as Exhibit A, the Form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C, incorporated by reference to Exhibit No. 4.1 to the Company's Current Report on Form 8-K filed July 31, 2001.
4.5	Amendment dated April 25, 2003 to the Stockholder and Registration Rights Agreement dated as of October 6, 2000 between the Company and New York Life Insurance Company
10.12,3	Executive Employment Agreement dated as of August 31, 2004 between the Company and David Lowenberg.
10.22,3	Executive Employment Agreement executed on August 31, 2004 and effective as of April 1, 2004, between the Company and C.K. Casteel.
10.32,3	Executive Employment Agreement executed on August 31, 2004 and effective as of April 1, 2004, between the Company and Douglas Porter.
10.42,3	Executive Employment Agreement executed on August 31, 2004 and effective as of April 1, 2004, between the Company and Agnes Rey-Giraud.
10.52,3	Executive Employment Agreement dated as of October 29, 2004 between the Company and Thomas Boudreau.
10.62,3	Executive Employment Agreement executed on October 29, 2004 and effective as of April 1, 2004, between the Company and Edward Ignaczak.
10.72,3	Form of Restricted Stock Agreement used with respect to grants of restricted stock by the Company
31.12	Certification by Barrett A. Toan, as Chairman and Chief Executive Officer of Express Scripts, Inc., pursuant to Exchange Act Rule 13a-14(a).
31.22	Certification by Edward Stiften, as Senior Vice President and Chief Financial Officer of Express Scripts, Inc., pursuant to Exchange Act Rule 13a-14(a).
32.12	Certification by Barrett A. Toan, as Chairman and Chief Executive Officer of Express Scripts, Inc., pursuant to 18 U.S.C.ss.1350 and Exchange Act Rule 13a-14(b).
32.22	Certification by Edward Stiften, as Senior Vice President and Chief Financial Officer of Express Scripts, Inc., pursuant to 18 U.S.C.ss.1350 and Exchange Act Rule 13a-14(b).

         _________________

1 The Company agrees to furnish supplementally a copy of any omitted schedule to this agreement to the Commission upon request.

2 Filed herein.

3 Management contract or compensatory plan or arrangement.

EX-10

EXECUTIVE EMPLOYMENT AGREEMENT

        This Executive Employment Agreement (the “Agreement”) dated as of August 31, 2004 (the “Effective Date”), by and between Express Scripts, Inc., a Delaware corporation (the “Company”), and David A. Lowenberg (“Executive”).

        WHEREAS, Executive is now and has been employed by the Company as Chief Operating Officer pursuant to the terms of that certain Executive Employment Agreement dated as of March 15, 2001, as amended (the “Prior Agreement”); and

        WHEREAS, the Company and Executive mutually desire to terminate the Employment Period under the Prior Agreement, as defined therein, and to replace the Prior Agreement with this Agreement to provide for the continued employment of Executive on the terms and conditions set forth herein; all effective as of the Effective Date;

        NOW, THEREFORE, in consideration of the premises and the mutual covenants herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

      As used herein, the following terms shall have the following meanings:

        1.1     “Annual Base Salary”means the base salary set forth in Section 3.1 hereof.

        1.2     “Annual Bonus” means Executive’s annual bonus granted pursuant to the Annual Bonus Plan, as described in Section 3.2 hereof.

        1.3     “Annual Bonus Plan” means the annual bonus program established for senior executives by the Board of Directors of the Company (the “Board”) or by the Committee, as adopted or amended from time to time.

        1.4     “Bonus Potential” means the maximum bonus amount Executive could receive pursuant to Section 3.2 hereof for achieving 100% of “base” or “targeted” performance goals established by the Board or Committee under the Annual Bonus Plan with respect to the applicable fiscal year; provided, however, in no event shall Executive’s Bonus Potential for the year in which the Bonus Potential is being determined (a) be less than 70% of Executive’s Annual Base Salary as in effect on January 1 of such year, or (b) take into account, or include in any way, any increase in Executive’s bonus amount due to the Company exceeding its “base” or “target” goals for such year (e.g., if Executive’s “base” or “target” Bonus Potential is stated at $50,000, but Executive is eligible to receive more than $50,000 if certain targets are exceeded then Executive’s Bonus Potential for purposes of this definition is $50,000).

        1.5     “Cause ” means:

                   (a)     any act or acts by Executive, whether or not in connection with his employment by the Company, constituting, or Executive’s conviction or plea of guilty or nolo contendere (no contest) to, (i) a felony under applicable law or (ii) a misdemeanor involving moral turpitude;

                   (b)      any act or acts of gross dishonesty or gross misconduct in the performance of Executive’s duties hereunder;

                   (c)      any willful malfeasance or willful misconduct by Executive in connection with Executive’s duties hereunder or any act or omission which is injurious to the financial condition or business reputation of the Company or its affiliates; or

                   (d)      any breach by Executive of the provisions of Sections 5.1 through 5.3 of this Agreement, or of the terms and provisions of the Nondisclosure and Noncompetition Agreement (as defined in Section 1.25 hereof).

                   Notwithstanding the foregoing, the event(s) described in clause (c) of this Section 1.5 shall not be deemed to constitute “Cause” if such event is (i) solely as the result of bad judgment or negligence on the part of Executive not rising to the level of gross negligence; or (ii) solely because of an act or omission believed by Executive in good faith to have been in, or not opposed to, the interests of the Company and its affiliates.

        1.6     “Change in Control” means a Change in Control as that term is defined in the Incentive Plan (as defined in Section 1.23 hereof).

        1.7     “Change in Control Date” means the Change in Control Date as that term is defined in the Incentive Plan.

        1.8     “Change in Control Period” means the ninety (90) day period commencing on the Change in Control Date.

        1.9     “Change in Control Price” means the value, expressed in dollars, as of the date of receipt of the per share consideration received by the Company’s stockholders whose stock is acquired in a transaction constituting a Change in Control.

        1.10     “Code” means the Internal Revenue Code of 1986, as amended.

        1.11     “Committee” means the Compensation and Development Committee of the Board.

        1.12     “Covered Payments” means the amounts described in Section 6.12(a) hereof.

        1.13     “Deferred Bonus” means the bonus described in Section 3.6 hereof; provided, however, for purposes of determining the total amount of the Deferred Bonus payable upon distribution from the Deferred Compensation Plan, the amount in Section 3.6 hereof will be adjusted to take into account any interest, earnings or other gains accrued thereon and any losses resulting from investment of the Deferred Bonus in the investment selections under the Deferred Compensation Plan. Notwithstanding anything to the contrary herein, in the event the Deferred Bonus is to be credited by the Company in two or more installments, then all references to the Deferred Bonus herein shall apply only to those installments which have either already been credited by the Company, or with respect to which the Company’s obligation to credit such installment(s) has vested.

        1.14     “Deferred Compensation Plan” means the Express Scripts, Inc. Executive Deferred Compensation Plan, as amended from time to time, or any successor plan.

        1.15     “Disability” has the meaning ascribed to such term in the Incentive Plan.

        1.16     “EBITDA” means earnings before interest, taxes, depreciation and amortization.

        1.17     “Effective Date” means the date specified in the recitals to this Agreement.

        1.18     “Employment Period” means the Initial Employment Period (as defined in Section 1.24 hereof) plus any additional Renewal Periods (as defined in Section 1.29 hereof).

        1.19     “EPS” means the earnings per share of the Company.

        1.20     “Excise Tax” means the excise tax imposed by Section 4999 of the Code or any similar state or local tax that may be imposed.

        1.21     “General Release” means the General Release and Acknowledgment attached hereto as Exhibit A.

        1.22     “Good Reason” means the occurrence of any one or more of the following:

                    (a)     Any material breach by the Company of any of the provisions of this Agreement or any material failure by the Company to carry out any of its obligations hereunder;

                    (b)     The Company’s requiring Executive to be based at any office or location more than 50 miles from 13900 Riverport Drive, Maryland Heights, Missouri (the “Current Headquarters”), except for travel reasonably required in the performance of Executive’s responsibilities to the extent substantially consistent with Executive’s business travel obligations;

                    (c)     Any substantial and sustained dimunition in Executive’s authority or responsibilities from those described in Section 2.3 hereof; provided, however, notwithstanding the foregoing, (i) in the event a Change in Control shall occur which results in the Company becoming a subsidiary of another pharmacy benefit management company (“PBM”), or which is in the form of a merger in which the surviving corporation or entity is a PBM (x) so long as Executive is offered a position as an officer of the parent PBM (or surviving corporation or entity) with duties and responsibilities which are not inconsistent in any material adverse respect with his or her duties and responsibilities immediately prior to such Change in Control, and such position is based at an office or location not more than 50 miles from the Current Headquarters, such change in position shall not constitute Good Reason, but (y) if Executive is not offered a position as an officer of the parent PBM or surviving corporation or entity as described in (x), a substantial and sustained dimunition in Executive’s authority or responsibility shall be deemed to have occurred; or (ii) in the event a Change in Control shall occur which results in the Company becoming a subsidiary of a non-PBM or is in the form of a merger in which the surviving corporation or entity is not a PBM, failure to receive an offer to serve as an officer of the non-PBM parent or surviving corporation or entity shall not constitute Good Reason provided Executive’s duties subsequent to the Change in Control are not inconsistent in any material adverse respect with his or her duties immediately prior to the Change in Control, and such position is based at an office or location not more than 50 miles from the Current Headquarters;

                    (d)     The failure by the Company to continue to provide Executive with substantially similar perquisites or benefits Executive enjoyed in the aggregate under the Company’s benefit programs (other than long-term incentive compensation programs), such as any of the Company’s pension, savings, vacation, life insurance, medical, health and accident, or disability plans in which he or she was participating at the time of any such discontinuation (or, alternatively, if such plans are amended, modified or discontinued, substantially similar equivalent benefits thereto in the aggregate), or the taking of any action by the Company which would directly or indirectly cause such benefits to be no longer substantially equivalent in the aggregate to the benefits in effect immediately prior to taking such action; provided, that any amendment, modification or discontinuation of any plans or benefits referred to in this subsection (d) hereof that generally affect substantially all other domestic salaried employees of the Company who were eligible to participate, and participated, in the affected Company benefit program(s) shall not be deemed to constitute Good Reason; and

Provided that the events described in Section 1.22 (a), (b), (c) or (d) above shall only constitute Good Reason if the Company fails to cure such event within 30 days after receipt from Executive of written notice of the event which constitutes Good Reason; and provided further that, “Good Reason” shall cease to exist for an event on the 60th day following the later of its occurrence or Executive’s knowledge thereof, unless Executive has given the Company written notice thereof prior to such date.

         1.23    “Incentive Plan” means the Express Scripts, Inc. 2000 Long-Term Incentive Plan, as amended from time to time.

         1.24    “Initial Employment Period” has the meaning set forth in Section 2.2 hereof.

         1.25    “Nondisclosure and Noncompetition Agreement” means the Form of Nondisclosure and Noncompetition Agreement entered into by and between Executive and the Company dated as of February 5, 1996.

        1.26     “Option” means the option to purchase the number of shares of the Company’s common stock as set forth in Section 3.4 hereof.

        1.27     “Payment Cap” means the maximum amount described in Section 6.12(b) hereof

        1.28     “Pro Rata Deferred Bonus” means a pro rata payment of the Deferred Bonus equal to the product of (i) the Deferred Bonus multiplied by (ii) a fraction, the numerator of which is the number of days which have elapsed in the Initial Employment Period through the Termination Date and the denominator of which is the total number of days in the Initial Employment Period. Notwithstanding the foregoing, in the event the termination of Executive’s employment results from Executive’s death, the Pro Rata Deferred Bonus shall be 100% of the Deferred Bonus. As set forth in Section 1.13 hereof, the calculation of the Pro Rata Deferred Bonus shall not include any installments of the Deferred Bonus which either have not already been credited by the Company, or with respect to which the Company’s obligation to credit such installment(s) has not vested.

        1.29     “Renewal Period” has the meaning set forth in Section 2.2 hereof.

        1.30     “Restricted Stock” means shares of the Company’s common stock, $0.01 par value per share, which are issued pursuant to the Incentive Plan and subject to one or more restrictions prescribed by the Board or the by Committee, in the sole discretion of either, as applicable.

        1.31     “Retirement” means the voluntary termination of employment by Executive on or after attaining age 59 1/2 which does not occur during a Change in Control Period.

        1.32     “Retirement Account” means Executive’s Retirement Account (as defined in the Deferred Compensation Plan).

        1.33     “Severance Benefit” means a severance payment in an amount equal to:

        (a)   eighteen (18) months of Executive’s Annual Base Salary as in effect immediately prior to the Termination Date, plus

        (b)   an amount equal to the product of (i) Executive’s Bonus Potential for the year in which the Termination Date occurs (the “Termination Year”), multiplied by (ii) the average percentage of the Bonus Potential earned by the Executive for the three (3) full years immediately preceding the Termination Year, (or such shorter period if Executive was employed by the Company for less than three (3) full years and received, or was eligible to receive, a bonus during such period), which product shall be prorated for the portion of the Termination Year in which Executive was employed by the Company. Notwithstanding anything to the contrary herein, neither the three-year average percentage of Bonus Potential described in (ii) above, nor the percentage for any single year used to compute such three-year average, may exceed 100%.

        1.34     “Tax Reimbursement Payment” means the payment described in Section 6.12(c) hereof.

        1.35     “Termination Date” means the effective date of termination of Executive’s employment as determined in accordance with Section 4.7 hereof.

ARTICLE II
TERM/POSITION

        2.1     Employment; Effectiveness of Agreement. Effective as of the Effective Date, the Company hereby employs Executive, and Executive hereby accepts such employment, according to the terms and conditions set forth in this Agreement.

        2.2     Term. Subject to the provisions of Sections 4.1 through 4.7 of this Agreement, the term of Executive’s employment hereunder shall commence on the Effective Date and continue through March 31, 2006 (the “Initial Employment Period”). On April 1st of each year, commencing with April 1, 2006 and on each subsequent April 1st thereafter (each, an “Anniversary Date”), this Agreement shall be extended automatically at such time for an additional twelve (12) month period (each, a “Renewal Period”) unless either party hereto delivers written notice in accordance with Section 6.2 hereof to the other party hereto at least 30 days prior to such Anniversary Date of his, her or its desire not to renew this Agreement for an additional Renewal Period. The Initial Employment Period and any Renewal Periods, if any, shall constitute the “Employment Period” for purposes of this Agreement. If there are no Renewal Periods, then the Employment Period shall have the same meaning as Initial Employment Period. Except as set forth in Section 6.1 hereof, upon termination of Executive’s employment with the Company in accordance with the terms hereof or upon termination of the Initial Employment Period or the Employment Period without extension thereof, this Agreement shall terminate and no longer be of any force or effect

        2.3     Position and Duties. Executive shall hold the position of Chief Operating Officer and shall report to, and at all times be subject to the lawful direction of, the Chief Executive Officer or President of the Company (as designated by the Chief Executive Officer of the Company). Additionally, Executive shall serve as a member of the executive staff and participate in the strategic decision-making of the Company from time to time. If requested, Executive shall also serve as a member of the Board without additional compensation. During the Employment Period, Executive shall devote his or her best efforts and his or her full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business affairs of the Company. Executive shall perform his or her duties and responsibilities to the best of his or her abilities in a diligent, trustworthy, businesslike and efficient manner. Nothing herein shall preclude Executive from, subject to the prior written consent of the Board, (a) serving on any corporate or governmental board of directors (b) serving on the board of, or working for, any charitable, not-for-profit or community organization, (c) pursuing his or her personal, financial and legal affairs, or (d) pursuing any other activity; provided that Executive shall not engage in any other business, profession, occupation or other activity, for compensation or otherwise, which would violate the provisions of Section 5.1 or would, in each case, and in the aggregate, otherwise conflict or interfere with the performance of Executive’s duties and responsibilities hereunder, either directly or indirectly, without the prior written consent of the Board

ARTICLE III
COMPENSATION AND BENEFITS

        3.1     Annual Base Salary. During the Employment Period, the Company shall pay Executive a base salary (the “Annual Base Salary”) at the annual rate of Four Hundred Fifty Thousand Dollars ($450,000), which shall be payable in regular installments in accordance with the Company’s usual payroll practices and shall be subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes. Executive shall be eligible for such merit-based increases in Executive’s Annual Base Salary, if any, as may be determined from time to time in the sole discretion of the Board; provided that any such increase shall not serve to limit or reduce any other obligation to Executive under this Agreement. The term “Annual Base Salary” as used in this Agreement shall refer to the Annual Base Salary as in effect from time to time during the Employment Period. Executive’s Annual Base Salary shall not be reduced after any such increase without Executive’s express written consent.

        The parties agree that the amount of Annual Base Salary shall be deemed effective as of January 1, 2004. In order to account for the retroactive increase in salary, the Company shall, within thirty days of the Effective Date, deliver a one-time payment to Executive in an amount equal to the difference between the salary paid to Executive for the period from January 1, 2004 through the Effective Date and the salary which would have been paid during such period had the Annual Base Salary been in effect. Such payment shall be to deductions for customary withholdings and the Company’s standard payroll policies and procedures.

        3.2     Annual Incentive Compensation. Executive shall be eligible to participate in the Company’s Annual Bonus Plan established for senior executives by the Board or the Committee. The size of Executive’s bonus opportunity, which shall be no less than the Bonus Potential, and the terms of Executive’s participation in the Annual Bonus Plan, shall be determined based on the terms and conditions of the Annual Bonus Plan, subject to adjustment as described therein. Executive’s Annual Bonus shall be based upon performance of Executive, Executive’s department, and/or the Company in relation to the financial and non-financial objectives to be established by the Board or by the Committee, at the sole discretion of either, as applicable, pursuant to the terms of the Annual Bonus Plan. Executive’s Annual Bonus shall be subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes, and Medicare taxes. Subject to the achievement or failure to achieve the relevant financial and non-financial objectives under the Annual Bonus Plan, Executive may receive, for any given year, from 0% to 200% of Executive's Bonus Potential (or such higher percentage as may be achievable pursuant to the terms of the Annual Bonus Plan), as further set forth in the Annual Bonus Plan.

        3.3     Participation in Benefit and Incentive Plans. During the Employment Period, Executive shall be entitled to participate in the Company’s employee benefit plans (other than bonus and incentive plans) as in effect from time to time, on the same basis as those benefits are generally made available to similarly situated senior executives of the Company. The payments provided in Article III hereof are in addition to benefits which Executive is entitled to receive pursuant to the terms of any pension plan or group hospitalization, health, dental care, disability insurance, death benefit, travel and/or accident insurance, or executive compensation plan or arrangement, including, without limitation, the Incentive Plan and the Deferred Compensation Plan.

        3.4     Stock Options.

                    (a)     Executive will receive a non-qualified option to purchase seventeen thousand, five hundred and fifty-four (17,554) shares of the Company’s common stock (the “Performance-Based Option”), subject to approval by the Committee and to the terms and conditions of this Agreement, the applicable option agreement or notice and the Incentive Plan, with a purchase price equal to the Fair Markeet Value (as defined in the Incentive Plan) of the Company's common stock on the date of grant subject to adjustment pursuant to the terms of the Incentive Plan (the "Exercise Price"). The Performance-Based Option shall vest on December 31, 2010 (subject to acceleration as set forth in Section 3.4(b) below), provided Executive is still employed by the Company on such date and subject to such other vesting terms as may be provided in the Incentive Plan and the applicable option agreement or notice. The Performance-Based Option shall expire seven (7) years from the date of grant, subject to earlier expiration following Executive’s termination of employment as may be provided in the Incentive Plan and the applicable option agreement or notice.

                    (b)     Notwithstanding the foregoing, the vesting of the Performance-Based Option may be accelerated if certain financial targets and other conditions are met in accordance with vesting provisions adopted by the Board or the Committee and set forth in the applicable option agreement or notice, subject to the terms of the Incentive Plan and the applicable option agreement or notice.

                    (c)     Notwithstanding the standard provisions of the Incentive Plan, the Performance-Based Option shall not vest or otherwise become exercisable solely as a result of either Executive’s Retirement hereunder or Executive’s “Retirement” under the Incentive Plan (as such term is defined therein).

        3.5     Restricted Stock.

                    (a)     Executive will receive Fourteen Thousand Four Hundred Fifty-One (14,451) shares of Restricted Stock, subject to approval by the Committee and to the terms and conditions of this Agreement, the applicable restricted stock agreement and the Incentive Plan. For the purposes hereof, Twelve Thousand Forty (12,040) shares of the above-described Restricted Stock shall be referred to as the "Target Shares."

                    (b)     Notwithstanding the standard provisions in the Incentive Plan, the Restricted Stock awarded pursuant to Section 3.5(a) hereof shall vest or be forfeited in accordance with the following:

                                (i)     If Executive remains in the employ of the Company until the seventh anniversary of the date the Restricted Stock is granted by the Committee (the “Restricted Stock Vesting Date”), Executive shall become fully vested in the Restricted Stock subject to this Agreement. Unless either Section 3.5(b)(ii) or 3.5(b)(iii) shall apply, if Executive’s employment is terminated prior to the Restricted Stock Vesting Date, all shares of Restricted Stock awarded pursuant to Section 3.5(a) hereof shall be forfeited without payment of consideration by the Company.

                                (ii)     Notwithstanding the foregoing, the vesting of the Restricted Stock may be accelerated if certain financial targets and other conditions are met in accordance with vesting provisions adopted by the Board or the Committee and set forth in the applicable restricted stock agreement.

                                (iii)     To the extent the Restricted Stock awarded pursuant to Section 3.5(a) hereof does not otherwise vest pursuant to Section 3.5 (b)(ii), if, prior to the Restricted Stock Vesting Date, either Executive terminates employment on account of death, Disability or for Good Reason, or Executive is terminated by the Company on account of Disability or other than for Cause, Executive shall become vested in a portion of the unvested Restricted Stock awarded pursuant to Section 3.5(a) hereof equal to the product of (x) the Target Shares, multiplied by (y) a fraction, the numerator of which is the number of days which have elapsed in the Initial Employment Period through the Termination Date and the denominator of which is the total number of days in the Initial Employment Period; provided, however, that notwithstanding such formula, in the event such termination is on account of Executive's death, the product of (x) and (y) above shall be deemed to be the full amount of the Target Shares.   Shares of Restricted Stock awarded pursuant to Section 3.5 (a) hereof which have not otherwise vested pursuant to either Section 3.5(b)(ii) hereof or the preceding sentence of this Section 3.5(b)(iii) shall be forfeited without payment of consideration by the Company.

                   (c)     Notwithstanding the standard provisions of the Incentive Plan, the Restricted Stock shall not vest or otherwise become exercisable solely as a result of either Executive’s Retirement hereunder or Executive’s “Retirement” under the Incentive Plan (as such term is defined therein).

3.6     Deferred Bonus.

                   (a)     In addition to any other bonus or deferred compensation benefit described in Article III hereof, or to which Executive is otherwise entitled pursuant to another plan or arrangement with the Company, the Company agrees to credit six hundred thousand and dollars ($600,000) (the “Deferred Bonus”) to Executive’s Retirement Account as deferred compensation under the Deferred Compensation Plan, subject to the terms and conditions hereof. The Deferred Bonus shall be credited in two equal installments of three hundred thousand dollars ($300,000) each as follows: (i) the first installment shall be credited as soon as practicable following the Effective Date, and (ii), the second installment shall be credited as soon as practicable following such first anniversary; provided, that in the event Executive’s employment with the Company is terminated for any reason prior to the first anniversary of the Effective Date, the Company shall have no obligation to credit the second installment of the Deferred Bonus and Executive shall have no rights with respect to such second installment.

                   (b)     Notwithstanding anything to the contrary in the Deferred Compensation Plan, in the event Executive’s employment with the Company is terminated prior to expiration of the Initial Employment Period, Executive shall forfeit all of the Deferred Bonus, without payment of consideration by the Company, except as otherwise provided in Section 3.6(e) hereof. In the event a distribution is otherwise made from Executive’s Retirement Account pursuant to the rules set forth in the Deferred Compensation Plan prior to expiration of the Initial Employment Period, no portion of the Retirement Account traceable to the Deferred Bonus shall be eligible for distribution from the Retirement Account at such time, except as otherwise provided in Section 3.6(e).

                   (c)     Subject to Section 3.6(f) hereof, provided Executive remains in the employ of the Company until expiration of the Initial Employment Period, Executive shall be entitled to receive a distribution of the Deferred Bonus after expiration of the Employment Period at the time and in the manner provided under the Deferred Compensation Plan.

                   (d)     If, prior to March 31, 2006, either Executive terminates employment on account of Retirement, death, Disability or for Good Reason, or Executive is terminated by the Company on account of Disability or other than for Cause, Executive shall be entitled to receive a Pro Rata Deferred Bonus; provided, however, Executive shall be entitled to receive the Pro Rata Deferred Bonus only if he or she is not otherwise entitled to receive the entire Deferred Bonus pursuant to Section 3.4(e) hereof as of the Termination Date. Notwithstanding the foregoing, Executive agrees that payment of any Pro Rata Deferred Bonus is contingent upon the terms of Section 4.2(c) hereof. Payment of the Pro Rata Deferred Bonus is subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes.

                   (e)     Subject to Section 3.6(f) hereof, Executive shall obtain a vested right to receive the Deferred Bonus upon a Change in Control as follows:

                              (i)     If the Change in Control occurs prior to expiration of the Initial Employment Period and Executive remains in the employ of the Company through the end of the Change in Control Period, Executive shall obtain a vested right to receive one-half of the Deferred Bonus, with the remaining one-half otherwise eligible for vesting pursuant to the terms set forth in Sections 3.6(b), 3.6(c) and 3.6(e) hereof.

                              (ii)     If the Change in Control occurs prior to expiration of the Initial Employment Period and Executive is terminated by the Company other than for Cause or Disability, or Executive terminates for Good Reason, either during the ninety (90) day period immediately preceding the Change in Control Date (provided such Change in Control was public knowledge as of the Termination Date) or at any time after the occurrence of such Change in Control but prior to the expiration of the Initial Employment Period, Executive shall obtain a vested right to receive the entire Deferred Bonus.

                              (iii)     If the Initial Employment Period expires during the Change in Control Period (i.e., March 31, 2006 falls within the Change in Control Period), Executive shall obtain a vested right to receive the entire Deferred Bonus on such expiration date regardless of whether Executive remains in the employ of the Company after such date pursuant to the terms of this Agreement or otherwise.

Any portion of the Deferred Bonus to which Executive becomes entitled to receive pursuant to this Section 3.6(e) shall be payable at the time and in the manner provided under the Deferred Compensation Plan.

                   (f)     As a condition to entitlement to the Deferred Bonus pursuant to Section 3.6(c) or 3.6(e) hereof, Executive shall be required to honor, in accordance with their terms, the provisions of Sections 5.1, 5.2 and 5.3 hereof (and the terms and provisions of the General Release and the Nondisclosure and Noncompetition Agreement). In the event Executive fails to honor any such provision, payments of the Deferred Bonus, and any accrued interest, earnings or other gains thereon, to which Executive may otherwise have been entitled pursuant to Section 3.6(c) or 3.6(e) hereof shall immediately cease and Executive shall immediately forfeit all right, title and interest in and to any remaining Deferred Bonus and Executive shall promptly pay to the Company any and all Deferred Bonus amounts which have already been paid, allocated or provided by the Company to Executive.

        3.7     Business Expenses. During the Employment Period, Executive shall be reimbursed for all reasonable expenses incurred by him in performing his or her duties hereunder provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company.

        3.8     Perquisites. During the Employment Period, Executive shall be entitled to receive such perquisites and fringe benefits which similarly situated executives of the Company are entitled to receive and such other perquisites which are suitable to the character of Executive’s position with the Company and adequate for the performance of Executive’s duties hereunder.

ARTICLE IV
TERMINATION OF EMPLOYMENT

        4.1     Termination by the Company for Cause; Termination by Executive Other Than for Good Reason or Retirement. If the Employment Period and Executive’s employment under this Agreement is terminated by the Company for Cause or by Executive other than for Good Reason or Retirement, prior to the scheduled expiration of the Employment Period, Executive shall be entitled to receive:

                    (a)     The Annual Base Salary through the Termination Date;

                    (b)     Any Annual Bonus earned for a previously completed fiscal year, but unpaid as of the Termination Date;

                    (c)     Reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the Termination Date; and

                    (d)     Such employee benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company, including rights with respect to the Performance-Based Option and the Restricted Stock subject to the terms and conditions of Sections 3.4 and 3.5 hereof and of the Incentive Plan and the applicable option or agreement or notice, if relevant (the amounts described in clauses (a) through (d) hereof being referred to as the “Accrued Rights”).

Following such termination of Executive’s employment hereunder pursuant to this Section 4.1, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.2     Termination by the Company Other Than for Cause or Disability; Termination by Executive for Good Reason.

                    (a)     If the Employment Period and Executive’s employment of under this Agreement is terminated by the Company prior to the scheduled expiration of the Employment Period other than for Cause or Disability, or Executive terminates his employment prior to the end of the Employment Period for Good Reason, Executive shall be entitled to receive:

                                (i)    The Accrued Rights;

                                (ii)     A Severance Benefit pursuant to the terms and conditions set forth below, and the Company will reimburse the Executive for Executive’s cost of continuing medical insurance under COBRA (the “Welfare Benefit”) for eighteen (18) months; and

                                (iii)     If the termination of employment occurs during the Initial Employment Period, any Pro Rata Deferred Bonus which Executive is eligible to receive pursuant to Section 3.6 hereof.

                    (b)     The Company shall pay the Severance Benefit, without interest thereon, in eighteen (18) substantially equal monthly installments, which installments shall be payable on the first day of each month, with the first installment payable in the first full month commencing fifteen (15) days after the Termination Date. Payment of the Severance Benefit is subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes. Executive shall not be under any duty to mitigate damages in order to be eligible to receive the Severance Benefit.

                    (c)     Notwithstanding the foregoing and the terms of Sections 3.5(b)(iii) and 3.6(d), Executive agrees that payment of the Severance Benefit, the Pro Rata Deferred bonus and the delivery of any portion of the Restricted Stock under Section 3.5(b)(iii) is contingent upon the following:

                                (i)     In the event of breach by Executive of Sections 5.1 through 5.3 hereof (or any breach of any agreements in the General Release or in the Nondisclosure and Noncompetition Agreement), Executive shall reimburse the Company for all compensation or other amounts previously paid, allocated, accrued, delivered or provided by the Company to Executive pursuant to Section 3.5(b)(ii), 3.6(d) or 4.2(a)(ii or iii)hereof and the Company shall be entitled to discontinue the future payment, delivery, allocation, accrual or provision of the Severance Benefit, the Welfare Benefit, the Pro Rata Deferred Bonus (if any) and any Restricted Stock.

                                (ii)     No later than thirty (30) days after the Termination Date, Executive must execute and deliver a General Release in the form attached hereto as Exhibit A.

Following such termination of Executive’s employment hereunder pursuant to this Section 4.2, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.3     Termination upon Death. If the Employment Period and Executive’s employment under this Agreement are terminated due to Executive’s death prior to the scheduled expiration of the Employment Period, Executive's estate will receive:

                    (a)     The Accrued Rights; and

                    (b)     If the termination of employment occurs during the Initial Employment Period, any Pro Rata Deferred Bonus which Executive is entitled to received pursuant to Section 3.6 hereof and/or any portion of the Restricted Stock which has vested in accordance with Section 3.5.

        Following such termination of Executive’s employment hereunder pursuant to this Section 4.3, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.4     Termination for Disability. If the Employment Period and Executive’s employment under this Agreement is terminated by the Company or by Executive due to Executive’s Disability prior to the scheduled expiration of the Employment Period, then Executive will receive:

                    (a)     the Accrued Rights; and

                    (b)     If the termination of employment occurs during the Initial Employment Period, any Pro Rata Deferred bonus which Executive is entitled to receive pursuant to Section 3.6 hereof and/or any portion of the Restricted Stock which has vested in accordance with Section 3.5

        Following such termination of Executive’s employment hereunder pursuant to this Section 4.4, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.5     Termination by Executive on Account of Retirement. If the Employment Period and Executive’s employment under this Agreement is terminated by Executive prior to the scheduled expiration of the Employment Period on account of Retirement, Executive shall be entitled to receive:

                    (a)     the Accrued Rights; and

                    (b)     If the termination of employment occurs during the Initial Employment Period, any Pro Rata Deferred bonus which Executive is entitled to receive pursuant to Section 3.6 hereof.

        Following such termination of Executive’s employment hereunder pursuant to this Section 4.5, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

      4.6     Expiration of the Employment Period.

                    (a)     In the event either party elects not to extend the Employment Period pursuant to Section 2.2, unless Executive’s employment is earlier terminated pursuant to Sections 4.1 through 4.5 of this Article IV, Executive’s termination of employment hereunder (whether or not Executive continues as an employee of the Company thereafter) shall be deemed to close on the close of business on the day immediately preceding the next scheduled Anniversary Date and Executive shall be entitled to receive the Accrued Rights.

                    (b)     Unless the parties otherwise agree in writing executed subsequent to the Effective Date, continuation of Executive’s employment with the Company beyond the expiration of the Employment Period shall be deemed an employment at-will and, subject only to Section 6.1, shall not be deemed to extend any of the provisions of this Agreement and Executive’s employment may thereafter be terminated at will by either Executive or the Company.

Following such termination of Executive’s employment hereunder pursuant to this Section 4.6, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.7     Notice of Termination. For purposes of this Agreement, any purported termination of Executive’s employment by the Company or by Executive, shall be communicated by written “Notice of Termination” to the other party hereto in accordance with Section 6.2 hereof. Any Notice of Termination shall set forth (a) the effective date of termination (for purposes of determining Executive’s entitlement to benefits hereunder), which shall not be less than fifteen (15) days after the date the Notice of Termination is delivered (the “Termination Date”); (b) the specific provision in this Agreement relied upon; and (c) in reasonable detail, the facts and circumstances claimed to provide a basis for such termination. If the Company terminates Executive's employment pursuant to Section 4.2 or 4.4 hereof, the Termination Date shall be the date upon which the Company notifies Executive of such termination. If Executive terminates employment pursuant to Section 4.1, 4.3, 4.4, 4.5 or 4.6 hereof, the Termination Date shall be Executive's last full day of work prior to such termination. Notwithstanding the foregoing, if within fifteen (15) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a good faith dispute exists concerning the termination, the “Termination Date” for purposes of determining the Executive’s entitlement to benefits under this Agreement shall be the date on which the dispute is finally determined by an independent arbitrator selected by the American Arbitration Association.

        4.8     Board/Committee Resignation. Upon termination of Executive’s employment for any reason, Executive agrees to resign, as of the Termination Date and to the extent applicable, from the Board (and any committees thereof) and the Board of Directors (and any committees thereof) of any of the Company’s affiliates.

ARTICLE V
RESTRICTIVE COVENANTS

For the purposes of this Article V, all references to the Company shall include the Company and its affiliates.

        5.1     Non-Solicitation and Non-Competition.

                    (a)     Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and its affiliates and accordingly agrees as follows:

                               (i)     During the period of Executive’s employment with the Company and, for a period of two (2) years after termination of Executive’s employment (the “Nonsolicit Period”), Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (“Person”), directly or indirectly solicit or assist in soliciting in competition with the Company, the business of any client or prospective client:

(1)        with whom Executive had personal contact or dealings on behalf of the Company during the one (1) year period preceding Executive’s termination of employment;

(2)        with whom employees reporting to Executive have had personal contact or dealings on behalf of the Company during the one (1) year immediately preceding the Executive’s termination of employment; or

(3)        for whom Executive had direct or indirect responsibility during the one (1) year immediately preceding Executive’s termination of employment.

                               (ii)     During the Nonsolicit Period, Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any Person, directly or indirectly:

(1)        solicit or encourage any employee of the Company or its affiliates to leave the employment of the Company or its affiliates; or

(2)        hire any such employee who was employed by the Company or its affiliates as of the date of Executive’s termination of employment with the Company or who left the employment of the Company or its affiliates coincident with, or within one year prior to or after, the termination of Executive’s employment with the Company.

                               (iii)     During the Nonsolicit Period, Executive will not, directly or indirectly, solicit or encourage to cease to work with the Company or its affiliates any consultant then under contract with the Company or its affiliates.

                               (iv)     During the period of Executive’s employment with the Company and, for a period of one (1) year after termination of Executive’s employment, if Executive remains in the employ of the Company at least until the expiration of the Employment Period, or for a period of eighteen (18) months after termination of Executive’s employment, if Executive’s employment is terminated (either by Executive or by the Company for any reason whatsoever) prior to the expiration of the Employment Period (the “Noncompete Period”), Executive will not directly or indirectly:

(1)        engage in any business that is, or will be, engaged wholly or primarily in the business of manufacturing, purchasing, selling or supplying in the United States any product or service manufactured, purchased, sold, supplied or provided by the Company or its affiliates, and which is or will be directly in competition with the business of the Company or its affiliates (including, without limitation, businesses which the Company or its affiliates have specific plans to conduct in the future and as to which Executive is aware of such planning) in the United States (a “Competitive Business”);

(2)        enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in a Competitive Business;

(3)        acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or

(4)         interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its affiliates and customers, clients, suppliers, partners, members or investors of the Company or its affiliates.

                               (v)     Notwithstanding anything to the contrary herein, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in the business of the Company or its affiliates which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such Person and (ii) does not, directly or indirectly, own 5% or more of any class of securities of such Person.

      5.2     Confidentiality.

                    (a)     Executive acknowledges that the identity of the clients and customers of the Company, the prices, terms and conditions at, or upon which, the Company sells its products or provides its services and other non-public, proprietary or confidential information relating to the business, financial and other affairs of the Company (including, without limitation, any idea, product, trade secret, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property; creative or conceptual business or marketing plan, strategy or other material developed for the Company by Executive; or information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals — concerning the past, current or future business, activities and operations of the Company or its affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis) (hereinafter collectively referred to as “Confidential Information”) are valuable, special unique assets of the Company and that such Confidential Information, if disclosed to others, may result in loss of business or other irreparable and consequential damage to the Company.

                    (b)     Executive shall hold in fiduciary capacity, for the benefit of the Company, all Confidential Information and shall not, at any time during the Employment Period or thereafter (i) retain or use for the benefit, purposes or account of Executive of any other Person, or (ii) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any Confidential Information, without the prior written authorization of the Company.

                    (c)     Notwithstanding the foregoing, the term Confidential Information shall not include information (i) generally known to the public or the trade other than as a result of Executive’s breach of this covenant or any breach of other confidentiality obligations by third parties, (ii) made legitimately available to Executive by a third party without breach of any confidentiality obligation, (iii) the release of which is deemed by the Board to be in the best interest of the Company, or (iv) the disclosure of which is required by applicable law; provided that Executive shall give prompt written notice to the Company of such legal requirement, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similar treatment.

                    (d)     Notwithstanding anything herein to the contrary, any party to this Agreement (and any employee, representative, or other agent of any party to this Agreement) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. However, any such information relating to the tax treatment or tax structure is required to be kept confidential to the extent necessary to comply with any applicable federal or state securities laws.

                    (e)     Upon termination of Executive’s employment with the Company for any reason, Executive shall (i) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company or its affiliates, (ii) immediately destroy, delete, or return to the Company, at the Company’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executive’s possession or control (including any of the foregoing stored or located in Executive’s office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or otherwise relate to the business of the Company or its affiliates, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information, and (iii) notify and fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information of which Executive is or becomes aware.

        5.3     Non-Disparagement. Executive agrees that Executive will not disparage the Company or its affiliates, or its or their current or former officers, directors, and employees in any way; further, Executive will not make or solicit any comments, statements, or the like to the media or to others that would be considered derogatory or detrimental to the good name or business reputation of any of the aforementioned entities or individuals; provided, that this Section does not prohibit statements which Executive is required to make under oath or which are otherwise required by law, provided that such statements are truthful and made in a professional manner.

        5.4     Acknowledgment of Reasonable Covenants. It is expressly understood and agreed that Executive and the Company consider the restrictions and covenants contained herein to be reasonable and enforceable, because, among other things, (a) Executive will be receiving compensation under this Agreement or otherwise, (b) there are many other areas in which, and companies for which, Executive could work in view of Executive’s background, (c) the restrictions and covenants set forth herein do not impose any undue hardship on Executive, (d) the Company would not have entered into this Agreement but for the restrictions and covenants of Executive contained herein, and (e) the restrictions and covenants contained herein have been made in order to induce the Company to enter into this Agreement.

        5.5     Modification of the Restrictive Covenants. If, at the time of enforcement of the restrictive covenants set forth herein, a final judicial determination is made by a court or arbiter of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

ARTICLE VI
MISCELLANEOUS

        6.1     Survival. Sections 4.1 through 4.8 inclusive (as applicable to the relevant circumstance of termination only), 5.1 through 5.5 inclusive and 6.1 through 6.14 inclusive shall survive and continue in full force in accordance with their terms notwithstanding any termination of Executive’s employment hereunder or termination of the Initial Employment Period or the Employment Period.

        6.2     Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally, mailed by certified or registered mail, return receipt requested and postage prepaid, or sent via a nationally recognized overnight courier, or sent via facsimile to the recipient. Such notices, demands and other communications shall be sent to the address indicated below:

To the Company:

Express Scripts, Inc.

13900 Riverport Drive

Maryland Heights, MO 63403

Attention: Chief Executive Officer

To Executive:

Mr. David A. Lowenberg

XXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXX

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.

        6.3     Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

        6.4     Complete Agreement. This Agreement constitutes the complete agreement and understanding between the parties regarding the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by and between the parties, written or oral; provided, however, this Agreement shall not supersede or modify the terms of the Nondisclosure and Noncompetition Agreement, and the Options and Restricted Stock shall be subject to the applicable option and restricted stock notices or agreements. The applicable provisions of this Agreement amend the terms and provisions of the Express Scripts, Inc. 2000 Long-Term Incentive Plan to the extent addressed by this Agreement, as the same may have been amended prior to the date hereof, with respect to awards covered by this Agreement and made to Executive hereunder.

        6.5     Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

        6.6     Successors and Assigns. Except as otherwise provided herein, all covenants and agreements contained in this Agreement shall bind and inure to the benefit of and be enforceable by the Company and its respective successors and assigns. Except as otherwise specifically provided herein, this Agreement, including the obligations and benefits hereunder, may not be assigned to any party by Executive.

        6.7     No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied to this Agreement.

        6.8     Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

        6.9     Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Missouri, without regard to conflicts of laws principles thereof; provided, however, that issues related to the Incentive Plan or any grants thereunder shall be resolved in accordance with the laws of the State of Delaware.

        6.10     Specific Performance. The Company shall be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorneys’ fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The Executive agrees and acknowledges that money damages are an inadequate remedy for any breach of the provisions of this Agreement, including, without limitation, Sections 5.1 through 5.3 hereof, and that the Company shall be entitled to apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. Further, Executive acknowledges that the forfeiture provision set forth in the termination provisions hereof shall not be construed to limit or otherwise affect the Company’s right to seek legal or equitable remedies it may otherwise have, or the amount damages for which it may seek recovery, resulting from breach of this Agreement.

        6.11     Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive.

        6.12     Tax Indemnification.

                    (a)     Notwithstanding anything to the contrary herein (or any other agreement entered into by and between Executive and the Company or any incentive arrangement or plan offered by the Company), in the event that any amount or benefit paid or distributed to Executive pursuant to this Agreement, taken together with any amounts or benefits otherwise paid or distributed to Executive by the Company or any of its subsidiaries (collectively, the “Covered Payments”), would constitute an “excess parachute payment” as defined in Section 280G of the Code, and would thereby subject Executive to an Excise Tax, the provisions of this Section 6.12 shall apply.

                    (b)     If the aggregate present value (as determined for purposes of Section 280G of the Code) of the Covered Payments exceeds the amount which can be paid to Executive without Executive incurring an Excise Tax, but is less than 125% of such amount, then the amounts payable to Executive under this Agreement (or any other agreement by and between Executive and the Company or pursuant to any incentive arrangement or plan offered by the Company) may, in the discretion of the Company, be reduced (but not below zero) to the maximum amount which may be paid hereunder without Executive becoming subject to the Excise Tax (such reduced payments to be referred to as the “Payment Cap”). In the event Executive receives reduced payments and benefits as a result of application of this Section 6.12, Executive shall have the right to designate which of the payments and benefits otherwise set forth herein (or any other agreement between Executive and the Company or any incentive arrangement or plan offered by the Company) will be received in connection with the application of the Payment Cap.

                    (c)     If the aggregate present value of all Covered Payments is equal to or exceeds 125% of the amount which can be paid to Executive without Executive incurring an Excise Tax, Executive shall be entitled to receive an additional amount (the “Tax Reimbursement Payment”) such that the net amount retained by Executive with respect to such Covered Payments, after deduction of any Excise Tax on the Covered Payments and any federal, state and local income tax and Excise Tax on the Tax Reimbursement Payment provided for by this Section 6.12, but before deduction for any federal, state or local income or employment tax withholding on such Covered Payments, shall be equal to the amount of the Covered Payments. Such additional amount may be paid by the Company directly to the applicable taxing authority.

                    (d)     Immediately upon a Change in Control, the Company shall notify Executive of any modification or reduction as a result of the application of this Section 6.12. In the event Executive and the Company disagree as to the application of this Section 6.12, the Company shall select a law firm or accounting firm from among those regularly consulted (during the twelve-month period immediately prior to the Change in Control that resulted in the characterization of the Covered Payments as parachute payments) by the Company, and such law firm or accounting firm shall determine, at the Company’s expense, the amount to which Executive shall be entitled hereunder (and pursuant to any other agreements, incentive arrangements or plans), taking into consideration the application of this Section 6.12, and such determination shall be final and binding upon Executive and the Company.

        6.13     Executive Representation. Executive hereby represents to the Company that the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound.

        6.14     Cooperation. Each party shall provide reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executive’s employment hereunder.

_________________

        IN WITNESS WHEREOF, the parties hereto have executed this Executive Employment Agreement as of the date first above written.

THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

EXPRESS SCRIPTS, INC.

By: /s/ Barrett Toan                                        

Name: Barrett Toan

Title: Chairman and Chief Executive Officer

EXECUTIVE

/s/ David A. Lowenberg                                   

Name: David A. Lowenberg

Title: Chief Operating Officer

EXHIBIT A

GENERAL RELEASE AND ACKNOWLEDGMENT

        THIS GENERAL RELEASE AND ACKNOWLEDGMENT (the “General Release”) is made this ___ day of ________, ___________, by David A. Lowenberg (the “Executive”) in favor of Express Scripts, Inc. (the “Company”) pursuant to Section 4.2(c)(ii) of the Executive’s Employment Agreement dated August 31, 2004 (the “Agreement”). Unless otherwise defined herein, capitalized terms appearing herein shall have the meanings given to them in the Agreement.

        1.     General Release of Claims. The Executive, for and on behalf of the Executive and the Executive’s heirs, beneficiaries, executors, administrators, successors, assigns, and anyone claiming through or under any of the foregoing, hereby agrees to, and does, release and forever discharge the Company, and its agents, officers, employees, successors and assigns, from any and all matters, claims, demands, damages, causes of action, debts, liabilities, controversies, judgments and suits of every kind and nature whatsoever, foreseen or unforeseen, known or unknown, arising out of or relating to any matter whatsoever, including, without limitation, the Executive’s termination from employment with the Company, matters arising from the offer and acceptance of the Agreement, matters relating to employment references or lack thereof from the Company, and those claims described in paragraph 3 hereof.

        2.     Agreement Not to File Suit. Except as otherwise expressly permitted in paragraph 3 hereof, the Executive, for and on behalf of the Executive and the Executive’s beneficiaries, executors, administrators, successors, assigns, and anyone claiming through or under any of the foregoing, agrees that he or she will not file or otherwise submit any charge, claim, complaint, or action to any agency, court, organization, or judicial forum (nor will the Executive permit any person, group of persons, or organization to take such action on the Executive’s behalf) against the Company arising out of any actions or non-actions on the part of the Company prior to or as of the date hereof arising out of or relating to any matter whatsoever. The Executive further agrees that in the event that any person or entity should bring such a charge, claim, complaint, or action on the Executive’s behalf, the Executive hereby waives and forfeits any right to recovery under said claim and will exercise every good faith effort (but will not be obliged to incur any expense) to have such claim dismissed.

        3.     Claims Covered. The charges, claims, complaints, matters, demands, damages, and causes of action referenced in paragraphs 1 and 2 above include, but are not limited to:

                    (a)     any breach of an actual or implied contract of employment between the Executive and the Company;

                    (b)     any claim of unjust, wrongful, or tortious discharge (including any claim of fraud, negligence, retaliation for whistleblowing, or intentional infliction of emotional distress);

                    (c)     any claim of defamation or other common-law action;

                    (d)     any claims of violations arising under the Civil Rights Act of 1964, as amended, 42 U.S.C.ss.2000e et seq., the Age Discrimination in Employment Act, 29 U.S.C.ss.621 et seq. (only with respect to claims regarding acts of discrimination arising prior to the execution of this General Release), the Americans with Disabilities Act of 1990, 42 U.S.C.ss.12101 et seq., the Fair Labor Standards Act of 1938, as amended, 29 U.S.C.ss.201 et seq., the Rehabilitation Act of 1973, as amended, 29 U.S.C.ss.701 et seq., the Missouri Human Rights Act,ss.213.000 R.S.Mo. et seq., or any other relevant federal, state, or local statutes or ordinances; provided, however, that for purposes of the Age Discrimination in Employment Act only, this General Release does not affect the rights and responsibilities of the Equal Employment Opportunity Commission (the “EEOC”) to enforce the Age Discrimination in Employment Act, nor does this General Release prohibit the Executive from filing a charge or complaint under the Age Discrimination in Employment Act with the EEOC or participating in any investigation or proceeding conducted by the EEOC;

                    (e)     any claims for salary, bonus pay, vacation pay, severance pay or welfare benefits, other than those payments and benefits specifically provided in the Agreement; and

                    (f)     any other matter whatsoever, whether related or unrelated to employment matters.

        4.     Claims Excluded. Notwithstanding anything else herein to the contrary, this General Release shall not:

                    (a)     apply to the obligations of the Company described in Sections 3.4, 3.5, 3.6 and Article IV of the Agreement; or

                    (b)     affect, alter or extinguish any vested rights that the Executive may have with respect to any benefits, rights or entitlements under the terms of any employee benefit programs of the Company to which the Executive is or will be entitled by virtue of his or her employment with the Company or any of its subsidiaries, and nothing in this General Release will prohibit or be deemed to restrict the Executive from enforcing his or her rights to any such benefits, rights or entitlements; or

                    (c)     limit the Executive’s right to indemnification to the extent provided in the Company’s Certificate of Incorporation and/or bylaws.

        5.     Acknowledgments. By signing this General Release, the Executive hereby represents, certifies and acknowledges that the Executive:

                    (a)     has received a copy of the Agreement and this General Release for review and study before executing the Agreement;

                    (b)     has read the Agreement and this General Release carefully before signing this General Release;

                    (c)     has had sufficient opportunity before signing this General Release to ask any questions the Executive has about the Agreement or this General Release and has received satisfactory answers to all such questions;

                    (d)     understands the Executive’s rights and obligations under the Agreement and this General Release;

                    (e)     understands that the Agreement and this General Release are legal documents, and that by signing this General Release the Executive is giving up certain legal rights including but not limited to rights under the Age Discrimination in Employment Act, 29 U.S.C. ss. 621 et seq. and the other matters covered in paragraph 3 hereof;

                    (f)     understands and agrees that the execution of this General Release is a condition precedent, and material inducement to the Company’s provision of payments made to Executive pursuant to Section 3.5, 3.6 or 4.2 of the Agreement and such payments, subject to the conditions stated therein, constitute sufficient additional consideration in exchange for the Executive’s promises and obligations contained herein;

                    (g)     knowingly and voluntarily agreed to accept the payments described in Section 3.5, 3.6 or 4.2 of the Agreement, subject to the conditions stated therein, as a full and final compromise, adjustment and settlement of all potential claims herein described;

                    (h)     has been given at least twenty-one (21) days to consider this General Release and that he or she has been advised to consult with an attorney about its terms, and if the Executive has executed this General Release prior to the expiration of the twenty-one (21) day period, that he or she was afforded the opportunity to consider this General Release for twenty-one (21) days before executing it and that the Executive’s execution of this General Release prior to the expiration of such twenty-one (21) day period was his or her free and voluntary act; and

                    (i)     understands that he or she may revoke this General Release within seven (7) days after he or she signs it and that if the Executive does not revoke this General Release within that time, this General Release becomes effective and enforceable by both parties immediately after the expiration of such seven-day period. The Executive also understands that any revocation must be in writing and must be received by the Company no later than the close of business on the seventh day after his or her execution of this General Release. The Executive acknowledges that the Company has given the Executive enough time to consult with his or her family and other advisers and to consider whether he or she should agree to the terms of this General Release.

        6.     Governing Law. The validity, interpretation, construction and performance of this General Release shall be governed by the laws of the State of Missouri, without regard to principles of conflicts of laws.

        7.     Severability. If any provision of this General Release or the application thereof to any person or circumstance shall to any extent be held to be invalid or unenforceable, the remainder of this General Release shall not be affected thereby, and each provision of this General Release shall be valid and enforceable to the fullest extent permitted by law.

        8.     Binding Effect. Executive acknowledges that the terms and provisions of this General Release shall be binding upon the Executive’s heirs, executors, administrators, personal representatives, successors and assigns, and that the terms and provisions of this General Release shall inure to the benefit of the Company’s affiliates, successors, assigns, officers, directors, agents, attorneys and employees.

_________________

THIS GENERAL RELEASE HAS IMPORTANT LEGAL CONSEQUENCES, INCLUDING THE EXECUTIVE’S WAIVER TO PURSUE CERTAIN LEGAL CLAIMS. THE EXECUTIVE IS ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS GENERAL RELEASE.

        IN WITNESS WHEREOF, the undersigned has caused this General Release to be executed and delivered as of the day and year first above set forth.

EXECUTIVE:

______________________________

EX-10

EXECUTIVE EMPLOYMENT AGREEMENT

        This Executive Employment Agreement (the “Agreement”) dated as of August 31, 2004 and effective as of April 1, 2004 (the “Effective Date”), by and between Express Scripts, Inc., a Delaware corporation (the “Company”), and Carroll K. Casteel (“Executive”).

        WHEREAS, Executive is now and has been employed by the Company as Senior Vice President, Supply Chain Management; and

        WHEREAS, the Company and Executive mutually desire to provide for the continued employment of Executive on the terms and conditions set forth herein;

        NOW, THEREFORE, in consideration of the premises and the mutual covenants herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

      As used herein, the following terms shall have the following meanings:

        1.1     “Annual Base Salary”means the base salary set forth in Section 3.1 hereof.

        1.2     “Annual Bonus” means Executive’s annual bonus granted pursuant to the Annual Bonus Plan, as described in Section 3.2 hereof.

        1.3     “Annual Bonus Plan” means the annual bonus program established for senior executives by the Board of Directors of the Company (the “Board”) or by the Committee, as adopted or amended from time to time.

        1.4     “Bonus Potential” means the maximum bonus amount Executive could receive pursuant to Section 3.2 hereof for achieving 100% of “base” or “targeted” performance goals established by the Board or Committee under the Annual Bonus Plan with respect to the applicable fiscal year; provided, however, in no event shall Executive’s Bonus Potential for the year in which the Bonus Potential is being determined (a) be less than 51% of Executive’s Annual Base Salary as in effect on January 1 of such year, or (b) take into account, or include in any way, any increase in Executive’s bonus amount due to the Company exceeding its “base” or “target” goals for such year (e.g., if Executive’s “base” or “target” Bonus Potential is stated at $50,000, but Executive is eligible to receive more than $50,000 if certain targets are exceeded then Executive’s Bonus Potential for purposes of this definition is $50,000).

        1.5     “Cause ” means:

                   (a)     any act or acts by Executive, whether or not in connection with his employment by the Company, constituting, or Executive’s conviction or plea of guilty or nolo contendere (no contest) to, (i) a felony under applicable law or (ii) a misdemeanor involving moral turpitude;

                   (b)      any act or acts of gross dishonesty or gross misconduct in the performance of Executive’s duties hereunder;

                   (c)      any willful malfeasance or willful misconduct by Executive in connection with Executive’s duties hereunder or any act or omission which is injurious to the financial condition or business reputation of the Company or its affiliates; or

                   (d)      any breach by Executive of the provisions of Sections 5.1 through 5.3 of this Agreement, or of the terms and provisions of the Nondisclosure and Noncompetition Agreement (as defined in Section 1.24 hereof).

                   Notwithstanding the foregoing, the event(s) described in clause (c) of this Section 1.5 shall not be deemed to constitute “Cause” if such event is (i) solely as the result of bad judgment or negligence on the part of Executive not rising to the level of gross negligence; or (ii) solely because of an act or omission believed by Executive in good faith to have been in, or not opposed to, the interests of the Company and its affiliates.

        1.6     “Change in Control” means a Change in Control as that term is defined in the Incentive Plan (as defined in Section 1.22 hereof).

        1.7     “Change in Control Date” means the Change in Control Date as that term is defined in the Incentive Plan.

        1.8     “Change in Control Period” means the ninety (90) day period commencing on the Change in Control Date.

        1.9     “Change in Control Price” means the value, expressed in dollars, as of the date of receipt of the per share consideration received by the Company’s stockholders whose stock is acquired in a transaction constituting a Change in Control.

        1.10     “Code” means the Internal Revenue Code of 1986, as amended.

        1.11     “Committee” means the Compensation and Development Committee of the Board.

        1.12     “Covered Payments” means the amounts described in Section 6.12(a) hereof.

        1.13     “Deferred Compensation Plan” means the Express Scripts, Inc. Executive Deferred Compensation Plan, as amended from time to time, or any successor plan.

        1.14     “Disability” has the meaning ascribed to such term in the Incentive Plan.

        1.15     “EBITDA” means earnings before interest, taxes, depreciation and amortization.

        1.16     “Effective Date” means the date specified in the recitals to this Agreement.

        1.17     “Employment Period” means the Initial Employment Period (as defined in Section 1.23 hereof) plus any additional Renewal Periods (as defined in Section 1.27 hereof).

        1.18     “EPS” means the earnings per share of the Company.

        1.19     “Excise Tax” means the excise tax imposed by Section 4999 of the Code or any similar state or local tax that may be imposed.

        1.20     “General Release” means the General Release and Acknowledgment attached hereto as Exhibit A.

        1.21     “Good Reason” means the occurrence of any one or more of the following:

                    (a)     Any material breach by the Company of any of the provisions of this Agreement or any material failure by the Company to carry out any of its obligations hereunder;

                    (b)     The Company’s requiring Executive to be based at any office or location more than 50 miles from 13900 Riverport Drive, Maryland Heights, Missouri (the “Current Headquarters”), except for travel reasonably required in the performance of Executive’s responsibilities to the extent substantially consistent with Executive’s business travel obligations;

                    (c)     Any substantial and sustained diminution in Executive’s authority or responsibilities from those described in Section 2.3 hereof; provided, however, notwithstanding the foregoing, (i) in the event a Change in Control shall occur which results in the Company becoming a subsidiary of another pharmacy benefit management company (“PBM”), or which is in the form of a merger in which the surviving corporation or entity is a PBM (x) so long as Executive is offered a position as an officer of the parent PBM (or surviving corporation or entity) with duties and responsibilities which are not inconsistent in any material adverse respect with his or her duties and responsibilities immediately prior to such Change in Control, and such position is based at an office or location not more than 50 miles from the Current Headquarters, such change in position shall not constitute Good Reason, but (y) if Executive is not offered a position as an officer of the parent PBM or surviving corporation or entity as described in (x), a substantial and sustained diminution in Executive’s authority or responsibility shall be deemed to have occurred; or (ii) in the event a Change in Control shall occur which results in the Company becoming a subsidiary of a non-PBM or is in the form of a merger in which the surviving corporation or entity is not a PBM, failure to receive an offer to serve as an officer of the non-PBM parent or surviving corporation or entity shall not constitute Good Reason provided Executive’s duties subsequent to the Change in Control are not inconsistent in any material adverse respect with his or her duties immediately prior to the Change in Control, and such position is based at an office or location not more than 50 miles from the Current Headquarters;

                    (d)     The failure by the Company to continue to provide Executive with substantially similar perquisites or benefits Executive enjoyed in the aggregate under the Company’s benefit programs (other than long-term incentive compensation programs), such as any of the Company’s pension, savings, vacation, life insurance, medical, health and accident, or disability plans in which he or she was participating at the time of any such discontinuation (or, alternatively, if such plans are amended, modified or discontinued, substantially similar equivalent benefits thereto in the aggregate), or the taking of any action by the Company which would directly or indirectly cause such benefits to be no longer substantially equivalent in the aggregate to the benefits in effect immediately prior to taking such action; provided, that any amendment, modification or discontinuation of any plans or benefits referred to in this subsection (d) hereof that generally affect substantially all other domestic salaried employees of the Company who were eligible to participate, and participated, in the affected Company benefit program(s) shall not be deemed to constitute Good Reason; and

Provided that the events described in Section 1.21 (a), (b), (c) or (d) above shall only constitute Good Reason if the Company fails to cure such event within 30 days after receipt from Executive of written notice of the event which constitutes Good Reason; and provided further that, “Good Reason” shall cease to exist for an event on the 60th day following the later of its occurrence or Executive’s knowledge thereof, unless Executive has given the Company written notice thereof prior to such date.

         1.22    “Incentive Plan” means the Express Scripts, Inc. 2000 Long-Term Incentive Plan, as amended from time to time.

         1.23    “Initial Employment Period” has the meaning set forth in Section 2.2 hereof.

         1.24    “Nondisclosure and Noncompetition Agreement” means the Form of Nondisclosure and Noncompetition Agreement entered into by and between Executive and the Company dated as of September 11, 2002.

        1.25     “Options” means the options to purchase the number of shares of the Company’s common stock as set forth in Section 3.4 hereof.

        1.26     “Payment Cap” means the maximum amount described in Section 6.12(b) hereof

        1.27     “Renewal Period” has the meaning set forth in Section 2.2 hereof.

        1.28     “Restricted Stock” means shares of the Company’s common stock, $0.01 par value per share, which are issued pursuant to the Incentive Plan and subject to one or more restrictions prescribed by the Board or the by Committee, in the sole discretion of either, as applicable.

        1.29     “Retirement” means the voluntary termination of employment by Executive on or after attaining age 59 1/2 which does not occur during a Change in Control Period.

        1.30     “Severance Benefit” means a severance payment in an amount equal to:

        (a)   eighteen (18) months of Executive’s Annual Base Salary as in effect immediately prior to the Termination Date, plus

        (b)   an amount equal to the product of (i) Executive’s Bonus Potential for the year in which the Termination Date occurs (the “Termination Year”), multiplied by (ii) the average percentage of the Bonus Potential earned by the Executive for the three (3) full years immediately preceding the Termination Year, (or such shorter period if Executive was employed by the Company for less than three (3) full years and received, or was eligible to receive, a bonus during such period), which product shall be prorated for the portion of the Termination Year in which Executive was employed by the Company. Notwithstanding anything to the contrary herein, neither the three-year average percentage of Bonus Potential described in (ii) above, nor the percentage for any single year used to compute such three-year average, may exceed 100%.

        1.31     “Tax Reimbursement Payment” means the payment described in Section 6.12(c) hereof.

        1.32     “Termination Date” means the effective date of termination of Executive’s employment as determined in accordance with Section 4.7 hereof.

ARTICLE II
TERM/POSITION

        2.1     Employment; Effectiveness of Agreement. Effective as of the Effective Date, the Company hereby employs Executive, and Executive hereby accepts such employment, according to the terms and conditions set forth in this Agreement.

        2.2     Term. Subject to the provisions of Sections 4.1 through 4.7 of this Agreement, the term of Executive’s employment hereunder shall commence on the Effective Date and continue through March 31, 2007 (the “Initial Employment Period”). On April 1st of each year, commencing with April 1, 2007 and on each subsequent April 1st thereafter (each, an “Anniversary Date”), this Agreement shall be extended automatically at such time for an additional twelve (12) month period (each, a “Renewal Period”) unless either party hereto delivers written notice in accordance with Section 6.2 hereof to the other party hereto at least 180 days prior to such Anniversary Date of his, her or its desire not to renew this Agreement for an additional Renewal Period. The Initial Employment Period and any Renewal Periods, if any, shall constitute the “Employment Period” for purposes of this Agreement. If there are no Renewal Periods, then the Employment Period shall have the same meaning as Initial Employment Period. Except as set forth in Section 6.1 hereof, upon termination of Executive’s employment with the Company in accordance with the terms hereof or upon termination of the Initial Employment Period or the Employment Period without extension thereof, this Agreement shall terminate and no longer be of any force or effect

        2.3     Position and Duties. Executive shall hold the position of Senior Vice President, Supply Chain Management and shall report to, and at all times be subject to the lawful direction of, the Chief Executive Officer, President, or Chief Operating Officer of the Company (as designated by the Chief Executive Officer of the Company). Additionally, Executive shall serve as a member of the executive staff and participate in the strategic decision-making of the Company from time to time. If requested, Executive shall also serve as a member of the Board without additional compensation. During the Employment Period, Executive shall devote his or her best efforts and his or her full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business affairs of the Company. Executive shall perform his or her duties and responsibilities to the best of his or her abilities in a diligent, trustworthy, businesslike and efficient manner. Nothing herein shall preclude Executive from, subject to the prior written consent of the Board, (a) serving on any corporate or governmental board of directors (b) serving on the board of, or working for, any charitable, not-for-profit or community organization, (c) pursuing his or her personal, financial and legal affairs, or (d) pursuing any other activity; provided that Executive shall not engage in any other business, profession, occupation or other activity, for compensation or otherwise, which would violate the provisions of Section 5.1 or would, in each case, and in the aggregate, otherwise conflict or interfere with the performance of Executive’s duties and responsibilities hereunder, either directly or indirectly, without the prior written consent of the Board

ARTICLE III
COMPENSATION AND BENEFITS

        3.1     Annual Base Salary. During the Employment Period, the Company shall pay Executive a base salary (the “Annual Base Salary”) at the annual rate of two hundred seventy-five thousand dollars ($275,000), which shall be payable in regular installments in accordance with the Company’s usual payroll practices and shall be subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes. Executive shall be eligible for such merit-based increases in Executive’s Annual Base Salary, if any, as may be determined from time to time in the sole discretion of the Board; provided that any such increase shall not serve to limit or reduce any other obligation to Executive under this Agreement. The term “Annual Base Salary” as used in this Agreement shall refer to the Annual Base Salary as in effect from time to time during the Employment Period. Executive’s Annual Base Salary shall not be reduced after any such increase without Executive’s express written consent.

        3.2     Annual Incentive Compensation. Executive shall be eligible to participate in the Company’s Annual Bonus Plan established for senior executives by the Board or the Committee. The size of Executive’s bonus opportunity, which shall be no less than the Bonus Potential, and the terms of Executive’s participation in the Annual Bonus Plan, shall be determined based on the terms and conditions of the Annual Bonus Plan, subject to adjustment as described therein. Executive’s Annual Bonus shall be based upon performance of Executive, Executive’s department, and/or the Company in relation to the financial and non-financial objectives to be established by the Board or by the Committee, at the sole discretion of either, as applicable, pursuant to the terms of the Annual Bonus Plan. Executive’s Annual Bonus shall be subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes. Subject to the achievement or failure to achieve the relevant financial and non-financial objectives under the Annual Bonus Plan, Executive may receive, for any given year, from 0% to 200% of Executive's Bonus Potential (or such higher percentage as may be achievable pursuant to the terms of the Annual Bonus Plan), as further set forth in the Annual Bonus Plan.

        3.3     Participation in Benefit and Incentive Plans. During the Employment Period, Executive shall be entitled to participate in the Company’s employee benefit plans (other than bonus and incentive plans) as in effect from time to time, on the same basis as those benefits are generally made available to similarly situated senior executives of the Company. The payments provided in Article III hereof are in addition to benefits which Executive is entitled to receive pursuant to the terms of any pension plan or group hospitalization, health, dental care, disability insurance, death benefit, travel and/or accident insurance, or executive compensation plan or arrangement, including, without limitation, the Incentive Plan and the Deferred Compensation Plan.

        3.4     Stock Options.

                    (a)     Executive will receive a non-qualified option to purchase eight thousand, seven hundred and seventy-seven (8,777) shares of the Company’s common stock (the “Performance-Based Option”), subject to approval by the Committee and to the terms and conditions of this Agreement, the applicable option agreement or notice and the Incentive Plan, with a purchase price equal to the Fair Markeet Value (as defined in the Incentive Plan) of the Company's common stock on the date of grant subject to adjustment pursuant to the terms of the Incentive Plan. The Performance-Based Option shall vest on December 31, 2010 (subject to acceleration as set forth in Section 3.4(b) below), provided Executive is still employed by the Company on such date and subject to such other vesting terms as may be provided in the Incentive Plan and the applicable option agreement or notice. The Performance-Based Option shall expire seven (7) years from the date of grant, subject to earlier expiration following Executive’s termination of employment as may be provided in the Incentive Plan and the applicable option agreement or notice.

                    (b)     Notwithstanding the foregoing, the vesting of the Performance-Based Option may be accelerated if certain financial targets and other conditions are met in accordance with vesting provisions adopted by the Board or the Committee and set forth in the applicable option agreement or notice, subject to the terms of the Incentive Plan and the applicable option agreement or notice.

                    (c)     Notwithstanding the standard provisions of the Incentive Plan, the Performance-Based Option shall not vest or otherwise become exercisable solely as a result of either Executive’s Retirement hereunder or Executive’s “Retirement” under the Incentive Plan (as such term is defined therein).

        3.5     Restricted Stock.

                    (a)     Executive will receive Ten Thousand Five Hundred Thirty-Seven (10,537) shares of Restricted Stock, subject to approval by the Committee and to the terms and conditions of this Agreement, the applicable restricted stock agreement and the Incentive Plan. For the purposes hereof, Five Thousand Two Hundred Sixty-Eight (5,268) shares of the above-described Restricted Stock shall be referred to as the "Target Shares."

                    (b)     Notwithstanding the standard provisions in the Incentive Plan, the Restricted Stock awarded pursuant to Section 3.5(a) hereof shall vest or be forfeited in accordance with the following:

                                (i)     If Executive remains in the employ of the Company until the tenth anniversary of the date the Restricted Stock is granted by the Committee (the “Restricted Stock Vesting Date”), Executive shall become fully vested in the Restricted Stock subject to this Agreement. Unless either Section 3.5(b)(ii) or 3.5(b)(iii) shall apply, if Executive’s employment is terminated prior to the Restricted Stock Vesting Date, all shares of Restricted Stock awarded pursuant to Section 3.5(a) hereof shall be forfeited without payment of consideration by the Company.

                                (ii)     Notwithstanding the foregoing, the vesting of the Restricted Stock may be accelerated if certain financial targets and other conditions are met in accordance with vesting provisions adopted by the Board or the Committee and set forth in the applicable restricted stock agreement.

                                (iii)     To the extent the Restricted Stock awarded pursuant to Section 3.5(a) hereof does not otherwise vest pursuant to Section 3.5 (b)(ii), if, prior to the Restricted Stock Vesting Date, either Executive terminates employment on account of Retirement, death, Disability or for Good Reason, or Executive is terminated by the Company on account of Disability or other than for Cause, Executive shall become vested in a portion of the unvested Restricted Stock awarded pursuant to Section 3.5(a) hereof equal to the product of (x) the Target Shares, multiplied by (y) a fraction, the numerator of which is the number of days which have elapsed in the Initial Employment Period through the Termination Date and the denominator of which is the total number of days in the Initial Employment Period; provided, however, that notwithstanding such formula, in the event such termination is on account of Executive's death, the product of (x) and (y) above shall be deemed to be the full amount of the Target Shares.   Shares of Restricted Stock awarded pursuant to Section 3.5 (a) hereof which have not otherwise vested pursuant to either Section 3.5(b)(ii) hereof or the preceding sentence of this Section 3.5(b)(iii) shall be forfeited without payment of consideration by the Company.

        3.6     Business Expenses. During the Employment Period, Executive shall be reimbursed for all reasonable expenses incurred by him in performing his or her duties hereunder provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company.

        3.7     Perquisites. During the Employment Period, Executive shall be entitled to receive such perquisites and fringe benefits which similarly situated executives of the Company are entitled to receive and such other perquisites which are suitable to the character of Executive’s position with the Company and adequate for the performance of Executive’s duties hereunder.

ARTICLE IV
TERMINATION OF EMPLOYMENT

        4.1     Termination by the Company for Cause; Termination by Executive Other Than for Good Reason or Retirement. If the Employment Period and Executive’s employment under this Agreement is terminated by the Company for Cause or by Executive other than for Good Reason or Retirement, prior to the scheduled expiration of the Employment Period, Executive shall be entitled to receive:

                    (a)     The Annual Base Salary through the Termination Date;

                    (b)     Any Annual Bonus earned for a previously completed fiscal year, but unpaid as of the Termination Date;

                    (c)     Reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the Termination Date; and

                    (d)     Such employee benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company, including rights with respect to the Performance-Based Option and the Restricted Stock subject to the terms and conditions of Sections 3.4 and 3.5 hereof and of the Incentive Plan and the applicable option or restricted stock agreement or notice, if relevant (the amounts described in clauses (a) through (d) hereof being referred to as the “Accrued Rights”).

Following such termination of Executive’s employment hereunder pursuant to this Section 4.1, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.2     Termination by the Company Other Than for Cause or Disability; Termination by Executive for Good Reason.

                    (a)     If the Employment Period and Executive’s employment of under this Agreement is terminated by the Company prior to the scheduled expiration of the Employment Period other than for Cause or Disability, or Executive terminates his employment prior to the end of the Employment Period for Good Reason, Executive shall be entitled to receive:

                                (i)    The Accrued Rights; and

                                (ii)     A Severance Benefit pursuant to the terms and conditions set forth below, and the Company will reimburse the Executive for Executive’s cost of continuing medical insurance under COBRA (the “Welfare Benefit”) for eighteen (18) months.

                    (b)     The Company shall pay the Severance Benefit, without interest thereon, in eighteen (18) substantially equal monthly installments, which installments shall be payable on the first day of each month, with the first installment payable in the first full month commencing fifteen (15) days after the Termination Date. Payment of the Severance Benefit is subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes. Executive shall not be under any duty to mitigate damages in order to be eligible to receive the Severance Benefit.

                    (c)     Notwithstanding the foregoing and the terms of Section 3.5(b)(iii), Executive agrees that payment of the Severance Benefit and the delivery of any portion of the Restricted Stock under Section 3.5(b)(iii) is contingent upon the following:

                                (i)     In the event of breach by Executive of Sections 5.1 through 5.3 hereof (or any breach of any agreements in the General Release or in the Nondisclosure and Noncompetition Agreement), Executive shall reimburse the Company for all compensation previously paid, allocated, accrued, delivered or provided by the Company to Executive pursuant to Section 4.2 (a)(ii) or Section 3.5(b)(iii)hereof and the Company shall be entitled to discontinue the future payment, delivery, allocation, accrual or provision of the Severance Benefit, the Welfare Benefit and any Restricted Stock.

                                (ii)     No later than thirty (30) days after the Termination Date, Executive must execute and deliver a General Release in the form attached hereto as Exhibit A.

Following such termination of Executive’s employment hereunder pursuant to this Section 4.2, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.3     Termination upon Death. If the Employment Period and Executive’s employment under this Agreement are terminated due to Executive’s death prior to the scheduled expiration of the Employment Period, Executive will receivethe Accrued Rights and any portion of the Restricted Stock which has vested in accordance with Section 3.5.

        Following such termination of Executive’s employment hereunder pursuant to this Section 4.3, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.4     Termination for Disability. If the Employment Period and Executive’s employment under this Agreement is terminated by the Company or by Executive due to Executive’s Disability prior to the scheduled expiration of the Employment Period, then Executive will receive the Accrued Rights and any portion of the Restricted Stock which has vested in accordance with Section 3.5

        Following such termination of Executive’s employment hereunder pursuant to this Section 4.4, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.5     Termination by Executive on Account of Retirement. If the Employment Period and Executive’s employment under this Agreement is terminated by Executive prior to the scheduled expiration of the Employment Period on account of Retirement, Executive shall be entitled to receive the Accrued Rights and any portion of the Restricted Stock which has vested in accordance with Section 3.5.

        Following such termination of Executive’s employment hereunder pursuant to this Section 4.5, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

      4.6     Expiration of the Employment Period.

                    (a)     In the event either party elects not to extend the Employment Period pursuant to Section 2.2, unless Executive’s employment is earlier terminated pursuant to Sections 4.1 through 4.5 of this Article IV, Executive’s termination of employment hereunder (whether or not Executive continues as an employee of the Company thereafter) shall be deemed to close on the close of business on the day immediately preceding the next scheduled Anniversary Date and Executive shall be entitled to receive the Accrued Rights.

                    (b)     Unless the parties otherwise agree in writing executed subsequent to the Effective Date, continuation of Executive’s employment with the Company beyond the expiration of the Employment Period shall be deemed an employment at-will and, subject only to Section 6.1, shall not be deemed to extend any of the provisions of this Agreement and Executive’s employment may thereafter be terminated at will by either Executive or the Company.

Following such termination of Executive’s employment hereunder pursuant to this Section 4.6, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.7     Notice of Termination. For purposes of this Agreement, any purported termination of Executive’s employment by the Company or by Executive, shall be communicated by written “Notice of Termination” to the other party hereto in accordance with Section 6.2 hereof. Any Notice of Termination shall set forth (a) the effective date of termination (for purposes of determining Executive’s entitlement to benefits hereunder), which shall not be less than fifteen (15) days after the date the Notice of Termination is delivered (the “Termination Date”); (b) the specific provision in this Agreement relied upon; and (c) in reasonable detail, the facts and circumstances claimed to provide a basis for such termination. If the Company terminates Executive's employment pursuant to Section 4.2 or 4.4 hereof, the Termination Date shall be the date upon which the Company notifies Executive of such termination. If Executive terminates employment pursuant to Section 4.1, 4.3, 4.4, 4.5 or 4.6 hereof, the Termination Date shall be Executive's last full day of work prior to such termination. Notwithstanding the foregoing, if within fifteen (15) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a good faith dispute exists concerning the termination, the “Termination Date” for purposes of determining the Executive’s entitlement to benefits under this Agreement shall be the date on which the dispute is finally determined by an independent arbitrator selected by the American Arbitration Association.

        4.8     Board/Committee Resignation. Upon termination of Executive’s employment for any reason, Executive agrees to resign, as of the Termination Date and to the extent applicable, from the Board (and any committees thereof) and the Board of Directors (and any committees thereof) of any of the Company’s affiliates.

ARTICLE V
RESTRICTIVE COVENANTS

For the purposes of this Article V, all references to the Company shall include the Company and its affiliates.

        5.1     Non-Solicitation and Non-Competition.

                    (a)     Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and its affiliates and accordingly agrees as follows:

                               (i)     During the period of Executive’s employment with the Company and, for a period of two (2) years after termination of Executive’s employment (the “Nonsolicit Period”), Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (“Person”), directly or indirectly solicit or assist in soliciting in competition with the Company, the business of any client or prospective client:

(1)        with whom Executive had personal contact or dealings on behalf of the Company during the one (1) year period preceding Executive’s termination of employment;

(2)        with whom employees reporting to Executive have had personal contact or dealings on behalf of the Company during the one (1) year immediately preceding the Executive’s termination of employment; or

(3)        for whom Executive had direct or indirect responsibility during the one (1) year immediately preceding Executive’s termination of employment.

                               (ii)     During the Nonsolicit Period, Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any Person, directly or indirectly:

(1)        solicit or encourage any employee of the Company or its affiliates to leave the employment of the Company or its affiliates; or

(2)        hire any such employee who was employed by the Company or its affiliates as of the date of Executive’s termination of employment with the Company or who left the employment of the Company or its affiliates coincident with, or within one year prior to or after, the termination of Executive’s employment with the Company.

                               (iii)     During the Nonsolicit Period, Executive will not, directly or indirectly, solicit or encourage to cease to work with the Company or its affiliates any consultant then under contract with the Company or its affiliates.

                               (iv)     During the period of Executive’s employment with the Company and, for a period of one (1) year after termination of Executive’s employment, if Executive remains in the employ of the Company at least until the expiration of the Employment Period, or for a period of eighteen (18) months after termination of Executive’s employment, if Executive’s employment is terminated (either by Executive or by the Company for any reason whatsoever) prior to the expiration of the Employment Period (the “Noncompete Period”), Executive will not directly or indirectly:

(1)        engage in any business that is, or will be, engaged wholly or primarily in the business of manufacturing, purchasing, selling or supplying in the United States any product or service manufactured, purchased, sold, supplied or provided by the Company or its affiliates, and which is or will be directly in competition with the business of the Company or its affiliates (including, without limitation, businesses which the Company or its affiliates have specific plans to conduct in the future and as to which Executive is aware of such planning) in the United States (a “Competitive Business”);

(2)        enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in a Competitive Business;

(3)        acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or

(4)         interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its affiliates and customers, clients, suppliers, partners, members or investors of the Company or its affiliates.

                               (v)     Notwithstanding anything to the contrary herein, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in the business of the Company or its affiliates which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such Person and (ii) does not, directly or indirectly, own 5% or more of any class of securities of such Person.

      5.2     Confidentiality.

                    (a)     Executive acknowledges that the identity of the clients and customers of the Company, the prices, terms and conditions at, or upon which, the Company sells its products or provides its services and other non-public, proprietary or confidential information relating to the business, financial and other affairs of the Company (including, without limitation, any idea, product, trade secret, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property; creative or conceptual business or marketing plan, strategy or other material developed for the Company by Executive; or information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals — concerning the past, current or future business, activities and operations of the Company or its affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis) (hereinafter collectively referred to as “Confidential Information”) are valuable, special unique assets of the Company and that such Confidential Information, if disclosed to others, may result in loss of business or other irreparable and consequential damage to the Company.

                    (b)     Executive shall hold in fiduciary capacity, for the benefit of the Company, all Confidential Information and shall not, at any time during the Employment Period or thereafter (i) retain or use for the benefit, purposes or account of Executive of any other Person, or (ii) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any Confidential Information, without the prior written authorization of the Company.

                    (c)     Notwithstanding the foregoing, the term Confidential Information shall not include information (i) generally known to the public or the trade other than as a result of Executive’s breach of this covenant or any breach of other confidentiality obligations by third parties, (ii) made legitimately available to Executive by a third party without breach of any confidentiality obligation, (iii) the release of which is deemed by the Board to be in the best interest of the Company, or (iv) the disclosure of which is required by applicable law; provided that Executive shall give prompt written notice to the Company of such legal requirement, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similar treatment.

                    (d)     Notwithstanding anything herein to the contrary, any party to this Agreement (and any employee, representative, or other agent of any party to this Agreement) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. However, any such information relating to the tax treatment or tax structure is required to be kept confidential to the extent necessary to comply with any applicable federal or state securities laws.

                    (e)     Upon termination of Executive’s employment with the Company for any reason, Executive shall (i) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company or its affiliates, (ii) immediately destroy, delete, or return to the Company, at the Company’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executive’s possession or control (including any of the foregoing stored or located in Executive’s office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or otherwise relate to the business of the Company or its affiliates, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information, and (iii) notify and fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information of which Executive is or becomes aware.

        5.3     Non-Disparagement. Executive agrees that Executive will not disparage the Company or its affiliates, or its or their current or former officers, directors, and employees in any way; further, Executive will not make or solicit any comments, statements, or the like to the media or to others that would be considered derogatory or detrimental to the good name or business reputation of any of the aforementioned entities or individuals; provided, that this Section does not prohibit statements which Executive is required to make under oath or which are otherwise required by law, provided that such statements are truthful and made in a professional manner.

        5.4     Acknowledgment of Reasonable Covenants. It is expressly understood and agreed that Executive and the Company consider the restrictions and covenants contained herein to be reasonable and enforceable, because, among other things, (a) Executive will be receiving compensation under this Agreement or otherwise, (b) there are many other areas in which, and companies for which, Executive could work in view of Executive’s background, (c) the restrictions and covenants set forth herein do not impose any undue hardship on Executive, (d) the Company would not have entered into this Agreement but for the restrictions and covenants of Executive contained herein, and (e) the restrictions and covenants contained herein have been made in order to induce the Company to enter into this Agreement.

        5.5     Modification of the Restrictive Covenants. If, at the time of enforcement of the restrictive covenants set forth herein, a final judicial determination is made by a court or arbiter of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

ARTICLE VI
MISCELLANEOUS

        6.1     Survival. Sections 4.1 through 4.8 inclusive (as applicable to the relevant circumstance of termination only), 5.1 through 5.5 inclusive and 6.1 through 6.14 inclusive shall survive and continue in full force in accordance with their terms notwithstanding any termination of Executive’s employment hereunder or termination of the Initial Employment Period or the Employment Period.

        6.2     Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally, mailed by certified or registered mail, return receipt requested and postage prepaid, or sent via a nationally recognized overnight courier, or sent via facsimile to the recipient. Such notices, demands and other communications shall be sent to the address indicated below:

To the Company:

Express Scripts, Inc.

13900 Riverport Drive

Maryland Heights, MO 63403

Attention: Chief Executive Officer

To Executive:

Mr. Carroll K. Casteel

XXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXX

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.

        6.3     Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

        6.4     Complete Agreement. This Agreement constitutes the complete agreement and understanding between the parties regarding the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by and between the parties, written or oral; provided, however, this Agreement shall not supersede or modify the terms of the Nondisclosure and Noncompetition Agreement, and the Options and Restricted Stock shall be subject to the applicable option and restricted stock notices or agreements. The applicable provisions of this Agreement amend the terms and provisions of the Express Scripts, Inc. 2000 Long-Term Incentive Plan to the extent addressed by this Agreement, as the same may have been amended prior to the date hereof, with respect to awards covered by this Agreement and made to Executive hereunder.

        6.5     Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

        6.6     Successors and Assigns. Except as otherwise provided herein, all covenants and agreements contained in this Agreement shall bind and inure to the benefit of and be enforceable by the Company and its respective successors and assigns. Except as otherwise specifically provided herein, this Agreement, including the obligations and benefits hereunder, may not be assigned to any party by Executive.

        6.7     No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied to this Agreement.

        6.8     Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

        6.9     Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Missouri, without regard to conflicts of laws principles thereof; provided, however, that issues related to the Incentive Plan or any grants thereunder shall be resolved in accordance with the laws of the State of Delaware.

        6.10     Specific Performance. The Company shall be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorneys’ fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The Executive agrees and acknowledges that money damages are an inadequate remedy for any breach of the provisions of this Agreement, including, without limitation, Sections 5.1 through 5.3 hereof, and that the Company shall be entitled to apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. Further, Executive acknowledges that the forfeiture provision set forth in the termination provisions hereof shall not be construed to limit or otherwise affect the Company’s right to seek legal or equitable remedies it may otherwise have, or the amount damages for which it may seek recovery, resulting from breach of this Agreement.

        6.11     Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive.

        6.12     Tax Indemnification.

                    (a)     Notwithstanding anything to the contrary herein (or any other agreement entered into by and between Executive and the Company or any incentive arrangement or plan offered by the Company), in the event that any amount or benefit paid or distributed to Executive pursuant to this Agreement, taken together with any amounts or benefits otherwise paid or distributed to Executive by the Company or any of its subsidiaries (collectively, the “Covered Payments”), would constitute an “excess parachute payment” as defined in Section 280G of the Code, and would thereby subject Executive to an Excise Tax, the provisions of this Section 6.12 shall apply.

                    (b)     If the aggregate present value (as determined for purposes of Section 280G of the Code) of the Covered Payments exceeds the amount which can be paid to Executive without Executive incurring an Excise Tax, but is less than 125% of such amount, then the amounts payable to Executive under this Agreement (or any other agreement by and between Executive and the Company or pursuant to any incentive arrangement or plan offered by the Company) may, in the discretion of the Company, be reduced (but not below zero) to the maximum amount which may be paid hereunder without Executive becoming subject to the Excise Tax (such reduced payments to be referred to as the “Payment Cap”). In the event Executive receives reduced payments and benefits as a result of application of this Section 6.12, Executive shall have the right to designate which of the payments and benefits otherwise set forth herein (or any other agreement between Executive and the Company or any incentive arrangement or plan offered by the Company) will be received in connection with the application of the Payment Cap.

                    (c)     If the aggregate present value of all Covered Payments is equal to or exceeds 125% of the amount which can be paid to Executive without Executive incurring an Excise Tax, Executive shall be entitled to receive an additional amount (the “Tax Reimbursement Payment”) such that the net amount retained by Executive with respect to such Covered Payments, after deduction of any Excise Tax on the Covered Payments and any federal, state and local income tax and Excise Tax on the Tax Reimbursement Payment provided for by this Section 6.12, but before deduction for any federal, state or local income or employment tax withholding on such Covered Payments, shall be equal to the amount of the Covered Payments. Such additional amount may be paid by the Company directly to the applicable taxing authority.

                    (d)     Immediately upon a Change in Control, the Company shall notify Executive of any modification or reduction as a result of the application of this Section 6.12. In the event Executive and the Company disagree as to the application of this Section 6.12, the Company shall select a law firm or accounting firm from among those regularly consulted (during the twelve-month period immediately prior to the Change in Control that resulted in the characterization of the Covered Payments as parachute payments) by the Company, and such law firm or accounting firm shall determine, at the Company’s expense, the amount to which Executive shall be entitled hereunder (and pursuant to any other agreements, incentive arrangements or plans), taking into consideration the application of this Section 6.12, and such determination shall be final and binding upon Executive and the Company.

        6.13     Executive Representation. Executive hereby represents to the Company that the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound.

        6.14     Cooperation. Each party shall provide reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executive’s employment hereunder.

_________________

        IN WITNESS WHEREOF, the parties hereto have executed this Executive Employment Agreement as of the date first above written.

THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

EXPRESS SCRIPTS, INC.

By: /s/ Barrett Toan                                                              

Name: Barrett Toan

Title: Chairman and Chief Executive Officer

EXECUTIVE

/s/ Carroll K. Casteel                                                               

Name: Carroll K. Casteel

Title: Senior Vice President, Supply Chain Management

EXHIBIT A

GENERAL RELEASE AND ACKNOWLEDGMENT

        THIS GENERAL RELEASE AND ACKNOWLEDGMENT (the “General Release”) is made this ___ day of ________, ___________, by Carroll K. Casteel (the “Executive”) in favor of Express Scripts, Inc. (the “Company”) pursuant to Section 4.2(c)(ii) of the Executive’s Employment Agreement dated ________________, 2004 (the “Agreement”). Unless otherwise defined herein, capitalized terms appearing herein shall have the meanings given to them in the Agreement.

        1.     General Release of Claims. The Executive, for and on behalf of the Executive and the Executive’s heirs, beneficiaries, executors, administrators, successors, assigns, and anyone claiming through or under any of the foregoing, hereby agrees to, and does, release and forever discharge the Company, and its agents, officers, employees, successors and assigns, from any and all matters, claims, demands, damages, causes of action, debts, liabilities, controversies, judgments and suits of every kind and nature whatsoever, foreseen or unforeseen, known or unknown, arising out of or relating to any matter whatsoever, including, without limitation, the Executive’s termination from employment with the Company, matters arising from the offer and acceptance of the Agreement, matters relating to employment references or lack thereof from the Company, and those claims described in paragraph 3 hereof.

        2.     Agreement Not to File Suit. Except as otherwise expressly permitted in paragraph 3 hereof, the Executive, for and on behalf of the Executive and the Executive’s beneficiaries, executors, administrators, successors, assigns, and anyone claiming through or under any of the foregoing, agrees that he or she will not file or otherwise submit any charge, claim, complaint, or action to any agency, court, organization, or judicial forum (nor will the Executive permit any person, group of persons, or organization to take such action on the Executive’s behalf) against the Company arising out of any actions or non-actions on the part of the Company prior to or as of the date hereof arising out of or relating to any matter whatsoever. The Executive further agrees that in the event that any person or entity should bring such a charge, claim, complaint, or action on the Executive’s behalf, the Executive hereby waives and forfeits any right to recovery under said claim and will exercise every good faith effort (but will not be obliged to incur any expense) to have such claim dismissed.

        3.     Claims Covered. The charges, claims, complaints, matters, demands, damages, and causes of action referenced in paragraphs 1 and 2 above include, but are not limited to:

                    (a)     any breach of an actual or implied contract of employment between the Executive and the Company;

                    (b)     any claim of unjust, wrongful, or tortious discharge (including any claim of fraud, negligence, retaliation for whistleblowing, or intentional infliction of emotional distress);

                    (c)     any claim of defamation or other common-law action;

                    (d)     any claims of violations arising under the Civil Rights Act of 1964, as amended, 42 U.S.C.ss.2000e et seq., the Age Discrimination in Employment Act, 29 U.S.C.ss.621 et seq. (only with respect to claims regarding acts of discrimination arising prior to the execution of this General Release), the Americans with Disabilities Act of 1990, 42 U.S.C.ss.12101 et seq., the Fair Labor Standards Act of 1938, as amended, 29 U.S.C.ss.201 et seq., the Rehabilitation Act of 1973, as amended, 29 U.S.C.ss.701 et seq., the Missouri Human Rights Act,ss.213.000 R.S.Mo. et seq., or any other relevant federal, state, or local statutes or ordinances; provided, however, that for purposes of the Age Discrimination in Employment Act only, this General Release does not affect the rights and responsibilities of the Equal Employment Opportunity Commission (the “EEOC”) to enforce the Age Discrimination in Employment Act, nor does this General Release prohibit the Executive from filing a charge or complaint under the Age Discrimination in Employment Act with the EEOC or participating in any investigation or proceeding conducted by the EEOC;

                    (e)     any claims for salary, bonus pay, vacation pay, severance pay or welfare benefits, other than those payments and benefits specifically provided in the Agreement; and

                    (f)     any other matter whatsoever, whether related or unrelated to employment matters.

        4.     Claims Excluded. Notwithstanding anything else herein to the contrary, this General Release shall not:

                    (a)     apply to the obligations of the Company described in Sections 3.4, 3.5, and Article IV of the Agreement; or

                    (b)     affect, alter or extinguish any vested rights that the Executive may have with respect to any benefits, rights or entitlements under the terms of any employee benefit programs of the Company to which the Executive is or will be entitled by virtue of his or her employment with the Company or any of its subsidiaries, and nothing in this General Release will prohibit or be deemed to restrict the Executive from enforcing his or her rights to any such benefits, rights or entitlements; or

                    (c)     limit the Executive’s right to indemnification to the extent provided in the Company’s Certificate of Incorporation and/or bylaws.

        5.     Acknowledgments. By signing this General Release, the Executive hereby represents, certifies and acknowledges that the Executive:

                    (a)     has received a copy of the Agreement and this General Release for review and study before executing the Agreement;

                    (b)     has read the Agreement and this General Release carefully before signing this General Release;

                    (c)     has had sufficient opportunity before signing this General Release to ask any questions the Executive has about the Agreement or this General Release and has received satisfactory answers to all such questions;

                    (d)     understands the Executive’s rights and obligations under the Agreement and this General Release;

                    (e)     understands that the Agreement and this General Release are legal documents, and that by signing this General Release the Executive is giving up certain legal rights including but not limited to rights under the Age Discrimination in Employment Act, 29 U.S.C. ss. 621 et seq. and the other matters covered in paragraph 3 hereof;

                    (f)     understands and agrees that the execution of this General Release is a condition precedent, and material inducement to the Company’s provision of payments made to Executive pursuant to Section 3.5, or 4.2 of the Agreement and such payments, subject to the conditions stated therein, constitute sufficient additional consideration in exchange for the Executive’s promises and obligations contained herein;

                    (g)     knowingly and voluntarily agreed to accept the payments described in Section 3.5, or 4.2 of the Agreement, subject to the conditions stated therein, as a full and final compromise, adjustment and settlement of all potential claims herein described;

                    (h)     has been given at least twenty-one (21) days to consider this General Release and that he or she has been advised to consult with an attorney about its terms, and if the Executive has executed this General Release prior to the expiration of the twenty-one (21) day period, that he or she was afforded the opportunity to consider this General Release for twenty-one (21) days before executing it and that the Executive’s execution of this General Release prior to the expiration of such twenty-one (21) day period was his or her free and voluntary act; and

                    (i)     understands that he or she may revoke this General Release within seven (7) days after he or she signs it and that if the Executive does not revoke this General Release within that time, this General Release becomes effective and enforceable by both parties immediately after the expiration of such seven-day period. The Executive also understands that any revocation must be in writing and must be received by the Company no later than the close of business on the seventh day after his or her execution of this General Release. The Executive acknowledges that the Company has given the Executive enough time to consult with his or her family and other advisers and to consider whether he or she should agree to the terms of this General Release.

        6.     Governing Law. The validity, interpretation, construction and performance of this General Release shall be governed by the laws of the State of Missouri, without regard to principles of conflicts of laws.

        7.     Severability. If any provision of this General Release or the application thereof to any person or circumstance shall to any extent be held to be invalid or unenforceable, the remainder of this General Release shall not be affected thereby, and each provision of this General Release shall be valid and enforceable to the fullest extent permitted by law.

        8.     Binding Effect. Executive acknowledges that the terms and provisions of this General Release shall be binding upon the Executive’s heirs, executors, administrators, personal representatives, successors and assigns, and that the terms and provisions of this General Release shall inure to the benefit of the Company’s affiliates, successors, assigns, officers, directors, agents, attorneys and employees.

_________________

THIS GENERAL RELEASE HAS IMPORTANT LEGAL CONSEQUENCES, INCLUDING THE EXECUTIVE’S WAIVER TO PURSUE CERTAIN LEGAL CLAIMS. THE EXECUTIVE IS ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS GENERAL RELEASE.

        IN WITNESS WHEREOF, the undersigned has caused this General Release to be executed and delivered as of the day and year first above set forth.

EXECUTIVE:

______________________________

EX-10

EXECUTIVE EMPLOYMENT AGREEMENT

        This Executive Employment Agreement (the “Agreement”) dated as of August 31, 2004 and effective as of April 1, 2004 (the “Effective Date”), by and between Express Scripts, Inc., a Delaware corporation (the “Company”), and Douglas W. Porter (“Executive”).

        WHEREAS, Executive is now and has been employed by the Company as Senior Vice President, Client Services; and

        WHEREAS, the Company and Executive mutually desire to provide for the continued employment of Executive on the terms and conditions set forth herein;

        NOW, THEREFORE, in consideration of the premises and the mutual covenants herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

      As used herein, the following terms shall have the following meanings:

        1.1     “Annual Base Salary”means the base salary set forth in Section 3.1 hereof.

        1.2     “Annual Bonus” means Executive’s annual bonus granted pursuant to the Annual Bonus Plan, as described in Section 3.2 hereof.

        1.3     “Annual Bonus Plan” means the annual bonus program established for senior executives by the Board of Directors of the Company (the “Board”) or by the Committee, as adopted or amended from time to time.

        1.4     “Bonus Potential” means the maximum bonus amount Executive could receive pursuant to Section 3.2 hereof for achieving 100% of “base” or “targeted” performance goals established by the Board or Committee under the Annual Bonus Plan with respect to the applicable fiscal year; provided, however, in no event shall Executive’s Bonus Potential for the year in which the Bonus Potential is being determined (a) be less than 55% of Executive’s Annual Base Salary as in effect on January 1 of such year, or (b) take into account, or include in any way, any increase in Executive’s bonus amount due to the Company exceeding its “base” or “target” goals for such year (e.g., if Executive’s “base” or “target” Bonus Potential is stated at $50,000, but Executive is eligible to receive more than $50,000 if certain targets are exceeded then Executive’s Bonus Potential for purposes of this definition is $50,000).

        1.5     “Cause ” means:

                   (a)     any act or acts by Executive, whether or not in connection with his employment by the Company, constituting, or Executive’s conviction or plea of guilty or nolo contendere (no contest) to, (i) a felony under applicable law or (ii) a misdemeanor involving moral turpitude;

                   (b)      any act or acts of gross dishonesty or gross misconduct in the performance of Executive’s duties hereunder;

                   (c)      any willful malfeasance or willful misconduct by Executive in connection with Executive’s duties hereunder or any act or omission which is injurious to the financial condition or business reputation of the Company or its affiliates; or

                   (d)      any breach by Executive of the provisions of Sections 5.1 through 5.3 of this Agreement, or of the terms and provisions of the Nondisclosure and Noncompetition Agreement (as defined in Section 1.24 hereof).

                   Notwithstanding the foregoing, the event(s) described in clause (c) of this Section 1.5 shall not be deemed to constitute “Cause” if such event is (i) solely as the result of bad judgment or negligence on the part of Executive not rising to the level of gross negligence; or (ii) solely because of an act or omission believed by Executive in good faith to have been in, or not opposed to, the interests of the Company and its affiliates.

        1.6     “Change in Control” means a Change in Control as that term is defined in the Incentive Plan (as defined in Section 1.22 hereof).

        1.7     “Change in Control Date” means the Change in Control Date as that term is defined in the Incentive Plan.

        1.8     “Change in Control Period” means the ninety (90) day period commencing on the Change in Control Date.

        1.9     “Change in Control Price” means the value, expressed in dollars, as of the date of receipt of the per share consideration received by the Company’s stockholders whose stock is acquired in a transaction constituting a Change in Control.

        1.10     “Code” means the Internal Revenue Code of 1986, as amended.

        1.11     “Committee” means the Compensation and Development Committee of the Board.

        1.12     “Covered Payments” means the amounts described in Section 6.12(a) hereof.

        1.13     “Deferred Compensation Plan” means the Express Scripts, Inc. Executive Deferred Compensation Plan, as amended from time to time, or any successor plan.

        1.14     “Disability” has the meaning ascribed to such term in the Incentive Plan.

        1.15     “EBITDA” means earnings before interest, taxes, depreciation and amortization.

        1.16     “Effective Date” means the date specified in the recitals to this Agreement.

        1.17     “Employment Period” means the Initial Employment Period (as defined in Section 1.23 hereof) plus any additional Renewal Periods (as defined in Section 1.27 hereof).

        1.18     “EPS” means the earnings per share of the Company.

        1.19     “Excise Tax” means the excise tax imposed by Section 4999 of the Code or any similar state or local tax that may be imposed.

        1.20     “General Release” means the General Release and Acknowledgment attached hereto as Exhibit A.

        1.21     “Good Reason” means the occurrence of any one or more of the following:

                    (a)     Any material breach by the Company of any of the provisions of this Agreement or any material failure by the Company to carry out any of its obligations hereunder;

                    (b)     The Company’s requiring Executive to be based at any office or location more than 50 miles from 13900 Riverport Drive, Maryland Heights, Missouri (the “Current Headquarters”), except for travel reasonably required in the performance of Executive’s responsibilities to the extent substantially consistent with Executive’s business travel obligations;

                    (c)     Any substantial and sustained diminution in Executive’s authority or responsibilities from those described in Section 2.3 hereof; provided, however, notwithstanding the foregoing, (i) in the event a Change in Control shall occur which results in the Company becoming a subsidiary of another pharmacy benefit management company (“PBM”), or which is in the form of a merger in which the surviving corporation or entity is a PBM (x) so long as Executive is offered a position as an officer of the parent PBM (or surviving corporation or entity) with duties and responsibilities which are not inconsistent in any material adverse respect with his or her duties and responsibilities immediately prior to such Change in Control, and such position is based at an office or location not more than 50 miles from the Current Headquarters, such change in position shall not constitute Good Reason, but (y) if Executive is not offered a position as an officer of the parent PBM or surviving corporation or entity as described in (x), a substantial and sustained diminution in Executive’s authority or responsibility shall be deemed to have occurred; or (ii) in the event a Change in Control shall occur which results in the Company becoming a subsidiary of a non-PBM or is in the form of a merger in which the surviving corporation or entity is not a PBM, failure to receive an offer to serve as an officer of the non-PBM parent or surviving corporation or entity shall not constitute Good Reason provided Executive’s duties subsequent to the Change in Control are not inconsistent in any material adverse respect with his or her duties immediately prior to the Change in Control, and such position is based at an office or location not more than 50 miles from the Current Headquarters;

                    (d)     The failure by the Company to continue to provide Executive with substantially similar perquisites or benefits Executive enjoyed in the aggregate under the Company’s benefit programs (other than long-term incentive compensation programs), such as any of the Company’s pension, savings, vacation, life insurance, medical, health and accident, or disability plans in which he or she was participating at the time of any such discontinuation (or, alternatively, if such plans are amended, modified or discontinued, substantially similar equivalent benefits thereto in the aggregate), or the taking of any action by the Company which would directly or indirectly cause such benefits to be no longer substantially equivalent in the aggregate to the benefits in effect immediately prior to taking such action; provided, that any amendment, modification or discontinuation of any plans or benefits referred to in this subsection (d) hereof that generally affect substantially all other domestic salaried employees of the Company who were eligible to participate, and participated, in the affected Company benefit program(s) shall not be deemed to constitute Good Reason; and

Provided that the events described in Section 1.21 (a), (b), (c) or (d) above shall only constitute Good Reason if the Company fails to cure such event within 30 days after receipt from Executive of written notice of the event which constitutes Good Reason; and provided further that, “Good Reason” shall cease to exist for an event on the 60th day following the later of its occurrence or Executive’s knowledge thereof, unless Executive has given the Company written notice thereof prior to such date.

         1.22    “Incentive Plan” means the Express Scripts, Inc. 2000 Long-Term Incentive Plan, as amended from time to time.

         1.23    “Initial Employment Period” has the meaning set forth in Section 2.2 hereof.

         1.24    “Nondisclosure and Noncompetition Agreement” means the Form of Nondisclosure and Noncompetition Agreement entered into by and between Executive and the Company dated as of June 14, 2002.

        1.25     “Options” means the options to purchase the number of shares of the Company’s common stock as set forth in Section 3.4 hereof.

        1.26     “Payment Cap” means the maximum amount described in Section 6.12(b) hereof

        1.27     “Renewal Period” has the meaning set forth in Section 2.2 hereof.

        1.28     “Restricted Stock” means shares of the Company’s common stock, $0.01 par value per share, which are issued pursuant to the Incentive Plan and subject to one or more restrictions prescribed by the Board or the by Committee, in the sole discretion of either, as applicable.

        1.29     “Retirement” means the voluntary termination of employment by Executive on or after attaining age 59 1/2 which does not occur during a Change in Control Period.

        1.30     “Severance Benefit” means a severance payment in an amount equal to:

        (a)   eighteen (18) months of Executive’s Annual Base Salary as in effect immediately prior to the Termination Date, plus

        (b)   an amount equal to the product of (i) Executive’s Bonus Potential for the year in which the Termination Date occurs (the “Termination Year”), multiplied by (ii) the average percentage of the Bonus Potential earned by the Executive for the three (3) full years immediately preceding the Termination Year, (or such shorter period if Executive was employed by the Company for less than three (3) full years and received, or was eligible to receive, a bonus during such period), which product shall be prorated for the portion of the Termination Year in which Executive was employed by the Company. Notwithstanding anything to the contrary herein, neither the three-year average percentage of Bonus Potential described in (ii) above, nor the percentage for any single year used to compute such three-year average, may exceed 100%.

        1.31     “Tax Reimbursement Payment” means the payment described in Section 6.12(c) hereof.

        1.32     “Termination Date” means the effective date of termination of Executive’s employment as determined in accordance with Section 4.7 hereof.

ARTICLE II
TERM/POSITION

        2.1     Employment; Effectiveness of Agreement. Effective as of the Effective Date, the Company hereby employs Executive, and Executive hereby accepts such employment, according to the terms and conditions set forth in this Agreement.

        2.2     Term. Subject to the provisions of Sections 4.1 through 4.7 of this Agreement, the term of Executive’s employment hereunder shall commence on the Effective Date and continue through March 31, 2007 (the “Initial Employment Period”). On April 1st of each year, commencing with April 1, 2007 and on each subsequent April 1st thereafter (each, an “Anniversary Date”), this Agreement shall be extended automatically at such time for an additional twelve (12) month period (each, a “Renewal Period”) unless either party hereto delivers written notice in accordance with Section 6.2 hereof to the other party hereto at least 180 days prior to such Anniversary Date of his, her or its desire not to renew this Agreement for an additional Renewal Period. The Initial Employment Period and any Renewal Periods, if any, shall constitute the “Employment Period” for purposes of this Agreement. If there are no Renewal Periods, then the Employment Period shall have the same meaning as Initial Employment Period. Except as set forth in Section 6.1 hereof, upon termination of Executive’s employment with the Company in accordance with the terms hereof or upon termination of the Initial Employment Period or the Employment Period without extension thereof, this Agreement shall terminate and no longer be of any force or effect

        2.3     Position and Duties. Executive shall hold the position of Senior Vice President, Client Services and shall report to, and at all times be subject to the lawful direction of, the Chief Executive Officer, President, or Chief Operating Officer of the Company (as designated by the Chief Executive Officer of the Company). Additionally, Executive shall serve as a member of the executive staff and participate in the strategic decision-making of the Company from time to time. If requested, Executive shall also serve as a member of the Board without additional compensation. During the Employment Period, Executive shall devote his or her best efforts and his or her full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business affairs of the Company. Executive shall perform his or her duties and responsibilities to the best of his or her abilities in a diligent, trustworthy, businesslike and efficient manner. Nothing herein shall preclude Executive from, subject to the prior written consent of the Board, (a) serving on any corporate or governmental board of directors (b) serving on the board of, or working for, any charitable, not-for-profit or community organization, (c) pursuing his or her personal, financial and legal affairs, or (d) pursuing any other activity; provided that Executive shall not engage in any other business, profession, occupation or other activity, for compensation or otherwise, which would violate the provisions of Section 5.1 or would, in each case, and in the aggregate, otherwise conflict or interfere with the performance of Executive’s duties and responsibilities hereunder, either directly or indirectly, without the prior written consent of the Board

ARTICLE III
COMPENSATION AND BENEFITS

        3.1     Annual Base Salary. During the Employment Period, the Company shall pay Executive a base salary (the “Annual Base Salary”) at the annual rate of two hundred fifty thousand dollars ($250,000), which shall be payable in regular installments in accordance with the Company’s usual payroll practices and shall be subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes. Executive shall be eligible for such merit-based increases in Executive’s Annual Base Salary, if any, as may be determined from time to time in the sole discretion of the Board; provided that any such increase shall not serve to limit or reduce any other obligation to Executive under this Agreement. The term “Annual Base Salary” as used in this Agreement shall refer to the Annual Base Salary as in effect from time to time during the Employment Period. Executive’s Annual Base Salary shall not be reduced after any such increase without Executive’s express written consent.

        3.2     Annual Incentive Compensation. Executive shall be eligible to participate in the Company’s Annual Bonus Plan established for senior executives by the Board or the Committee. The size of Executive’s bonus opportunity, which shall be no less than the Bonus Potential, and the terms of Executive’s participation in the Annual Bonus Plan, shall be determined based on the terms and conditions of the Annual Bonus Plan, subject to adjustment as described therein. Executive’s Annual Bonus shall be based upon performance of Executive, Executive’s department, and/or the Company in relation to the financial and non-financial objectives to be established by the Board or by the Committee, at the sole discretion of either, as applicable, pursuant to the terms of the Annual Bonus Plan. Executive’s Annual Bonus shall be subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes. Subject to the achievement or failure to achieve the relevant financial and non-financial objectives under the Annual Bonus Plan, Executive may receive, for any given year, from 0% to 200% of Executive's Bonus Potential (or such higher percentage as may be achievable pursuant to the terms of the Annual Bonus Plan), as further set forth in the Annual Bonus Plan.

        3.3     Participation in Benefit and Incentive Plans. During the Employment Period, Executive shall be entitled to participate in the Company’s employee benefit plans (other than bonus and incentive plans) as in effect from time to time, on the same basis as those benefits are generally made available to similarly situated senior executives of the Company. The payments provided in Article III hereof are in addition to benefits which Executive is entitled to receive pursuant to the terms of any pension plan or group hospitalization, health, dental care, disability insurance, death benefit, travel and/or accident insurance, or executive compensation plan or arrangement, including, without limitation, the Incentive Plan and the Deferred Compensation Plan.

        3.4     Stock Options.

                    (a)     Executive will receive a non-qualified option to purchase six thousand, five hundred and eighty-three (6,583) shares of the Company’s common stock (the “Performance-Based Option”), subject to approval by the Committee and to the terms and conditions of this Agreement, the applicable option agreement or notice and the Incentive Plan, with a purchase price equal to the Fair Markeet Value (as defined in the Incentive Plan) of the Company's common stock on the date of grant subject to adjustment pursuant to the terms of the Incentive Plan. The Performance-Based Option shall vest on December 31, 2010 (subject to acceleration as set forth in Section 3.4(b) below), provided Executive is still employed by the Company on such date and subject to such other vesting terms as may be provided in the Incentive Plan and the applicable option agreement or notice. The Performance-Based Option shall expire seven (7) years from the date of grant, subject to earlier expiration following Executive’s termination of employment as may be provided in the Incentive Plan and the applicable option agreement or notice.

                    (b)     Notwithstanding the foregoing, the vesting of the Performance-Based Option may be accelerated if certain financial targets and other conditions are met in accordance with vesting provisions adopted by the Board or the Committee and set forth in the applicable option agreement or notice, subject to the terms of the Incentive Plan and the applicable option agreement or notice.

                    (c)     Notwithstanding the standard provisions of the Incentive Plan, the Performance-Based Option shall not vest or otherwise become exercisable solely as a result of either Executive’s Retirement hereunder or Executive’s “Retirement” under the Incentive Plan (as such term is defined therein).

        3.5     Restricted Stock.

                    (a)     Executive will receive Ten Thousand Five Hundred Thirty-Seven (10,537) shares of Restricted Stock, subject to approval by the Committee and to the terms and conditions of this Agreement, the applicable restricted stock agreement and the Incentive Plan. For the purposes hereof, Five Thousand Two Hundred Sixty-Eight (5,268) shares of the above-described Restricted Stock shall be referred to as the "Target Shares."

                    (b)     Notwithstanding the standard provisions in the Incentive Plan, the Restricted Stock awarded pursuant to Section 3.5(a) hereof shall vest or be forfeited in accordance with the following:

                                (i)     If Executive remains in the employ of the Company until the tenth anniversary of the date the Restricted Stock is granted by the Committee (the “Restricted Stock Vesting Date”), Executive shall become fully vested in the Restricted Stock subject to this Agreement. Unless either Section 3.5(b)(ii) or 3.5(b)(iii) shall apply, if Executive’s employment is terminated prior to the Restricted Stock Vesting Date, all shares of Restricted Stock awarded pursuant to Section 3.5(a) hereof shall be forfeited without payment of consideration by the Company.

                                (ii)     Notwithstanding the foregoing, the vesting of the Restricted Stock may be accelerated if certain financial targets and other conditions are met in accordance with vesting provisions adopted by the Board or the Committee and set forth in the applicable restricted stock agreement.

                                (iii)     To the extent the Restricted Stock awarded pursuant to Section 3.5(a) hereof does not otherwise vest pursuant to Section 3.5 (b)(ii), if, prior to the Restricted Stock Vesting Date, either Executive terminates employment on account of Retirement, death, Disability or for Good Reason, or Executive is terminated by the Company on account of Disability or other than for Cause, Executive shall become vested in a portion of the unvested Restricted Stock awarded pursuant to Section 3.5(a) hereof equal to the product of (x) the Target Shares, multiplied by (y) a fraction, the numerator of which is the number of days which have elapsed in the Initial Employment Period through the Termination Date and the denominator of which is the total number of days in the Initial Employment Period; provided, however, that notwithstanding such formula, in the event such termination is on account of Executive's death, the product of (x) and (y) above shall be deemed to be the full amount of the Target Shares.   Shares of Restricted Stock awarded pursuant to Section 3.5 (a) hereof which have not otherwise vested pursuant to either Section 3.5(b)(ii) hereof or the preceding sentence of this Section 3.5(b)(iii) shall be forfeited without payment of consideration by the Company.

        3.6     Business Expenses. During the Employment Period, Executive shall be reimbursed for all reasonable expenses incurred by him in performing his or her duties hereunder provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company.

        3.7     Perquisites. During the Employment Period, Executive shall be entitled to receive such perquisites and fringe benefits which similarly situated executives of the Company are entitled to receive and such other perquisites which are suitable to the character of Executive’s position with the Company and adequate for the performance of Executive’s duties hereunder.

ARTICLE IV
TERMINATION OF EMPLOYMENT

        4.1     Termination by the Company for Cause; Termination by Executive Other Than for Good Reason or Retirement. If the Employment Period and Executive’s employment under this Agreement is terminated by the Company for Cause or by Executive other than for Good Reason or Retirement, prior to the scheduled expiration of the Employment Period, Executive shall be entitled to receive:

                    (a)     The Annual Base Salary through the Termination Date;

                    (b)     Any Annual Bonus earned for a previously completed fiscal year, but unpaid as of the Termination Date;

                    (c)     Reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the Termination Date; and

                    (d)     Such employee benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company, including rights with respect to the Performance-Based Option and the Restricted Stock subject to the terms and conditions of Sections 3.4 and 3.5 hereof and of the Incentive Plan and the applicable option or restricted stock agreement or notice, if relevant (the amounts described in clauses (a) through (d) hereof being referred to as the “Accrued Rights”).

Following such termination of Executive’s employment hereunder pursuant to this Section 4.1, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.2     Termination by the Company Other Than for Cause or Disability; Termination by Executive for Good Reason.

                    (a)     If the Employment Period and Executive’s employment of under this Agreement is terminated by the Company prior to the scheduled expiration of the Employment Period other than for Cause or Disability, or Executive terminates his employment prior to the end of the Employment Period for Good Reason, Executive shall be entitled to receive:

                                (i)    The Accrued Rights; and

                                (ii)     A Severance Benefit pursuant to the terms and conditions set forth below, and the Company will reimburse the Executive for Executive’s cost of continuing medical insurance under COBRA (the “Welfare Benefit”) for eighteen (18) months.

                    (b)     The Company shall pay the Severance Benefit, without interest thereon, in eighteen (18) substantially equal monthly installments, which installments shall be payable on the first day of each month, with the first installment payable in the first full month commencing fifteen (15) days after the Termination Date. Payment of the Severance Benefit is subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes. Executive shall not be under any duty to mitigate damages in order to be eligible to receive the Severance Benefit.

                    (c)     Notwithstanding the foregoing and the terms of Section 3.5(b)(iii), Executive agrees that payment of the Severance Benefit and the delivery of any portion of the Restricted Stock under Section 3.5(b)(iii) is contingent upon the following:

                                (i)     In the event of breach by Executive of Sections 5.1 through 5.3 hereof (or any breach of any agreements in the General Release or in the Nondisclosure and Noncompetition Agreement), Executive shall reimburse the Company for all compensation previously paid, allocated, accrued, delivered or provided by the Company to Executive pursuant to Section 4.2 (a)(ii) or Section 3.5(b)(iii)hereof and the Company shall be entitled to discontinue the future payment, delivery, allocation, accrual or provision of the Severance Benefit, the Welfare Benefit and any Restricted Stock.

                                (ii)     No later than thirty (30) days after the Termination Date, Executive must execute and deliver a General Release in the form attached hereto as Exhibit A.

Following such termination of Executive’s employment hereunder pursuant to this Section 4.2, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.3     Termination upon Death. If the Employment Period and Executive’s employment under this Agreement are terminated due to Executive’s death prior to the scheduled expiration of the Employment Period, Executive will receivethe Accrued Rights and any portion of the Restricted Stock which has vested in accordance with Section 3.5.

        Following such termination of Executive’s employment hereunder pursuant to this Section 4.3, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.4     Termination for Disability. If the Employment Period and Executive’s employment under this Agreement is terminated by the Company or by Executive due to Executive’s Disability prior to the scheduled expiration of the Employment Period, then Executive will receive the Accrued Rights and any portion of the Restricted Stock which has vested in accordance with Section 3.5

        Following such termination of Executive’s employment hereunder pursuant to this Section 4.4, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.5     Termination by Executive on Account of Retirement. If the Employment Period and Executive’s employment under this Agreement is terminated by Executive prior to the scheduled expiration of the Employment Period on account of Retirement, Executive shall be entitled to receive the Accrued Rights and any portion of the Restricted Stock which has vested in accordance with Section 3.5.

        Following such termination of Executive’s employment hereunder pursuant to this Section 4.5, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

      4.6     Expiration of the Employment Period.

                    (a)     In the event either party elects not to extend the Employment Period pursuant to Section 2.2, unless Executive’s employment is earlier terminated pursuant to Sections 4.1 through 4.5 of this Article IV, Executive’s termination of employment hereunder (whether or not Executive continues as an employee of the Company thereafter) shall be deemed to close on the close of business on the day immediately preceding the next scheduled Anniversary Date and Executive shall be entitled to receive the Accrued Rights.

                    (b)     Unless the parties otherwise agree in writing executed subsequent to the Effective Date, continuation of Executive’s employment with the Company beyond the expiration of the Employment Period shall be deemed an employment at-will and, subject only to Section 6.1, shall not be deemed to extend any of the provisions of this Agreement and Executive’s employment may thereafter be terminated at will by either Executive or the Company.

Following such termination of Executive’s employment hereunder pursuant to this Section 4.6, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.7     Notice of Termination. For purposes of this Agreement, any purported termination of Executive’s employment by the Company or by Executive, shall be communicated by written “Notice of Termination” to the other party hereto in accordance with Section 6.2 hereof. Any Notice of Termination shall set forth (a) the effective date of termination (for purposes of determining Executive’s entitlement to benefits hereunder), which shall not be less than fifteen (15) days after the date the Notice of Termination is delivered (the “Termination Date”); (b) the specific provision in this Agreement relied upon; and (c) in reasonable detail, the facts and circumstances claimed to provide a basis for such termination. If the Company terminates Executive's employment pursuant to Section 4.2 or 4.4 hereof, the Termination Date shall be the date upon which the Company notifies Executive of such termination. If Executive terminates employment pursuant to Section 4.1, 4.3, 4.4, 4.5 or 4.6 hereof, the Termination Date shall be Executive's last full day of work prior to such termination. Notwithstanding the foregoing, if within fifteen (15) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a good faith dispute exists concerning the termination, the “Termination Date” for purposes of determining the Executive’s entitlement to benefits under this Agreement shall be the date on which the dispute is finally determined by an independent arbitrator selected by the American Arbitration Association.

        4.8     Board/Committee Resignation. Upon termination of Executive’s employment for any reason, Executive agrees to resign, as of the Termination Date and to the extent applicable, from the Board (and any committees thereof) and the Board of Directors (and any committees thereof) of any of the Company’s affiliates.

ARTICLE V
RESTRICTIVE COVENANTS

For the purposes of this Article V, all references to the Company shall include the Company and its affiliates.

        5.1     Non-Solicitation and Non-Competition.

                    (a)     Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and its affiliates and accordingly agrees as follows:

                               (i)     During the period of Executive’s employment with the Company and, for a period of two (2) years after termination of Executive’s employment (the “Nonsolicit Period”), Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (“Person”), directly or indirectly solicit or assist in soliciting in competition with the Company, the business of any client or prospective client:

(1)        with whom Executive had personal contact or dealings on behalf of the Company during the one (1) year period preceding Executive’s termination of employment;

(2)        with whom employees reporting to Executive have had personal contact or dealings on behalf of the Company during the one (1) year immediately preceding the Executive’s termination of employment; or

(3)        for whom Executive had direct or indirect responsibility during the one (1) year immediately preceding Executive’s termination of employment.

                               (ii)     During the Nonsolicit Period, Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any Person, directly or indirectly:

(1)        solicit or encourage any employee of the Company or its affiliates to leave the employment of the Company or its affiliates; or

(2)        hire any such employee who was employed by the Company or its affiliates as of the date of Executive’s termination of employment with the Company or who left the employment of the Company or its affiliates coincident with, or within one year prior to or after, the termination of Executive’s employment with the Company.

                               (iii)     During the Nonsolicit Period, Executive will not, directly or indirectly, solicit or encourage to cease to work with the Company or its affiliates any consultant then under contract with the Company or its affiliates.

                               (iv)     During the period of Executive’s employment with the Company and, for a period of one (1) year after termination of Executive’s employment, if Executive remains in the employ of the Company at least until the expiration of the Employment Period, or for a period of eighteen (18) months after termination of Executive’s employment, if Executive’s employment is terminated (either by Executive or by the Company for any reason whatsoever) prior to the expiration of the Employment Period (the “Noncompete Period”), Executive will not directly or indirectly:

(1)        engage in any business that is, or will be, engaged wholly or primarily in the business of manufacturing, purchasing, selling or supplying in the United States any product or service manufactured, purchased, sold, supplied or provided by the Company or its affiliates, and which is or will be directly in competition with the business of the Company or its affiliates (including, without limitation, businesses which the Company or its affiliates have specific plans to conduct in the future and as to which Executive is aware of such planning) in the United States (a “Competitive Business”);

(2)        enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in a Competitive Business;

(3)        acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or

(4)         interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its affiliates and customers, clients, suppliers, partners, members or investors of the Company or its affiliates.

                               (v)     Notwithstanding anything to the contrary herein, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in the business of the Company or its affiliates which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such Person and (ii) does not, directly or indirectly, own 5% or more of any class of securities of such Person.

      5.2     Confidentiality.

                    (a)     Executive acknowledges that the identity of the clients and customers of the Company, the prices, terms and conditions at, or upon which, the Company sells its products or provides its services and other non-public, proprietary or confidential information relating to the business, financial and other affairs of the Company (including, without limitation, any idea, product, trade secret, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property; creative or conceptual business or marketing plan, strategy or other material developed for the Company by Executive; or information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals — concerning the past, current or future business, activities and operations of the Company or its affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis) (hereinafter collectively referred to as “Confidential Information”) are valuable, special unique assets of the Company and that such Confidential Information, if disclosed to others, may result in loss of business or other irreparable and consequential damage to the Company.

                    (b)     Executive shall hold in fiduciary capacity, for the benefit of the Company, all Confidential Information and shall not, at any time during the Employment Period or thereafter (i) retain or use for the benefit, purposes or account of Executive of any other Person, or (ii) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any Confidential Information, without the prior written authorization of the Company.

                    (c)     Notwithstanding the foregoing, the term Confidential Information shall not include information (i) generally known to the public or the trade other than as a result of Executive’s breach of this covenant or any breach of other confidentiality obligations by third parties, (ii) made legitimately available to Executive by a third party without breach of any confidentiality obligation, (iii) the release of which is deemed by the Board to be in the best interest of the Company, or (iv) the disclosure of which is required by applicable law; provided that Executive shall give prompt written notice to the Company of such legal requirement, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similar treatment.

                    (d)     Notwithstanding anything herein to the contrary, any party to this Agreement (and any employee, representative, or other agent of any party to this Agreement) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. However, any such information relating to the tax treatment or tax structure is required to be kept confidential to the extent necessary to comply with any applicable federal or state securities laws.

                    (e)     Upon termination of Executive’s employment with the Company for any reason, Executive shall (i) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company or its affiliates, (ii) immediately destroy, delete, or return to the Company, at the Company’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executive’s possession or control (including any of the foregoing stored or located in Executive’s office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or otherwise relate to the business of the Company or its affiliates, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information, and (iii) notify and fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information of which Executive is or becomes aware.

        5.3     Non-Disparagement. Executive agrees that Executive will not disparage the Company or its affiliates, or its or their current or former officers, directors, and employees in any way; further, Executive will not make or solicit any comments, statements, or the like to the media or to others that would be considered derogatory or detrimental to the good name or business reputation of any of the aforementioned entities or individuals; provided, that this Section does not prohibit statements which Executive is required to make under oath or which are otherwise required by law, provided that such statements are truthful and made in a professional manner.

        5.4     Acknowledgment of Reasonable Covenants. It is expressly understood and agreed that Executive and the Company consider the restrictions and covenants contained herein to be reasonable and enforceable, because, among other things, (a) Executive will be receiving compensation under this Agreement or otherwise, (b) there are many other areas in which, and companies for which, Executive could work in view of Executive’s background, (c) the restrictions and covenants set forth herein do not impose any undue hardship on Executive, (d) the Company would not have entered into this Agreement but for the restrictions and covenants of Executive contained herein, and (e) the restrictions and covenants contained herein have been made in order to induce the Company to enter into this Agreement.

        5.5     Modification of the Restrictive Covenants. If, at the time of enforcement of the restrictive covenants set forth herein, a final judicial determination is made by a court or arbiter of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

ARTICLE VI
MISCELLANEOUS

        6.1     Survival. Sections 4.1 through 4.8 inclusive (as applicable to the relevant circumstance of termination only), 5.1 through 5.5 inclusive and 6.1 through 6.14 inclusive shall survive and continue in full force in accordance with their terms notwithstanding any termination of Executive’s employment hereunder or termination of the Initial Employment Period or the Employment Period.

        6.2     Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally, mailed by certified or registered mail, return receipt requested and postage prepaid, or sent via a nationally recognized overnight courier, or sent via facsimile to the recipient. Such notices, demands and other communications shall be sent to the address indicated below:

To the Company:

Express Scripts, Inc.

13900 Riverport Drive

Maryland Heights, MO 63403

Attention: Chief Executive Officer

To Executive:

Mr. Douglas W. Porter

XXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXX

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.

        6.3     Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

        6.4     Complete Agreement. This Agreement constitutes the complete agreement and understanding between the parties regarding the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by and between the parties, written or oral; provided, however, this Agreement shall not supersede or modify the terms of the Nondisclosure and Noncompetition Agreement, and the Options and Restricted Stock shall be subject to the applicable option and restricted stock notices or agreements. The applicable provisions of this Agreement amend the terms and provisions of the Express Scripts, Inc. 2000 Long-Term Incentive Plan to the extent addressed by this Agreement, as the same may have been amended prior to the date hereof, with respect to awards covered by this Agreement and made to Executive hereunder.

        6.5     Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

        6.6     Successors and Assigns. Except as otherwise provided herein, all covenants and agreements contained in this Agreement shall bind and inure to the benefit of and be enforceable by the Company and its respective successors and assigns. Except as otherwise specifically provided herein, this Agreement, including the obligations and benefits hereunder, may not be assigned to any party by Executive.

        6.7     No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied to this Agreement.

        6.8     Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

        6.9     Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Missouri, without regard to conflicts of laws principles thereof; provided, however, that issues related to the Incentive Plan or any grants thereunder shall be resolved in accordance with the laws of the State of Delaware.

        6.10     Specific Performance. The Company shall be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorneys’ fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The Executive agrees and acknowledges that money damages are an inadequate remedy for any breach of the provisions of this Agreement, including, without limitation, Sections 5.1 through 5.3 hereof, and that the Company shall be entitled to apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. Further, Executive acknowledges that the forfeiture provision set forth in the termination provisions hereof shall not be construed to limit or otherwise affect the Company’s right to seek legal or equitable remedies it may otherwise have, or the amount damages for which it may seek recovery, resulting from breach of this Agreement.

        6.11     Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive.

        6.12     Tax Indemnification.

                    (a)     Notwithstanding anything to the contrary herein (or any other agreement entered into by and between Executive and the Company or any incentive arrangement or plan offered by the Company), in the event that any amount or benefit paid or distributed to Executive pursuant to this Agreement, taken together with any amounts or benefits otherwise paid or distributed to Executive by the Company or any of its subsidiaries (collectively, the “Covered Payments”), would constitute an “excess parachute payment” as defined in Section 280G of the Code, and would thereby subject Executive to an Excise Tax, the provisions of this Section 6.12 shall apply.

                    (b)     If the aggregate present value (as determined for purposes of Section 280G of the Code) of the Covered Payments exceeds the amount which can be paid to Executive without Executive incurring an Excise Tax, but is less than 125% of such amount, then the amounts payable to Executive under this Agreement (or any other agreement by and between Executive and the Company or pursuant to any incentive arrangement or plan offered by the Company) may, in the discretion of the Company, be reduced (but not below zero) to the maximum amount which may be paid hereunder without Executive becoming subject to the Excise Tax (such reduced payments to be referred to as the “Payment Cap”). In the event Executive receives reduced payments and benefits as a result of application of this Section 6.12, Executive shall have the right to designate which of the payments and benefits otherwise set forth herein (or any other agreement between Executive and the Company or any incentive arrangement or plan offered by the Company) will be received in connection with the application of the Payment Cap.

                    (c)     If the aggregate present value of all Covered Payments is equal to or exceeds 125% of the amount which can be paid to Executive without Executive incurring an Excise Tax, Executive shall be entitled to receive an additional amount (the “Tax Reimbursement Payment”) such that the net amount retained by Executive with respect to such Covered Payments, after deduction of any Excise Tax on the Covered Payments and any federal, state and local income tax and Excise Tax on the Tax Reimbursement Payment provided for by this Section 6.12, but before deduction for any federal, state or local income or employment tax withholding on such Covered Payments, shall be equal to the amount of the Covered Payments. Such additional amount may be paid by the Company directly to the applicable taxing authority.

                    (d)     Immediately upon a Change in Control, the Company shall notify Executive of any modification or reduction as a result of the application of this Section 6.12. In the event Executive and the Company disagree as to the application of this Section 6.12, the Company shall select a law firm or accounting firm from among those regularly consulted (during the twelve-month period immediately prior to the Change in Control that resulted in the characterization of the Covered Payments as parachute payments) by the Company, and such law firm or accounting firm shall determine, at the Company’s expense, the amount to which Executive shall be entitled hereunder (and pursuant to any other agreements, incentive arrangements or plans), taking into consideration the application of this Section 6.12, and such determination shall be final and binding upon Executive and the Company.

        6.13     Executive Representation. Executive hereby represents to the Company that the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound.

        6.14     Cooperation. Each party shall provide reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executive’s employment hereunder.

_________________

        IN WITNESS WHEREOF, the parties hereto have executed this Executive Employment Agreement as of the date first above written.

THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

EXPRESS SCRIPTS, INC.

By: /s/ Barrett Toan                                           

Name: Barrett Toan

Title: Chairman and Chief Executive Officer

EXECUTIVE

/s/ Douglas W. Porter                                    

Name: Douglas W. Porter

Title: Senior Vice President, Client Services

EXHIBIT A

GENERAL RELEASE AND ACKNOWLEDGMENT

        THIS GENERAL RELEASE AND ACKNOWLEDGMENT (the “General Release”) is made this ___ day of ________, ___________, by Douglas W. Porter (the “Executive”) in favor of Express Scripts, Inc. (the “Company”) pursuant to Section 4.2(c)(ii) of the Executive’s Employment Agreement dated ____________________, 2004 (the “Agreement”). Unless otherwise defined herein, capitalized terms appearing herein shall have the meanings given to them in the Agreement.

        1.     General Release of Claims. The Executive, for and on behalf of the Executive and the Executive’s heirs, beneficiaries, executors, administrators, successors, assigns, and anyone claiming through or under any of the foregoing, hereby agrees to, and does, release and forever discharge the Company, and its agents, officers, employees, successors and assigns, from any and all matters, claims, demands, damages, causes of action, debts, liabilities, controversies, judgments and suits of every kind and nature whatsoever, foreseen or unforeseen, known or unknown, arising out of or relating to any matter whatsoever, including, without limitation, the Executive’s termination from employment with the Company, matters arising from the offer and acceptance of the Agreement, matters relating to employment references or lack thereof from the Company, and those claims described in paragraph 3 hereof.

        2.     Agreement Not to File Suit. Except as otherwise expressly permitted in paragraph 3 hereof, the Executive, for and on behalf of the Executive and the Executive’s beneficiaries, executors, administrators, successors, assigns, and anyone claiming through or under any of the foregoing, agrees that he or she will not file or otherwise submit any charge, claim, complaint, or action to any agency, court, organization, or judicial forum (nor will the Executive permit any person, group of persons, or organization to take such action on the Executive’s behalf) against the Company arising out of any actions or non-actions on the part of the Company prior to or as of the date hereof arising out of or relating to any matter whatsoever. The Executive further agrees that in the event that any person or entity should bring such a charge, claim, complaint, or action on the Executive’s behalf, the Executive hereby waives and forfeits any right to recovery under said claim and will exercise every good faith effort (but will not be obliged to incur any expense) to have such claim dismissed.

        3.     Claims Covered. The charges, claims, complaints, matters, demands, damages, and causes of action referenced in paragraphs 1 and 2 above include, but are not limited to:

                    (a)     any breach of an actual or implied contract of employment between the Executive and the Company;

                    (b)     any claim of unjust, wrongful, or tortious discharge (including any claim of fraud, negligence, retaliation for whistleblowing, or intentional infliction of emotional distress);

                    (c)     any claim of defamation or other common-law action;

                    (d)     any claims of violations arising under the Civil Rights Act of 1964, as amended, 42 U.S.C.ss.2000e et seq., the Age Discrimination in Employment Act, 29 U.S.C.ss.621 et seq. (only with respect to claims regarding acts of discrimination arising prior to the execution of this General Release), the Americans with Disabilities Act of 1990, 42 U.S.C.ss.12101 et seq., the Fair Labor Standards Act of 1938, as amended, 29 U.S.C.ss.201 et seq., the Rehabilitation Act of 1973, as amended, 29 U.S.C.ss.701 et seq., the Missouri Human Rights Act,ss.213.000 R.S.Mo. et seq., or any other relevant federal, state, or local statutes or ordinances; provided, however, that for purposes of the Age Discrimination in Employment Act only, this General Release does not affect the rights and responsibilities of the Equal Employment Opportunity Commission (the “EEOC”) to enforce the Age Discrimination in Employment Act, nor does this General Release prohibit the Executive from filing a charge or complaint under the Age Discrimination in Employment Act with the EEOC or participating in any investigation or proceeding conducted by the EEOC;

                    (e)     any claims for salary, bonus pay, vacation pay, severance pay or welfare benefits, other than those payments and benefits specifically provided in the Agreement; and

                    (f)     any other matter whatsoever, whether related or unrelated to employment matters.

        4.     Claims Excluded. Notwithstanding anything else herein to the contrary, this General Release shall not:

                    (a)     apply to the obligations of the Company described in Sections 3.4, 3.5, and Article IV of the Agreement; or

                    (b)     affect, alter or extinguish any vested rights that the Executive may have with respect to any benefits, rights or entitlements under the terms of any employee benefit programs of the Company to which the Executive is or will be entitled by virtue of his or her employment with the Company or any of its subsidiaries, and nothing in this General Release will prohibit or be deemed to restrict the Executive from enforcing his or her rights to any such benefits, rights or entitlements; or

                    (c)     limit the Executive’s right to indemnification to the extent provided in the Company’s Certificate of Incorporation and/or bylaws.

        5.     Acknowledgments. By signing this General Release, the Executive hereby represents, certifies and acknowledges that the Executive:

                    (a)     has received a copy of the Agreement and this General Release for review and study before executing the Agreement;

                    (b)     has read the Agreement and this General Release carefully before signing this General Release;

                    (c)     has had sufficient opportunity before signing this General Release to ask any questions the Executive has about the Agreement or this General Release and has received satisfactory answers to all such questions;

                    (d)     understands the Executive’s rights and obligations under the Agreement and this General Release;

                    (e)     understands that the Agreement and this General Release are legal documents, and that by signing this General Release the Executive is giving up certain legal rights including but not limited to rights under the Age Discrimination in Employment Act, 29 U.S.C. ss. 621 et seq. and the other matters covered in paragraph 3 hereof;

                    (f)     understands and agrees that the execution of this General Release is a condition precedent, and material inducement to the Company’s provision of payments made to Executive pursuant to Section 3.5, or 4.2 of the Agreement and such payments, subject to the conditions stated therein, constitute sufficient additional consideration in exchange for the Executive’s promises and obligations contained herein;

                    (g)     knowingly and voluntarily agreed to accept the payments described in Section 3.5, or 4.2 of the Agreement, subject to the conditions stated therein, as a full and final compromise, adjustment and settlement of all potential claims herein described;

                    (h)     has been given at least twenty-one (21) days to consider this General Release and that he or she has been advised to consult with an attorney about its terms, and if the Executive has executed this General Release prior to the expiration of the twenty-one (21) day period, that he or she was afforded the opportunity to consider this General Release for twenty-one (21) days before executing it and that the Executive’s execution of this General Release prior to the expiration of such twenty-one (21) day period was his or her free and voluntary act; and

                    (i)     understands that he or she may revoke this General Release within seven (7) days after he or she signs it and that if the Executive does not revoke this General Release within that time, this General Release becomes effective and enforceable by both parties immediately after the expiration of such seven-day period. The Executive also understands that any revocation must be in writing and must be received by the Company no later than the close of business on the seventh day after his or her execution of this General Release. The Executive acknowledges that the Company has given the Executive enough time to consult with his or her family and other advisers and to consider whether he or she should agree to the terms of this General Release.

        6.     Governing Law. The validity, interpretation, construction and performance of this General Release shall be governed by the laws of the State of Missouri, without regard to principles of conflicts of laws.

        7.     Severability. If any provision of this General Release or the application thereof to any person or circumstance shall to any extent be held to be invalid or unenforceable, the remainder of this General Release shall not be affected thereby, and each provision of this General Release shall be valid and enforceable to the fullest extent permitted by law.

        8.     Binding Effect. Executive acknowledges that the terms and provisions of this General Release shall be binding upon the Executive’s heirs, executors, administrators, personal representatives, successors and assigns, and that the terms and provisions of this General Release shall inure to the benefit of the Company’s affiliates, successors, assigns, officers, directors, agents, attorneys and employees.

_________________

THIS GENERAL RELEASE HAS IMPORTANT LEGAL CONSEQUENCES, INCLUDING THE EXECUTIVE’S WAIVER TO PURSUE CERTAIN LEGAL CLAIMS. THE EXECUTIVE IS ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS GENERAL RELEASE.

        IN WITNESS WHEREOF, the undersigned has caused this General Release to be executed and delivered as of the day and year first above set forth.

EXECUTIVE:

______________________________

EX-10

EXECUTIVE EMPLOYMENT AGREEMENT

        This Executive Employment Agreement (the “Agreement”) dated as of August 31, 2004 and effective as of April 1, 2004 (the “Effective Date”), by and between Express Scripts, Inc., a Delaware corporation (the “Company”), and Agnes Rey-Giraud (“Executive”).

        WHEREAS, Executive is now and has been employed by the Company as Senior Vice President, Research and Program Management; and

        WHEREAS, the Company and Executive mutually desire to provide for the continued employment of Executive on the terms and conditions set forth herein;

        NOW, THEREFORE, in consideration of the premises and the mutual covenants herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

      As used herein, the following terms shall have the following meanings:

        1.1     “Annual Base Salary”means the base salary set forth in Section 3.1 hereof.

        1.2     “Annual Bonus” means Executive’s annual bonus granted pursuant to the Annual Bonus Plan, as described in Section 3.2 hereof.

        1.3     “Annual Bonus Plan” means the annual bonus program established for senior executives by the Board of Directors of the Company (the “Board”) or by the Committee, as adopted or amended from time to time.

        1.4     “Bonus Potential” means the maximum bonus amount Executive could receive pursuant to Section 3.2 hereof for achieving 100% of “base” or “targeted” performance goals established by the Board or Committee under the Annual Bonus Plan with respect to the applicable fiscal year; provided, however, in no event shall Executive’s Bonus Potential for the year in which the Bonus Potential is being determined (a) be less than 50% of Executive’s Annual Base Salary as in effect on January 1 of such year, or (b) take into account, or include in any way, any increase in Executive’s bonus amount due to the Company exceeding its “base” or “target” goals for such year (e.g., if Executive’s “base” or “target” Bonus Potential is stated at $50,000, but Executive is eligible to receive more than $50,000 if certain targets are exceeded then Executive’s Bonus Potential for purposes of this definition is $50,000).

        1.5     “Cause ” means:

                   (a)     any act or acts by Executive, whether or not in connection with his employment by the Company, constituting, or Executive’s conviction or plea of guilty or nolo contendere (no contest) to, (i) a felony under applicable law or (ii) a misdemeanor involving moral turpitude;

                   (b)      any act or acts of gross dishonesty or gross misconduct in the performance of Executive’s duties hereunder;

                   (c)      any willful malfeasance or willful misconduct by Executive in connection with Executive’s duties hereunder or any act or omission which is injurious to the financial condition or business reputation of the Company or its affiliates; or

                   (d)      any breach by Executive of the provisions of Sections 5.1 through 5.3 of this Agreement, or of the terms and provisions of the Nondisclosure and Noncompetition Agreement (as defined in Section 1.24 hereof).

                   Notwithstanding the foregoing, the event(s) described in clause (c) of this Section 1.5 shall not be deemed to constitute “Cause” if such event is (i) solely as the result of bad judgment or negligence on the part of Executive not rising to the level of gross negligence; or (ii) solely because of an act or omission believed by Executive in good faith to have been in, or not opposed to, the interests of the Company and its affiliates.

        1.6     “Change in Control” means a Change in Control as that term is defined in the Incentive Plan (as defined in Section 1.22 hereof).

        1.7     “Change in Control Date” means the Change in Control Date as that term is defined in the Incentive Plan.

        1.8     “Change in Control Period” means the ninety (90) day period commencing on the Change in Control Date.

        1.9     “Change in Control Price” means the value, expressed in dollars, as of the date of receipt of the per share consideration received by the Company’s stockholders whose stock is acquired in a transaction constituting a Change in Control.

        1.10     “Code” means the Internal Revenue Code of 1986, as amended.

        1.11     “Committee” means the Compensation and Development Committee of the Board.

        1.12     “Covered Payments” means the amounts described in Section 6.12(a) hereof.

        1.13     “Deferred Compensation Plan” means the Express Scripts, Inc. Executive Deferred Compensation Plan, as amended from time to time, or any successor plan.

        1.14     “Disability” has the meaning ascribed to such term in the Incentive Plan.

        1.15     “EBITDA” means earnings before interest, taxes, depreciation and amortization.

        1.16     “Effective Date” means the date specified in the recitals to this Agreement.

        1.17     “Employment Period” means the Initial Employment Period (as defined in Section 1.23 hereof) plus any additional Renewal Periods (as defined in Section 1.27 hereof).

        1.18     “EPS” means the earnings per share of the Company.

        1.19     “Excise Tax” means the excise tax imposed by Section 4999 of the Code or any similar state or local tax that may be imposed.

        1.20     “General Release” means the General Release and Acknowledgment attached hereto as Exhibit A.

        1.21     “Good Reason” means the occurrence of any one or more of the following:

                    (a)     Any material breach by the Company of any of the provisions of this Agreement or any material failure by the Company to carry out any of its obligations hereunder;

                    (b)     The Company’s requiring Executive to be based at any office or location more than 50 miles from 13900 Riverport Drive, Maryland Heights, Missouri (the “Current Headquarters”), except for travel reasonably required in the performance of Executive’s responsibilities to the extent substantially consistent with Executive’s business travel obligations;

                    (c)     Any substantial and sustained diminution in Executive’s authority or responsibilities from those described in Section 2.3 hereof; provided, however, notwithstanding the foregoing, (i) in the event a Change in Control shall occur which results in the Company becoming a subsidiary of another pharmacy benefit management company (“PBM”), or which is in the form of a merger in which the surviving corporation or entity is a PBM (x) so long as Executive is offered a position as an officer of the parent PBM (or surviving corporation or entity) with duties and responsibilities which are not inconsistent in any material adverse respect with his or her duties and responsibilities immediately prior to such Change in Control, and such position is based at an office or location not more than 50 miles from the Current Headquarters, such change in position shall not constitute Good Reason, but (y) if Executive is not offered a position as an officer of the parent PBM or surviving corporation or entity as described in (x), a substantial and sustained diminution in Executive’s authority or responsibility shall be deemed to have occurred; or (ii) in the event a Change in Control shall occur which results in the Company becoming a subsidiary of a non-PBM or is in the form of a merger in which the surviving corporation or entity is not a PBM, failure to receive an offer to serve as an officer of the non-PBM parent or surviving corporation or entity shall not constitute Good Reason provided Executive’s duties subsequent to the Change in Control are not inconsistent in any material adverse respect with his or her duties immediately prior to the Change in Control, and such position is based at an office or location not more than 50 miles from the Current Headquarters;

                    (d)     The failure by the Company to continue to provide Executive with substantially similar perquisites or benefits Executive enjoyed in the aggregate under the Company’s benefit programs (other than long-term incentive compensation programs), such as any of the Company’s pension, savings, vacation, life insurance, medical, health and accident, or disability plans in which he or she was participating at the time of any such discontinuation (or, alternatively, if such plans are amended, modified or discontinued, substantially similar equivalent benefits thereto in the aggregate), or the taking of any action by the Company which would directly or indirectly cause such benefits to be no longer substantially equivalent in the aggregate to the benefits in effect immediately prior to taking such action; provided, that any amendment, modification or discontinuation of any plans or benefits referred to in this subsection (d) hereof that generally affect substantially all other domestic salaried employees of the Company who were eligible to participate, and participated, in the affected Company benefit program(s) shall not be deemed to constitute Good Reason; and

Provided that the events described in Section 1.21 (a), (b), (c) or (d) above shall only constitute Good Reason if the Company fails to cure such event within 30 days after receipt from Executive of written notice of the event which constitutes Good Reason; and provided further that, “Good Reason” shall cease to exist for an event on the 60th day following the later of its occurrence or Executive’s knowledge thereof, unless Executive has given the Company written notice thereof prior to such date.

         1.22    “Incentive Plan” means the Express Scripts, Inc. 2000 Long-Term Incentive Plan, as amended from time to time.

         1.23    “Initial Employment Period” has the meaning set forth in Section 2.2 hereof.

         1.24    “Nondisclosure and Noncompetition Agreement” means the Form of Nondisclosure and Noncompetition Agreement entered into by and between Executive and the Company dated as of September 30, 1999.

        1.25     “Options” means the options to purchase the number of shares of the Company’s common stock as set forth in Section 3.4 hereof.

        1.26     “Payment Cap” means the maximum amount described in Section 6.12(b) hereof

        1.27     “Renewal Period” has the meaning set forth in Section 2.2 hereof.

        1.28     “Restricted Stock” means shares of the Company’s common stock, $0.01 par value per share, which are issued pursuant to the Incentive Plan and subject to one or more restrictions prescribed by the Board or the by Committee, in the sole discretion of either, as applicable.

        1.29     “Retirement” means the voluntary termination of employment by Executive on or after attaining age 59 1/2 which does not occur during a Change in Control Period.

        1.30     “Severance Benefit” means a severance payment in an amount equal to:

        (a)   eighteen (18) months of Executive’s Annual Base Salary as in effect immediately prior to the Termination Date, plus

        (b)   an amount equal to the product of (i) Executive’s Bonus Potential for the year in which the Termination Date occurs (the “Termination Year”), multiplied by (ii) the average percentage of the Bonus Potential earned by the Executive for the three (3) full years immediately preceding the Termination Year, (or such shorter period if Executive was employed by the Company for less than three (3) full years and received, or was eligible to receive, a bonus during such period), which product shall be prorated for the portion of the Termination Year in which Executive was employed by the Company. Notwithstanding anything to the contrary herein, neither the three-year average percentage of Bonus Potential described in (ii) above, nor the percentage for any single year used to compute such three-year average, may exceed 100%.

        1.31     “Tax Reimbursement Payment” means the payment described in Section 6.12(c) hereof.

        1.32     “Termination Date” means the effective date of termination of Executive’s employment as determined in accordance with Section 4.7 hereof.

ARTICLE II
TERM/POSITION

        2.1     Employment; Effectiveness of Agreement. Effective as of the Effective Date, the Company hereby employs Executive, and Executive hereby accepts such employment, according to the terms and conditions set forth in this Agreement.

        2.2     Term. Subject to the provisions of Sections 4.1 through 4.7 of this Agreement, the term of Executive’s employment hereunder shall commence on the Effective Date and continue through March 31, 2007 (the “Initial Employment Period”). On April 1st of each year, commencing with April 1, 2007 and on each subsequent April 1st thereafter (each, an “Anniversary Date”), this Agreement shall be extended automatically at such time for an additional twelve (12) month period (each, a “Renewal Period”) unless either party hereto delivers written notice in accordance with Section 6.2 hereof to the other party hereto at least 180 days prior to such Anniversary Date of his, her or its desire not to renew this Agreement for an additional Renewal Period. The Initial Employment Period and any Renewal Periods, if any, shall constitute the “Employment Period” for purposes of this Agreement. If there are no Renewal Periods, then the Employment Period shall have the same meaning as Initial Employment Period. Except as set forth in Section 6.1 hereof, upon termination of Executive’s employment with the Company in accordance with the terms hereof or upon termination of the Initial Employment Period or the Employment Period without extension thereof, this Agreement shall terminate and no longer be of any force or effect

        2.3     Position and Duties. Executive shall hold the position of Senior Vice President, Research and Program Management and shall report to, and at all times be subject to the lawful direction of, the Chief Executive Officer, President, or Chief Operating Officer of the Company (as designated by the Chief Executive Officer of the Company). Additionally, Executive shall serve as a member of the executive staff and participate in the strategic decision-making of the Company from time to time. If requested, Executive shall also serve as a member of the Board without additional compensation. During the Employment Period, Executive shall devote his or her best efforts and his or her full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business affairs of the Company. Executive shall perform his or her duties and responsibilities to the best of his or her abilities in a diligent, trustworthy, businesslike and efficient manner. Nothing herein shall preclude Executive from, subject to the prior written consent of the Board, (a) serving on any corporate or governmental board of directors (b) serving on the board of, or working for, any charitable, not-for-profit or community organization, (c) pursuing his or her personal, financial and legal affairs, or (d) pursuing any other activity; provided that Executive shall not engage in any other business, profession, occupation or other activity, for compensation or otherwise, which would violate the provisions of Section 5.1 or would, in each case, and in the aggregate, otherwise conflict or interfere with the performance of Executive’s duties and responsibilities hereunder, either directly or indirectly, without the prior written consent of the Board

ARTICLE III
COMPENSATION AND BENEFITS

        3.1     Annual Base Salary. During the Employment Period, the Company shall pay Executive a base salary (the “Annual Base Salary”) at the annual rate of Two Hundred Sixty Thousand dollars ($260,000), which shall be payable in regular installments in accordance with the Company’s usual payroll practices and shall be subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes. Executive shall be eligible for such merit-based increases in Executive’s Annual Base Salary, if any, as may be determined from time to time in the sole discretion of the Board; provided that any such increase shall not serve to limit or reduce any other obligation to Executive under this Agreement. The term “Annual Base Salary” as used in this Agreement shall refer to the Annual Base Salary as in effect from time to time during the Employment Period. Executive’s Annual Base Salary shall not be reduced after any such increase without Executive’s express written consent.

        3.2     Annual Incentive Compensation. Executive shall be eligible to participate in the Company’s Annual Bonus Plan established for senior executives by the Board or the Committee. The size of Executive’s bonus opportunity, which shall be no less than the Bonus Potential, and the terms of Executive’s participation in the Annual Bonus Plan, shall be determined based on the terms and conditions of the Annual Bonus Plan, subject to adjustment as described therein. Executive’s Annual Bonus shall be based upon performance of Executive, Executive’s department, and/or the Company in relation to the financial and non-financial objectives to be established by the Board or by the Committee, at the sole discretion of either, as applicable, pursuant to the terms of the Annual Bonus Plan. Executive’s Annual Bonus shall be subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes. Subject to the achievement or failure to achieve the relevant financial and non-financial objectives under the Annual Bonus Plan, Executive may receive, for any given year, from 0% to 200% of Executive's Bonus Potential (or such higher percentage as may be achievable pursuant to the terms of the Annual Bonus Plan), as further set forth in the Annual Bonus Plan.

        3.3     Participation in Benefit and Incentive Plans. During the Employment Period, Executive shall be entitled to participate in the Company’s employee benefit plans (other than bonus and incentive plans) as in effect from time to time, on the same basis as those benefits are generally made available to similarly situated senior executives of the Company. The payments provided in Article III hereof are in addition to benefits which Executive is entitled to receive pursuant to the terms of any pension plan or group hospitalization, health, dental care, disability insurance, death benefit, travel and/or accident insurance, or executive compensation plan or arrangement, including, without limitation, the Incentive Plan and the Deferred Compensation Plan.

        3.4     Stock Options.

                    (a)     Executive will receive a non-qualified option to purchase eight thousand, seven hundred and seventy-seven (8,777) shares of the Company’s common stock (the “Performance-Based Option”), subject to approval by the Committee and to the terms and conditions of this Agreement, the applicable option agreement or notice and the Incentive Plan, with a purchase price equal to the Fair Markeet Value (as defined in the Incentive Plan) of the Company's common stock on the date of grant subject to adjustment pursuant to the terms of the Incentive Plan. The Performance-Based Option shall vest on December 31, 2010 (subject to acceleration as set forth in Section 3.4(b) below), provided Executive is still employed by the Company on such date and subject to such other vesting terms as may be provided in the Incentive Plan and the applicable option agreement or notice. The Performance-Based Option shall expire seven (7) years from the date of grant, subject to earlier expiration following Executive’s termination of employment as may be provided in the Incentive Plan and the applicable option agreement or notice.

                    (b)     Notwithstanding the foregoing, the vesting of the Performance-Based Option may be accelerated if certain financial targets and other conditions are met in accordance with vesting provisions adopted by the Board or the Committee and set forth in the applicable option agreement or notice, subject to the terms of the Incentive Plan and the applicable option agreement or notice.

                    (c)     Notwithstanding the standard provisions of the Incentive Plan, the Performance-Based Option shall not vest or otherwise become exercisable solely as a result of either Executive’s Retirement hereunder or Executive’s “Retirement” under the Incentive Plan (as such term is defined therein).

        3.5     Restricted Stock.

                    (a)     Executive will receive Ten Thousand Five Hundred Thirty-Seven (10,537) shares of Restricted Stock, subject to approval by the Committee and to the terms and conditions of this Agreement, the applicable restricted stock agreement and the Incentive Plan. For the purposes hereof, Five Thousand Two Hundred Sixty-Eight (5,268) shares of the above-described Restricted Stock shall be referred to as the "Target Shares."

                    (b)     Notwithstanding the standard provisions in the Incentive Plan, the Restricted Stock awarded pursuant to Section 3.5(a) hereof shall vest or be forfeited in accordance with the following:

                                (i)     If Executive remains in the employ of the Company until the tenth anniversary of the date the Restricted Stock is granted by the Committee (the “Restricted Stock Vesting Date”), Executive shall become fully vested in the Restricted Stock subject to this Agreement. Unless either Section 3.5(b)(ii) or 3.5(b)(iii) shall apply, if Executive’s employment is terminated prior to the Restricted Stock Vesting Date, all shares of Restricted Stock awarded pursuant to Section 3.5(a) hereof shall be forfeited without payment of consideration by the Company.

                                (ii)     Notwithstanding the foregoing, the vesting of the Restricted Stock may be accelerated if certain financial targets and other conditions are met in accordance with vesting provisions adopted by the Board or the Committee and set forth in the applicable restricted stock agreement.

                                (iii)     To the extent the Restricted Stock awarded pursuant to Section 3.5(a) hereof does not otherwise vest pursuant to Section 3.5 (b)(ii), if, prior to the Restricted Stock Vesting Date, either Executive terminates employment on account of Retirement, death, Disability or for Good Reason, or Executive is terminated by the Company on account of Disability or other than for Cause, Executive shall become vested in a portion of the unvested Restricted Stock awarded pursuant to Section 3.5(a) hereof equal to the product of (x) the Target Shares, multiplied by (y) a fraction, the numerator of which is the number of days which have elapsed in the Initial Employment Period through the Termination Date and the denominator of which is the total number of days in the Initial Employment Period; provided, however, that notwithstanding such formula, in the event such termination is on account of Executive's death, the product of (x) and (y) above shall be deemed to be the full amount of the Target Shares.   Shares of Restricted Stock awarded pursuant to Section 3.5 (a) hereof which have not otherwise vested pursuant to either Section 3.5(b)(ii) hereof or the preceding sentence of this Section 3.5(b)(iii) shall be forfeited without payment of consideration by the Company.

        3.6     Business Expenses. During the Employment Period, Executive shall be reimbursed for all reasonable expenses incurred by him in performing his or her duties hereunder provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company.

        3.7     Perquisites. During the Employment Period, Executive shall be entitled to receive such perquisites and fringe benefits which similarly situated executives of the Company are entitled to receive and such other perquisites which are suitable to the character of Executive’s position with the Company and adequate for the performance of Executive’s duties hereunder.

ARTICLE IV
TERMINATION OF EMPLOYMENT

        4.1     Termination by the Company for Cause; Termination by Executive Other Than for Good Reason or Retirement. If the Employment Period and Executive’s employment under this Agreement is terminated by the Company for Cause or by Executive other than for Good Reason or Retirement, prior to the scheduled expiration of the Employment Period, Executive shall be entitled to receive:

                    (a)     The Annual Base Salary through the Termination Date;

                    (b)     Any Annual Bonus earned for a previously completed fiscal year, but unpaid as of the Termination Date;

                    (c)     Reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the Termination Date; and

                    (d)     Such employee benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company, including rights with respect to the Performance-Based Option and the Restricted Stock subject to the terms and conditions of Sections 3.4 and 3.5 hereof and of the Incentive Plan and the applicable option or restricted stock agreement or notice, if relevant (the amounts described in clauses (a) through (d) hereof being referred to as the “Accrued Rights”).

Following such termination of Executive’s employment hereunder pursuant to this Section 4.1, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.2     Termination by the Company Other Than for Cause or Disability; Termination by Executive for Good Reason.

                    (a)     If the Employment Period and Executive’s employment of under this Agreement is terminated by the Company prior to the scheduled expiration of the Employment Period other than for Cause or Disability, or Executive terminates his employment prior to the end of the Employment Period for Good Reason, Executive shall be entitled to receive:

                                (i)    The Accrued Rights; and

                                (ii)     A Severance Benefit pursuant to the terms and conditions set forth below, and the Company will reimburse the Executive for Executive’s cost of continuing medical insurance under COBRA (the “Welfare Benefit”) for eighteen (18) months.

                    (b)     The Company shall pay the Severance Benefit, without interest thereon, in eighteen (18) substantially equal monthly installments, which installments shall be payable on the first day of each month, with the first installment payable in the first full month commencing fifteen (15) days after the Termination Date. Payment of the Severance Benefit is subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes. Executive shall not be under any duty to mitigate damages in order to be eligible to receive the Severance Benefit.

                    (c)     Notwithstanding the foregoing and the terms of Section 3.5(b)(iii), Executive agrees that payment of the Severance Benefit and the delivery of any portion of the Restricted Stock under Section 3.5(b)(iii) is contingent upon the following:

                                (i)     In the event of breach by Executive of Sections 5.1 through 5.3 hereof (or any breach of any agreements in the General Release or in the Nondisclosure and Noncompetition Agreement), Executive shall reimburse the Company for all compensation previously paid, allocated, accrued, delivered or provided by the Company to Executive pursuant to Section 4.2(a)(ii) or Section 3.5(b)(iii)hereof and the Company shall be entitled to discontinue the future payment, delivery, allocation, accrual or provision of the Severance Benefit, the Welfare Benefit and any Restricted Stock.

                                (ii)     No later than thirty (30) days after the Termination Date, Executive must execute and deliver a General Release in the form attached hereto as Exhibit A.

Following such termination of Executive’s employment hereunder pursuant to this Section 4.2, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.3     Termination upon Death. If the Employment Period and Executive’s employment under this Agreement are terminated due to Executive’s death prior to the scheduled expiration of the Employment Period, Executive will receivethe Accrued Rights and any portion of the Restricted Stock which has vested in accordance with Section 3.5.

        Following such termination of Executive’s employment hereunder pursuant to this Section 4.3, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.4     Termination for Disability. If the Employment Period and Executive’s employment under this Agreement is terminated by the Company or by Executive due to Executive’s Disability prior to the scheduled expiration of the Employment Period, then Executive will receive the Accrued Rights and any portion of the Restricted Stock which has vested in accordance with Section 3.5

        Following such termination of Executive’s employment hereunder pursuant to this Section 4.4, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.5     Termination by Executive on Account of Retirement. If the Employment Period and Executive’s employment under this Agreement is terminated by Executive prior to the scheduled expiration of the Employment Period on account of Retirement, Executive shall be entitled to receive the Accrued Rights and any portion of the Restricted Stock which has vested in accordance with Section 3.5.

        Following such termination of Executive’s employment hereunder pursuant to this Section 4.5, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

      4.6     Expiration of the Employment Period.

                    (a)     In the event either party elects not to extend the Employment Period pursuant to Section 2.2, unless Executive’s employment is earlier terminated pursuant to Sections 4.1 through 4.5 of this Article IV, Executive’s termination of employment hereunder (whether or not Executive continues as an employee of the Company thereafter) shall be deemed to close on the close of business on the day immediately preceding the next scheduled Anniversary Date and Executive shall be entitled to receive the Accrued Rights.

                    (b)     Unless the parties otherwise agree in writing executed subsequent to the Effective Date, continuation of Executive’s employment with the Company beyond the expiration of the Employment Period shall be deemed an employment at-will and, subject only to Section 6.1, shall not be deemed to extend any of the provisions of this Agreement and Executive’s employment may thereafter be terminated at will by either Executive or the Company.

Following such termination of Executive’s employment hereunder pursuant to this Section 4.6, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.7     Notice of Termination. For purposes of this Agreement, any purported termination of Executive’s employment by the Company or by Executive, shall be communicated by written “Notice of Termination” to the other party hereto in accordance with Section 6.2 hereof. Any Notice of Termination shall set forth (a) the effective date of termination (for purposes of determining Executive’s entitlement to benefits hereunder), which shall not be less than fifteen (15) days after the date the Notice of Termination is delivered (the “Termination Date”); (b) the specific provision in this Agreement relied upon; and (c) in reasonable detail, the facts and circumstances claimed to provide a basis for such termination. If the Company terminates Executive's employment pursuant to Section 4.2 or 4.4 hereof, the Termination Date shall be the date upon which the Company notifies Executive of such termination. If Executive terminates employment pursuant to Section 4.1, 4.3, 4.4, 4.5 or 4.6 hereof, the Termination Date shall be Executive's last full day of work prior to such termination. Notwithstanding the foregoing, if within fifteen (15) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a good faith dispute exists concerning the termination, the “Termination Date” for purposes of determining the Executive’s entitlement to benefits under this Agreement shall be the date on which the dispute is finally determined by an independent arbitrator selected by the American Arbitration Association.

        4.8     Board/Committee Resignation. Upon termination of Executive’s employment for any reason, Executive agrees to resign, as of the Termination Date and to the extent applicable, from the Board (and any committees thereof) and the Board of Directors (and any committees thereof) of any of the Company’s affiliates.

ARTICLE V
RESTRICTIVE COVENANTS

For the purposes of this Article V, all references to the Company shall include the Company and its affiliates.

        5.1     Non-Solicitation and Non-Competition.

                    (a)     Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and its affiliates and accordingly agrees as follows:

                               (i)     During the period of Executive’s employment with the Company and, for a period of two (2) years after termination of Executive’s employment (the “Nonsolicit Period”), Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (“Person”), directly or indirectly solicit or assist in soliciting in competition with the Company, the business of any client or prospective client:

(1)        with whom Executive had personal contact or dealings on behalf of the Company during the one (1) year period preceding Executive’s termination of employment;

(2)        with whom employees reporting to Executive have had personal contact or dealings on behalf of the Company during the one (1) year immediately preceding the Executive’s termination of employment; or

(3)        for whom Executive had direct or indirect responsibility during the one (1) year immediately preceding Executive’s termination of employment.

                               (ii)     During the Nonsolicit Period, Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any Person, directly or indirectly:

(1)        solicit or encourage any employee of the Company or its affiliates to leave the employment of the Company or its affiliates; or

(2)        hire any such employee who was employed by the Company or its affiliates as of the date of Executive’s termination of employment with the Company or who left the employment of the Company or its affiliates coincident with, or within one year prior to or after, the termination of Executive’s employment with the Company.

                               (iii)     During the Nonsolicit Period, Executive will not, directly or indirectly, solicit or encourage to cease to work with the Company or its affiliates any consultant then under contract with the Company or its affiliates.

                               (iv)     During the period of Executive’s employment with the Company and, for a period of one (1) year after termination of Executive’s employment, if Executive remains in the employ of the Company at least until the expiration of the Employment Period, or for a period of eighteen (18) months after termination of Executive’s employment, if Executive’s employment is terminated (either by Executive or by the Company for any reason whatsoever) prior to the expiration of the Employment Period (the “Noncompete Period”), Executive will not directly or indirectly:

(1)        engage in any business that is, or will be, engaged wholly or primarily in the business of manufacturing, purchasing, selling or supplying in the United States any product or service manufactured, purchased, sold, supplied or provided by the Company or its affiliates, and which is or will be directly in competition with the business of the Company or its affiliates (including, without limitation, businesses which the Company or its affiliates have specific plans to conduct in the future and as to which Executive is aware of such planning) in the United States (a “Competitive Business”);

(2)        enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in a Competitive Business;

(3)        acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or

(4)         interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its affiliates and customers, clients, suppliers, partners, members or investors of the Company or its affiliates.

                               (v)     Notwithstanding anything to the contrary herein, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in the business of the Company or its affiliates which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such Person and (ii) does not, directly or indirectly, own 5% or more of any class of securities of such Person.

      5.2     Confidentiality.

                    (a)     Executive acknowledges that the identity of the clients and customers of the Company, the prices, terms and conditions at, or upon which, the Company sells its products or provides its services and other non-public, proprietary or confidential information relating to the business, financial and other affairs of the Company (including, without limitation, any idea, product, trade secret, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property; creative or conceptual business or marketing plan, strategy or other material developed for the Company by Executive; or information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals — concerning the past, current or future business, activities and operations of the Company or its affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis) (hereinafter collectively referred to as “Confidential Information”) are valuable, special unique assets of the Company and that such Confidential Information, if disclosed to others, may result in loss of business or other irreparable and consequential damage to the Company.

                    (b)     Executive shall hold in fiduciary capacity, for the benefit of the Company, all Confidential Information and shall not, at any time during the Employment Period or thereafter (i) retain or use for the benefit, purposes or account of Executive of any other Person, or (ii) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any Confidential Information, without the prior written authorization of the Company.

                    (c)     Notwithstanding the foregoing, the term Confidential Information shall not include information (i) generally known to the public or the trade other than as a result of Executive’s breach of this covenant or any breach of other confidentiality obligations by third parties, (ii) made legitimately available to Executive by a third party without breach of any confidentiality obligation, (iii) the release of which is deemed by the Board to be in the best interest of the Company, or (iv) the disclosure of which is required by applicable law; provided that Executive shall give prompt written notice to the Company of such legal requirement, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similar treatment.

                    (d)     Notwithstanding anything herein to the contrary, any party to this Agreement (and any employee, representative, or other agent of any party to this Agreement) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. However, any such information relating to the tax treatment or tax structure is required to be kept confidential to the extent necessary to comply with any applicable federal or state securities laws.

                    (e)     Upon termination of Executive’s employment with the Company for any reason, Executive shall (i) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company or its affiliates, (ii) immediately destroy, delete, or return to the Company, at the Company’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executive’s possession or control (including any of the foregoing stored or located in Executive’s office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or otherwise relate to the business of the Company or its affiliates, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information, and (iii) notify and fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information of which Executive is or becomes aware.

        5.3     Non-Disparagement. Executive agrees that Executive will not disparage the Company or its affiliates, or its or their current or former officers, directors, and employees in any way; further, Executive will not make or solicit any comments, statements, or the like to the media or to others that would be considered derogatory or detrimental to the good name or business reputation of any of the aforementioned entities or individuals; provided, that this Section does not prohibit statements which Executive is required to make under oath or which are otherwise required by law, provided that such statements are truthful and made in a professional manner.

        5.4     Acknowledgment of Reasonable Covenants. It is expressly understood and agreed that Executive and the Company consider the restrictions and covenants contained herein to be reasonable and enforceable, because, among other things, (a) Executive will be receiving compensation under this Agreement or otherwise, (b) there are many other areas in which, and companies for which, Executive could work in view of Executive’s background, (c) the restrictions and covenants set forth herein do not impose any undue hardship on Executive, (d) the Company would not have entered into this Agreement but for the restrictions and covenants of Executive contained herein, and (e) the restrictions and covenants contained herein have been made in order to induce the Company to enter into this Agreement.

        5.5     Modification of the Restrictive Covenants. If, at the time of enforcement of the restrictive covenants set forth herein, a final judicial determination is made by a court or arbiter of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

ARTICLE VI
MISCELLANEOUS

        6.1     Survival. Sections 4.1 through 4.8 inclusive (as applicable to the relevant circumstance of termination only), 5.1 through 5.5 inclusive and 6.1 through 6.14 inclusive shall survive and continue in full force in accordance with their terms notwithstanding any termination of Executive’s employment hereunder or termination of the Initial Employment Period or the Employment Period.

        6.2     Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally, mailed by certified or registered mail, return receipt requested and postage prepaid, or sent via a nationally recognized overnight courier, or sent via facsimile to the recipient. Such notices, demands and other communications shall be sent to the address indicated below:

To the Company:

Express Scripts, Inc.

13900 Riverport Drive

Maryland Heights, MO 63403

Attention: Chief Executive Officer

To Executive:

Ms. Agnes Rey-Giraud

XXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXX

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.

        6.3     Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

        6.4     Complete Agreement. This Agreement constitutes the complete agreement and understanding between the parties regarding the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by and between the parties, written or oral; provided, however, this Agreement shall not supersede or modify the terms of the Nondisclosure and Noncompetition Agreement, and the Options and Restricted Stock shall be subject to the applicable option and restricted stock notices or agreements. The applicable provisions of this Agreement amend the terms and provisions of the Express Scripts, Inc. 2000 Long-Term Incentive Plan to the extent addressed by this Agreement, as the same may have been amended prior to the date hereof, with respect to awards covered by this Agreement and made to Executive hereunder.

        6.5     Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

        6.6     Successors and Assigns. Except as otherwise provided herein, all covenants and agreements contained in this Agreement shall bind and inure to the benefit of and be enforceable by the Company and its respective successors and assigns. Except as otherwise specifically provided herein, this Agreement, including the obligations and benefits hereunder, may not be assigned to any party by Executive.

        6.7     No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied to this Agreement.

        6.8     Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

        6.9     Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Missouri, without regard to conflicts of laws principles thereof; provided, however, that issues related to the Incentive Plan or any grants thereunder shall be resolved in accordance with the laws of the State of Delaware.

        6.10     Specific Performance. The Company shall be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorneys’ fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The Executive agrees and acknowledges that money damages are an inadequate remedy for any breach of the provisions of this Agreement, including, without limitation, Sections 5.1 through 5.3 hereof, and that the Company shall be entitled to apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. Further, Executive acknowledges that the forfeiture provision set forth in the termination provisions hereof shall not be construed to limit or otherwise affect the Company’s right to seek legal or equitable remedies it may otherwise have, or the amount damages for which it may seek recovery, resulting from breach of this Agreement.

        6.11     Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive.

        6.12     Tax Indemnification.

                    (a)     Notwithstanding anything to the contrary herein (or any other agreement entered into by and between Executive and the Company or any incentive arrangement or plan offered by the Company), in the event that any amount or benefit paid or distributed to Executive pursuant to this Agreement, taken together with any amounts or benefits otherwise paid or distributed to Executive by the Company or any of its subsidiaries (collectively, the “Covered Payments”), would constitute an “excess parachute payment” as defined in Section 280G of the Code, and would thereby subject Executive to an Excise Tax, the provisions of this Section 6.12 shall apply.

                    (b)     If the aggregate present value (as determined for purposes of Section 280G of the Code) of the Covered Payments exceeds the amount which can be paid to Executive without Executive incurring an Excise Tax, but is less than 125% of such amount, then the amounts payable to Executive under this Agreement (or any other agreement by and between Executive and the Company or pursuant to any incentive arrangement or plan offered by the Company) may, in the discretion of the Company, be reduced (but not below zero) to the maximum amount which may be paid hereunder without Executive becoming subject to the Excise Tax (such reduced payments to be referred to as the “Payment Cap”). In the event Executive receives reduced payments and benefits as a result of application of this Section 6.12, Executive shall have the right to designate which of the payments and benefits otherwise set forth herein (or any other agreement between Executive and the Company or any incentive arrangement or plan offered by the Company) will be received in connection with the application of the Payment Cap.

                    (c)     If the aggregate present value of all Covered Payments is equal to or exceeds 125% of the amount which can be paid to Executive without Executive incurring an Excise Tax, Executive shall be entitled to receive an additional amount (the “Tax Reimbursement Payment”) such that the net amount retained by Executive with respect to such Covered Payments, after deduction of any Excise Tax on the Covered Payments and any federal, state and local income tax and Excise Tax on the Tax Reimbursement Payment provided for by this Section 6.12, but before deduction for any federal, state or local income or employment tax withholding on such Covered Payments, shall be equal to the amount of the Covered Payments. Such additional amount may be paid by the Company directly to the applicable taxing authority.

                    (d)     Immediately upon a Change in Control, the Company shall notify Executive of any modification or reduction as a result of the application of this Section 6.12. In the event Executive and the Company disagree as to the application of this Section 6.12, the Company shall select a law firm or accounting firm from among those regularly consulted (during the twelve-month period immediately prior to the Change in Control that resulted in the characterization of the Covered Payments as parachute payments) by the Company, and such law firm or accounting firm shall determine, at the Company’s expense, the amount to which Executive shall be entitled hereunder (and pursuant to any other agreements, incentive arrangements or plans), taking into consideration the application of this Section 6.12, and such determination shall be final and binding upon Executive and the Company.

        6.13     Executive Representation. Executive hereby represents to the Company that the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound.

        6.14     Cooperation. Each party shall provide reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executive’s employment hereunder.

_________________

        IN WITNESS WHEREOF, the parties hereto have executed this Executive Employment Agreement as of the date first above written.

THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

EXPRESS SCRIPTS, INC.

By: /s/ Barrett Toan                                                  

Name: Barrett Toan

Title: Chairman and Chief Executive Officer

EXECUTIVE

/s/ Agnes Rey-Giraud                                                

Name: Agnes Rey-Giraud

Title: Senior Vice President, Research and Program Management

EXHIBIT A

GENERAL RELEASE AND ACKNOWLEDGMENT

        THIS GENERAL RELEASE AND ACKNOWLEDGMENT (the “General Release”) is made this ___ day of ________, ___________, by Agnes Rey-Giraud (the “Executive”) in favor of Express Scripts, Inc. (the “Company”) pursuant to Section 4.2(c)(ii) of the Executive’s Employment Agreement dated _______________, 2004 (the “Agreement”). Unless otherwise defined herein, capitalized terms appearing herein shall have the meanings given to them in the Agreement.

        1.     General Release of Claims. The Executive, for and on behalf of the Executive and the Executive’s heirs, beneficiaries, executors, administrators, successors, assigns, and anyone claiming through or under any of the foregoing, hereby agrees to, and does, release and forever discharge the Company, and its agents, officers, employees, successors and assigns, from any and all matters, claims, demands, damages, causes of action, debts, liabilities, controversies, judgments and suits of every kind and nature whatsoever, foreseen or unforeseen, known or unknown, arising out of or relating to any matter whatsoever, including, without limitation, the Executive’s termination from employment with the Company, matters arising from the offer and acceptance of the Agreement, matters relating to employment references or lack thereof from the Company, and those claims described in paragraph 3 hereof.

        2.     Agreement Not to File Suit. Except as otherwise expressly permitted in paragraph 3 hereof, the Executive, for and on behalf of the Executive and the Executive’s beneficiaries, executors, administrators, successors, assigns, and anyone claiming through or under any of the foregoing, agrees that he or she will not file or otherwise submit any charge, claim, complaint, or action to any agency, court, organization, or judicial forum (nor will the Executive permit any person, group of persons, or organization to take such action on the Executive’s behalf) against the Company arising out of any actions or non-actions on the part of the Company prior to or as of the date hereof arising out of or relating to any matter whatsoever. The Executive further agrees that in the event that any person or entity should bring such a charge, claim, complaint, or action on the Executive’s behalf, the Executive hereby waives and forfeits any right to recovery under said claim and will exercise every good faith effort (but will not be obliged to incur any expense) to have such claim dismissed.

        3.     Claims Covered. The charges, claims, complaints, matters, demands, damages, and causes of action referenced in paragraphs 1 and 2 above include, but are not limited to:

                    (a)     any breach of an actual or implied contract of employment between the Executive and the Company;

                    (b)     any claim of unjust, wrongful, or tortious discharge (including any claim of fraud, negligence, retaliation for whistleblowing, or intentional infliction of emotional distress);

                    (c)     any claim of defamation or other common-law action;

                    (d)     any claims of violations arising under the Civil Rights Act of 1964, as amended, 42 U.S.C.ss.2000e et seq., the Age Discrimination in Employment Act, 29 U.S.C.ss.621 et seq. (only with respect to claims regarding acts of discrimination arising prior to the execution of this General Release), the Americans with Disabilities Act of 1990, 42 U.S.C.ss.12101 et seq., the Fair Labor Standards Act of 1938, as amended, 29 U.S.C.ss.201 et seq., the Rehabilitation Act of 1973, as amended, 29 U.S.C.ss.701 et seq., the Missouri Human Rights Act,ss.213.000 R.S.Mo. et seq., or any other relevant federal, state, or local statutes or ordinances; provided, however, that for purposes of the Age Discrimination in Employment Act only, this General Release does not affect the rights and responsibilities of the Equal Employment Opportunity Commission (the “EEOC”) to enforce the Age Discrimination in Employment Act, nor does this General Release prohibit the Executive from filing a charge or complaint under the Age Discrimination in Employment Act with the EEOC or participating in any investigation or proceeding conducted by the EEOC;

                    (e)     any claims for salary, bonus pay, vacation pay, severance pay or welfare benefits, other than those payments and benefits specifically provided in the Agreement; and

                    (f)     any other matter whatsoever, whether related or unrelated to employment matters.

        4.     Claims Excluded. Notwithstanding anything else herein to the contrary, this General Release shall not:

                    (a)     apply to the obligations of the Company described in Sections 3.4, 3.5, and Article IV of the Agreement; or

                    (b)     affect, alter or extinguish any vested rights that the Executive may have with respect to any benefits, rights or entitlements under the terms of any employee benefit programs of the Company to which the Executive is or will be entitled by virtue of his or her employment with the Company or any of its subsidiaries, and nothing in this General Release will prohibit or be deemed to restrict the Executive from enforcing his or her rights to any such benefits, rights or entitlements; or

                    (c)     limit the Executive’s right to indemnification to the extent provided in the Company’s Certificate of Incorporation and/or bylaws.

        5.     Acknowledgments. By signing this General Release, the Executive hereby represents, certifies and acknowledges that the Executive:

                    (a)     has received a copy of the Agreement and this General Release for review and study before executing the Agreement;

                    (b)     has read the Agreement and this General Release carefully before signing this General Release;

                    (c)     has had sufficient opportunity before signing this General Release to ask any questions the Executive has about the Agreement or this General Release and has received satisfactory answers to all such questions;

                    (d)     understands the Executive’s rights and obligations under the Agreement and this General Release;

                    (e)     understands that the Agreement and this General Release are legal documents, and that by signing this General Release the Executive is giving up certain legal rights including but not limited to rights under the Age Discrimination in Employment Act, 29 U.S.C. ss. 621 et seq. and the other matters covered in paragraph 3 hereof;

                    (f)     understands and agrees that the execution of this General Release is a condition precedent, and material inducement to the Company’s provision of payments made to Executive pursuant to Section 3.5, or 4.2 of the Agreement and such payments, subject to the conditions stated therein, constitute sufficient additional consideration in exchange for the Executive’s promises and obligations contained herein;

                    (g)     knowingly and voluntarily agreed to accept the payments described in Section 3.5, or 4.2 of the Agreement, subject to the conditions stated therein, as a full and final compromise, adjustment and settlement of all potential claims herein described;

                    (h)     has been given at least twenty-one (21) days to consider this General Release and that he or she has been advised to consult with an attorney about its terms, and if the Executive has executed this General Release prior to the expiration of the twenty-one (21) day period, that he or she was afforded the opportunity to consider this General Release for twenty-one (21) days before executing it and that the Executive’s execution of this General Release prior to the expiration of such twenty-one (21) day period was his or her free and voluntary act; and

                    (i)     understands that he or she may revoke this General Release within seven (7) days after he or she signs it and that if the Executive does not revoke this General Release within that time, this General Release becomes effective and enforceable by both parties immediately after the expiration of such seven-day period. The Executive also understands that any revocation must be in writing and must be received by the Company no later than the close of business on the seventh day after his or her execution of this General Release. The Executive acknowledges that the Company has given the Executive enough time to consult with his or her family and other advisers and to consider whether he or she should agree to the terms of this General Release.

        6.     Governing Law. The validity, interpretation, construction and performance of this General Release shall be governed by the laws of the State of Missouri, without regard to principles of conflicts of laws.

        7.     Severability. If any provision of this General Release or the application thereof to any person or circumstance shall to any extent be held to be invalid or unenforceable, the remainder of this General Release shall not be affected thereby, and each provision of this General Release shall be valid and enforceable to the fullest extent permitted by law.

        8.     Binding Effect. Executive acknowledges that the terms and provisions of this General Release shall be binding upon the Executive’s heirs, executors, administrators, personal representatives, successors and assigns, and that the terms and provisions of this General Release shall inure to the benefit of the Company’s affiliates, successors, assigns, officers, directors, agents, attorneys and employees.

_________________

THIS GENERAL RELEASE HAS IMPORTANT LEGAL CONSEQUENCES, INCLUDING THE EXECUTIVE’S WAIVER TO PURSUE CERTAIN LEGAL CLAIMS. THE EXECUTIVE IS ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS GENERAL RELEASE.

        IN WITNESS WHEREOF, the undersigned has caused this General Release to be executed and delivered as of the day and year first above set forth.

EXECUTIVE:

______________________________

EX-10

EXECUTIVE EMPLOYMENT AGREEMENT

        This Executive Employment Agreement (the “Agreement”) dated as of October 29, 2004 (the “Effective Date”), by and between Express Scripts, Inc., a Delaware corporation (the “Company”), and Thomas M. Boudreau (“Executive”).

        WHEREAS, Executive is now and has been employed by the Company as Senior Vice President and General Counsel pursuant to the terms of that certain Executive Employment Agreement dated as of March 15, 2001, as amended (the “Prior Agreement”); and

        WHEREAS, the Company and Executive mutually desire to terminate the Employment Period under the Prior Agreement, as defined therein, and to replace the Prior Agreement with this Agreement to provide for the continued employment of Executive on the terms and conditions set forth herein, all effective as of the Effective Date;

        NOW, THEREFORE, in consideration of the premises and the mutual covenants herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

        As used herein, the following terms shall have the following meanings:

        1.1     “Accrued Rights ” has the meaning set forth in Section 4.1.

         1.2     “Annual Base Salary” means the base salary set forth in Section 3.1 hereof.

        1.3     “Annual Bonus” means Executive’s annual bonus granted pursuant to the Annual Bonus Plan, as described in Section 3.2 hereof.

        1.4     “Annual Bonus Plan” means the annual bonus program established for senior executives by the Board of Directors of the Company (the “Board”) or by the Committee, as adopted or amended from time to time.

        1.5     “Bonus Potential” means the maximum bonus amount Executive could receive pursuant to Section 3.2 hereof for achieving 100% of “base” or “targeted” performance goals established by the Board or Committee under the Annual Bonus Plan with respect to the applicable fiscal year; provided, however, in no event shall Executive’s Bonus Potential for the year in which the Bonus Potential is being determined (a) be less than $224,000, or, if greater, 64% of Executive’s Annual Base Salary as in effect on January 1 of such year or (b) take into account, or include in any way, any increase in Executive’s bonus amount due to the Company exceeding its “base” or “target” goals for such year (e.g., if Executive’s “base” or “target” Bonus Potential is stated at $50,000, but Executive is eligible to receive more than $50,000 if certain targets are exceeded then Executive’s Bonus Potential for purposes of this definition is $50,000).

        1.6     "Cause" means:

    (a)        any act or acts by Executive, whether or not in connection with his or her employment by the Company, constituting, or Executive’s conviction or plea of guilty or nolo contendere (no contest) to, (i) a felony under applicable law or (ii) a misdemeanor involving moral turpitude;

    (b)        any act or acts of gross dishonesty or gross misconduct in the performance of Executive’s duties hereunder;

    (c)        any willful malfeasance or willful misconduct by Executive in connection with Executive’s duties hereunder or any act or omission which is materially injurious to the financial condition or business reputation of the Company or its affiliates; or

    (d)        any breach by Executive of the provisions of Sections 5.1 through 5.3 of this Agreement, or of the terms and provisions of the Nondisclosure and Noncompetition Agreement (as defined in Section 1.26 hereof).

                     Notwithstanding the foregoing, the event(s) described in clause (c) of this Section 1.6 shall not be deemed to constitute “Cause” if such event is (i) primarily the result of bad judgment or negligence on the part of Executive not rising to the level of gross negligence; or (ii) primarily because of an act or omission believed by Executive in good faith to have been in, or not opposed to, the interests of the Company and its affiliates.

        1.7     “Change in Control” means a Change in Control as that term is defined in the Incentive Plan (as defined in Section 1.24 hereof).

        1.8     “Change in Control Date” means the Change in Control Date as that term is defined in the Incentive Plan.

        1.9     “Change in Control Period” means the ninety (90) day period commencing on the Change in Control Date.

        1.10     “Change in Control Price” means the value, expressed in dollars, as of the date of receipt of the per share consideration received by the Company’s stockholders whose stock is acquired in a transaction constituting a Change in Control.

        1.11     “Code” means the Internal Revenue Code of 1986, as amended.

        1.12     “Committee” means the Compensation and Development Committee of the Board.

        1.13     “Covered Payments” means the amounts described in Section 6.12(a) hereof.

        1.14     “Deferred Bonus” means the bonus described in Section 3.6 hereof; provided, however, for purposes of determining the total amount of the Deferred Bonus payable upon distribution from the Deferred Compensation Plan, the amount in Section 3.6 hereof will be adjusted to take into account any interest, earnings or other gains accrued thereon and any losses resulting from investment of the Deferred Bonus in the investment selections under the Deferred Compensation Plan.

        1.15     “Deferred Compensation Plan” means the Express Scripts, Inc. Executive Deferred Compensation Plan, as amended from time to time, or any successor plan.

        1.16     “Disability” has the meaning ascribed to such term in the Incentive Plan.

        1.17     “EBITDA” means earnings before interest, taxes, depreciation and amortization.

        1.18     “Effective Date” means the date specified in the recitals to this Agreement.

        1.19     “Employment Period” means the Initial Employment Period (as defined in Section 1.25 hereof) plus any additional Renewal Periods (as defined in Section 1.30 hereof).

        1.20     “EPS” means the earnings per share of the Company.

        1.21     “Excise Tax” means the excise tax imposed by Section 4999 of the Code or any similar state or local tax that may be imposed.

        1.22     “General Release” means the General Release and Acknowledgment attached hereto as Exhibit A.

        1.23     “Good Reason” means the occurrence of any one or more of the following:

      (a)        Any material breach by the Company of any of the provisions of this Agreement or any material failure by the Company to carry out any of its obligations hereunder;

      (b)        The Company’s requiring Executive to be based at any office or location more than 50 miles from 13900 Riverport Drive, Maryland Heights, Missouri (the “Current Headquarters”), except for travel reasonably required in the performance of Executive’s responsibilities to the extent substantially consistent with Executive’s business travel obligations;

      (c)        Any substantial and sustained diminution in Executive’s authority or responsibilities from those described in Section 2.3 hereof; provided, however, notwithstanding the foregoing, (i) in the event a Change in Control shall occur which results in the Company becoming a subsidiary of another pharmacy benefit management company (“PBM”), or which is in the form of a merger in which the surviving corporation or entity is a PBM (x) so long as Executive is offered a position as an officer of the parent PBM (or surviving corporation or entity) with duties and responsibilities which are not inconsistent in any material adverse respect with his or her duties and responsibilities immediately prior to such Change in Control, and such position is based at an office or location not more than 50 miles from the Current Headquarters, such change in position shall not constitute Good Reason, but (y) if Executive is not offered a position as an officer of the parent PBM or surviving corporation or entity as described in (x), a substantial and sustained diminution in Executive’s authority or responsibility shall be deemed to have occurred; or (ii) in the event a Change in Control shall occur which results in the Company becoming a subsidiary of a non-PBM or is in the form of a merger in which the surviving corporation or entity is not a PBM, failure to receive an offer to serve as an officer of the non-PBM parent or surviving corporation or entity shall not constitute Good Reason provided Executive’s duties subsequent to the Change in Control are not inconsistent in any material adverse respect with his or her duties immediately prior to the Change in Control, and such position is based at an office or location not more than 50 miles from the Current Headquarters;

      (d)        The failure by the Company to continue to provide Executive with substantially similar perquisites or benefits Executive enjoyed in the aggregate under the Company’s benefit programs (other than long-term incentive compensation programs), such as any of the Company’s pension, savings, vacation, life insurance, medical, health and accident, or disability plans in which he or she was participating at the time of any such discontinuation (or, alternatively, if such plans are amended, modified or discontinued, substantially similar equivalent benefits thereto in the aggregate), or the taking of any action by the Company which would directly or indirectly cause such benefits to be no longer substantially equivalent in the aggregate to the benefits in effect immediately prior to taking such action; provided, that any amendment, modification or discontinuation of any plans or benefits referred to in this subsection (d) hereof that generally affect substantially all other domestic salaried employees of the Company who were eligible to participate, and participated, in the affected Company benefit program(s) shall not be deemed to constitute Good Reason; and

      (e)        The failure by the Committee to approve the grants of restricted stock or stock options specifically referenced in Sections 3.4 and 3.5 below within ninety (90) days of the Effective Date;

provided that the events described in Section 1.23 (a), (b), (c), (d) or (e) above shall only constitute Good Reason if the Company fails to cure such event within 30 days after receipt from Executive of written notice of the event which constitutes Good Reason; and provided further that, “Good Reason” shall cease to exist for an event on the 120th day following the later of its occurrence or Executive’s knowledge thereof, unless Executive has given the Company written notice thereof prior to such date.

        1.24     “Incentive Plan” means the Express Scripts, Inc. 2000 Long-Term Incentive Plan, as amended from time to time.

        1.25     “Initial Employment Period” has the meaning set forth in Section 2.2 hereof.

        1.26     “Nondisclosure and Noncompetition Agreement” means the Form of Nondisclosure and Noncompetition Agreement entered into by and between Executive and the Company dated as of February 29, 1996.

        1.27     “Option” means the option to purchase the number of shares of the Company’s common stock as set forth in Section 3.4 hereof.

        1.28     “Payment Cap” means the maximum amount described in Section 6.12(b) hereof.

        1.29     “Pro Rata Deferred Bonus” means a pro rata payment of the Deferred Bonus equal to the product of (i) the Deferred Bonus multiplied by (ii) a fraction, the numerator of which is the number of days which have elapsed in the Initial Employment Period through the Termination Date and the denominator of which is the total number of days in the Initial Employment Period. Notwithstanding the foregoing, in the event the termination of Executive’s employment results from Executive’s death, the Pro Rata Deferred Bonus shall be 100% of the Deferred Bonus. As set forth in Section 1.14 hereof, the calculation of the Pro Rata Deferred Bonus shall not include any installments of the Deferred Bonus which either have not already been credited by the Company, or with respect to which the Company’s obligation to credit such installment(s) has not vested.

        1.30     “Renewal Period” has the meaning set forth in Section 2.2 hereof.

        1.31     “Restricted Stock” means shares of the Company’s common stock, $0.01 par value per share, which are issued pursuant to the Incentive Plan and subject to one or more restrictions prescribed by the Board or the by Committee, in the sole discretion of either, as applicable.

        1.32     “Retirement” means the voluntary termination of employment by Executive on or after attaining age 59 1/2 which does not occur during a Change in Control Period.

        1.33     “Retirement Account” means Executive’s Retirement Account (as defined in the Deferred Compensation Plan).

        1.34     “Severance Benefit” means a severance payment in an amount equal to:

      (a)        eighteen (18) months of Executive’s Annual Base Salary as in effect immediately prior to the Termination Date, plus

      (b)        an amount equal to the product of (i) Executive’s Bonus Potential for the year in which the Termination Date occurs (the “Termination Year”), multiplied by (ii) the average percentage of the Bonus Potential earned by the Executive for the three (3) full years immediately preceding the Termination Year, (or such shorter period if Executive was employed by the Company for less than three (3) full years and received, or was eligible to receive, a bonus during such period), which product shall be prorated for the portion of the Termination Year in which Executive was employed by the Company. Notwithstanding anything to the contrary herein, neither the three-year average percentage of Bonus Potential described in (ii) above, nor the percentage for any single year used to compute such three-year average, may exceed 100%.

        1.35     “Tax Reimbursement Payment” means the payment described in Section 6.12(c) hereof.

        1.36     “Termination Date” means the effective date of termination of Executive’s employment as determined in accordance with Section 4.7 hereof.

        1.37     “Welfare Benefit” has the meaning set forth in Section 4.2.

ARTICLE II
TERM/POSITION

        2.1     Employment; Effectiveness of Agreement. Effective as of the Effective Date, the Company hereby employs Executive, and Executive hereby accepts such employment, according to the terms and conditions set forth in this Agreement.

        2.2     Term. Subject to the provisions of Sections 4.1 through 4.7 of this Agreement, the term of Executive’s employment hereunder shall commence on the Effective Date and continue through March 31, 2006 (the “Initial Employment Period”). On April 1st of each year, commencing with April 1, 2006 and on each subsequent April 1st thereafter (each, an “Anniversary Date”), this Agreement shall be extended automatically at such time for an additional twelve (12) month period (each, a “Renewal Period”) unless either party hereto delivers written notice in accordance with Section 6.2 hereof to the other party hereto at least 30 days prior to such Anniversary Date of his, her or its desire not to renew this Agreement for an additional Renewal Period. The Initial Employment Period and any Renewal Periods, if any, shall constitute the “Employment Period” for purposes of this Agreement. If there are no Renewal Periods, then the Employment Period shall have the same meaning as Initial Employment Period. Except as set forth in Section 6.1 hereof, upon termination of Executive’s employment with the Company in accordance with the terms hereof or upon termination of the Initial Employment Period or the Employment Period without extension thereof, this Agreement shall terminate and no longer be of any force or effect.

        2.3     Position and Duties. Executive shall hold the position of Senior Vice President and General Counsel and shall report to, and at all times be subject to the lawful direction of, the Chief Executive Officer or President of the Company (as designated by the Chief Executive Officer of the Company). Additionally, Executive shall serve as a member of the executive staff and participate in the strategic decision-making of the Company from time to time. During the Employment Period, Executive shall devote his or her best efforts and his or her full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business affairs of the Company. Executive shall perform his or her duties and responsibilities to the best of his or her abilities in a diligent, trustworthy, businesslike and efficient manner. Nothing herein shall preclude Executive from, (a) subject to the prior written consent of the Board, serving on any for-profit corporate or governmental board of directors (b) serving on the board of, or working for, any charitable, not-for-profit or community organization, (c) pursuing his or her personal, financial and legal affairs, or (d) pursuing any other activity; provided that Executive shall not engage in any other business, profession, occupation or other activity, for compensation or otherwise, which would violate the provisions of Section 5.1 or would, in each case, and in the aggregate, otherwise conflict or interfere with the performance of Executive’s duties and responsibilities hereunder, either directly or indirectly, without the prior written consent of the Board

ARTICLE III
COMPENSATION AND BENEFITS

        3.1     Annual Base Salary. During the Employment Period, the Company shall pay Executive a base salary (the “Annual Base Salary”) at the annual rate of three hundred fifty thousand Dollars ($350,000), which shall be payable in regular installments in accordance with the Company’s usual payroll practices and shall be subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes. Executive shall be eligible for such merit-based increases in Executive’s Annual Base Salary, if any, as may be determined from time to time in the sole discretion of the Board; provided that any such increase shall not serve to limit or reduce any other obligation to Executive under this Agreement. The term “Annual Base Salary” as used in this Agreement shall refer to the Annual Base Salary as in effect from time to time during the Employment Period. Executive’s Annual Base Salary shall not be reduced after any such increase without Executive’s express written consent.

        The parties agree that the amount of Annual Base Salary shall be deemed effective as of January 1, 2004. In order to account for the retroactive increase in salary, the Company shall, within thirty days of the Effective Date, deliver a one-time payment to Executive in an amount equal to the difference between the salary paid to Executive for the period from January 1, 2004 through the Effective Date and the salary which would have been paid during such period had the Annual Base Salary been in effect. Such payment shall be to deductions for customary withholdings and the Company’s standard payroll policies and procedures.

        3.2     Annual Incentive Compensation. Executive shall be eligible to participate in the Company’s Annual Bonus Plan established for senior executives by the Board or the Committee. The size of Executive’s bonus opportunity, which shall be no less than the Bonus Potential, and the terms of Executive’s participation in the Annual Bonus Plan, shall be determined based on the terms and conditions of the Annual Bonus Plan, subject to adjustment as described therein. Executive’s Annual Bonus shall be based upon performance of Executive, Executive’s department, and/or the Company in relation to the financial and non-financial objectives to be established by the Board or by the Committee, at the sole discretion of either, as applicable, pursuant to the terms of the Annual Bonus Plan. Executive’s Annual Bonus shall be subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes. Subject to the achievement or failure to achieve the relevant financial and non-financial objectives under the Annual Bonus Plan, Executive may receive, for any given year, from 0% to 200% of Executive’s Bonus Potential (or such higher percentage as may be achievable pursuant to the terms of the Annual Bonus Plan), as further set forth in the Annual Bonus Plan.

        3.3     Participation in Benefit and Incentive Plans. During the Employment Period, Executive shall be entitled to participate in the Company’s employee benefit plans (other than bonus and incentive plans) as in effect from time to time, on the same basis as those benefits are generally made available to similarly situated senior executives of the Company. The payments provided in Article III hereof are in addition to benefits which Executive is entitled to receive pursuant to the terms of any pension plan or group hospitalization, health, dental care, disability insurance, death benefit, travel and/or accident insurance, or executive compensation plan or arrangement, including, without limitation, the Incentive Plan and the Deferred Compensation Plan.

        3.4     Stock Options.

    (a)        Executive will receive a non-qualified option to purchase nine thousand, six hundred and fifty-five (9,655) shares of the Company’s common stock (the “Performance-Based Option”), subject to approval by the Committee and to the terms and conditions of this Agreement, the applicable option agreement or notice and the Incentive Plan, with a purchase price equal to the Fair Market Value (as defined in the Incentive Plan) of the Company’s common stock on the date of grant subject to adjustment pursuant to the terms of the Incentive Plan (the “Exercise Price”). The Performance-Based Option shall vest on December 31, 2010 (subject to acceleration as set forth in Section 3.4(b) below), provided Executive is still employed by the Company on such date and subject to such other vesting terms as may be provided in the Incentive Plan and the applicable option agreement or notice. The Performance-Based Option shall expire seven (7) years from the date of grant, subject to earlier expiration following Executive’s termination of employment as may be provided in the Incentive Plan and the applicable option agreement or notice.

    (b)        Notwithstanding the foregoing, the vesting of the Performance-Based Option may be accelerated if certain financial targets and other conditions are met in accordance with vesting provisions adopted by the Board or the Committee and set forth in the applicable option agreement or notice, subject to the terms of the Incentive Plan and the applicable option agreement or notice.

    (c)        Notwithstanding the standard provisions of the Incentive Plan, (i) the Performance-Based Option shall not vest or otherwise become exercisable solely as a result of either Executive’s Retirement hereunder or Executive’s “Retirement” under the Incentive Plan (as such term is defined therein) and (ii) Executive shall be entitled to exercise any portion of the Option which has become vested and exercisable as of the Termination Date until the expiration of the seven-year option term unless (A) Executive’s employment is terminated by the Company for Cause, or (B) Executive’s employment is terminated by the Executive other than for Good Reason and prior to April 1, 2007, in which event (i.e. the occurrence either of the events in (A) or (B)) the standard provisions of the Incentive Plan shall apply.

        3.5     Restricted Stock.

    (a)        Executive will receive Seven Thousand Two Hundred Twenty-Six (7,226) shares of Restricted Stock, subject to approval by the Committee and to the terms and conditions of this Agreement, the applicable restricted stock agreement and the Incentive Plan. For the purposes hereof, Six Thousand Twenty (6,020) shares of the above-described Restricted Stock shall be referred to as the “Target Shares.”

    (b)        Notwithstanding the standard provisions in the Incentive Plan, the Restricted Stock awarded pursuant to Section 3.5(a) hereof shall vest or be forfeited in accordance with the following:

    (i)      If Executive remains in the employ of the Company until the seventh anniversary of the date the Restricted Stock is granted by the Committee (the “Restricted Stock Vesting Date”), Executive shall become fully vested in the Restricted Stock subject to this Agreement. Unless either Section 3.5(b)(ii) or 3.5(b)(iii) shall apply, if Executive’s employment is terminated prior to the Restricted Stock Vesting Date, all shares of Restricted Stock awarded pursuant to Section 3.5(a) hereof shall be forfeited without payment of consideration by the Company.

    (ii)      Notwithstanding the foregoing, the vesting of the Restricted Stock may be accelerated if certain financial targets and other conditions are met in accordance with in accordance with vesting provisions adopted by the Board or the Committee and set forth in the applicable restricted stock agreement.

    (iii)      To the extent the Restricted Stock awarded pursuant to Section 3.5(a) hereof does not otherwise vest pursuant to Section 3.5(b)(ii), if, prior to the Restricted Stock Vesting Date, either Executive terminates employment on account of death, Disability or for Good Reason, or Executive is terminated by the Company on account of Disability or other than for Cause, Executive shall become vested in a portion of the unvested Restricted Stock awarded pursuant to Section 3.5(a) hereof equal to the product of (x) the Target Shares, multiplied by (y) a fraction, the numerator of which is the number of days which have elapsed in the Initial Employment Period through the Termination Date and the denominator of which is the total number of days in the Initial Employment Period; provided, however, that, notwithstanding such formula, in the event such termination is on account of Executive’s death, the product of (x) and (y) above shall be deemed to be the full amount of the Target Shares. Shares of Restricted Stock awarded pursuant to Section 3.5(a) hereof which have not otherwise vested pursuant to either Section 3.5(b)(ii) hereof or the preceding sentence of this Section 3.5(b)(iii) shall be forfeited without payment of consideration by the Company.

    (c)        Notwithstanding the standard provisions of the Incentive Plan, the Restricted Stock shall not vest or otherwise become exercisable solely as a result of either Executive’s Retirement hereunder or Executive’s “Retirement” under the Incentive Plan (as such term is defined therein).

        3.6     Deferred Bonus.

    (a)        In addition to any other bonus or deferred compensation benefit described in Article III hereof, or to which Executive is otherwise entitled pursuant to another plan or arrangement with the Company, the Company agrees to credit four hundred thousand dollars ($400,000) (the “Deferred Bonus”) to Executive’s Retirement Account as deferred compensation under the Deferred Compensation Plan, subject to the terms and conditions hereof. The Deferred Bonus shall be credited in two equal installments of two hundred thousand dollars ($200,000) each as follows: (i) the first installment shall be credited as soon as practicable following the Effective Date, and (ii), the second installment shall be credited on January 1, 2005; provided, that in the event Executive’s employment with the Company is terminated for any reason prior to January 1, 2005, the Company shall have no obligation to credit the second installment of the Deferred Bonus and Executive shall have no rights with respect to such second installment.

    (b)        Notwithstanding anything to the contrary in the Deferred Compensation Plan, in the event Executive’s employment with the Company is terminated prior to expiration of the Initial Employment Period, Executive shall forfeit all of the Deferred Bonus, without payment of consideration by the Company, except as otherwise provided in Section 3.6(e) hereof. In the event a distribution is otherwise made from Executive’s Retirement Account pursuant to the rules set forth in the Deferred Compensation Plan prior to expiration of the Initial Employment Period, no portion of the Retirement Account traceable to the Deferred Bonus shall be eligible for distribution from the Retirement Account at such time, except as otherwise provided in Section 3.6(e).

    (c)        Subject to Section 3.6(f) hereof, provided Executive remains in the employ of the Company until expiration of the Initial Employment Period, Executive shall be entitled to receive a distribution of the Deferred Bonus after expiration of the Employment Period at the time and in the manner provided under the Deferred Compensation Plan.

    (d)        If, prior to March 31, 2006, either Executive terminates employment on account of Retirement, death, Disability or for Good Reason, or Executive is terminated by the Company on account of Disability or other than for Cause, Executive shall be entitled to receive a Pro Rata Deferred Bonus; provided, however, Executive shall be entitled to receive the Pro Rata Deferred Bonus only if he or she is not otherwise entitled to receive the entire Deferred Bonus pursuant to Section 3.4(e) hereof as of the Termination Date. Notwithstanding the foregoing, Executive agrees that payment of any Pro Rata Deferred Bonus is contingent upon the terms of Section 4.2(c) hereof. Payment of the Pro Rata Deferred Bonus is subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes.

    (e)        Subject to Section 3.6(f) hereof, Executive shall obtain a vested right to receive the Deferred Bonus upon a Change in Control as follows:

    (i)        If the Change in Control occurs prior to expiration of the Initial Employment Period and Executive remains in the employ of the Company through the end of the Change in Control Period, Executive shall obtain a vested right to receive one-half of the Deferred Bonus, with the remaining one-half otherwise eligible for vesting pursuant to the terms set forth in Sections 3.6(b), 3.6(c) and 3.6(e) hereof.

    (ii)        If the Change in Control occurs prior to expiration of the Initial Employment Period and Executive is terminated by the Company other than for Cause or Disability, or Executive terminates for Good Reason, either during the ninety (90) day period immediately preceding the Change in Control Date (provided such Change in Control was public knowledge as of the Termination Date) or at any time after the occurrence of such Change in Control but prior to the expiration of the Initial Employment Period, Executive shall obtain a vested right to receive the entire Deferred Bonus.

    (iii)        If the Initial Employment Period expires during the Change in Control Period (i.e., March 31, 2006 falls within the Change in Control Period), Executive shall obtain a vested right to receive the entire Deferred Bonus on such expiration date regardless of whether Executive remains in the employ of the Company after such date pursuant to the terms of this Agreement or otherwise.

Any portion of the Deferred Bonus to which Executive becomes entitled to receive pursuant to this Section 3.6(e) shall be payable at the time and in the manner provided under the Deferred Compensation Plan.

    (f)        As a condition to entitlement to the Deferred Bonus pursuant to Section 3.6(c) or 3.6(e) hereof, Executive shall be required to honor, in accordance with their terms, the provisions of Sections 5.1, 5.2 and 5.3 hereof (and the terms and provisions of the General Release and the Nondisclosure and Noncompetition Agreement). In the event Executive fails to honor any such provision, payments of the Deferred Bonus, and any accrued interest, earnings or other gains thereon, to which Executive may otherwise have been entitled pursuant to Section 3.6(c) or 3.6(e) hereof shall immediately cease and Executive shall immediately forfeit all right, title and interest in and to any remaining Deferred Bonus and Executive shall promptly pay to the Company any and all Deferred Bonus amounts which have already been paid, allocated or provided by the Company to Executive.

        3.7     Signing Bonus. In exchange for his execution of this Agreement, Executive shall be entitled to receive a signing bonus in the amount of one hundred thousand dollars ($100,000) payable in two equal installments of fifty thousand dollars ($50,000) each as follows: (i) the first installment shall be paid as soon as practicable following the Effective Date, and (ii), the second installment shall vest as of January 1, 2005 and shall be paid as part of the Company’s first, regular payroll cycle following January 1, 2005; provided, that in the event Executive’s employment with the Company is terminated for any reason prior to January 1, 2005, the Company shall have no obligation to pay the second installment of the signing bonus and Executive shall have no rights with respect to such second installment. Each installment of Executive’s signing bonus shall be subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes.

        3.8     Business Expenses. During the Employment Period, Executive shall be reimbursed for all reasonable expenses incurred by him in performing his or her duties hereunder provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company.

        3.9     Perquisites. During the Employment Period, Executive shall be entitled to receive such perquisites and fringe benefits which similarly situated executives of the Company are entitled to receive and such other perquisites which are suitable to the character of Executive’s position with the Company and adequate for the performance of Executive’s duties hereunder.

ARTICLE IV
TERMINATION OF EMPLOYMENT

        4.1     Termination by the Company for Cause; Termination by Executive Other Than for Good Reason or Retirement. If the Employment Period and Executive’s employment under this Agreement is terminated by the Company for Cause or by Executive other than for Good Reason or Retirement, prior to the scheduled expiration of the Employment Period, Executive shall be entitled to receive:

    (a)        The Annual Base Salary through the Termination Date;

    (b)        Any Annual Bonus earned for a previously completed fiscal year, but unpaid as of the Termination Date;

    (c)        Reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the Termination Date; and

    (d)        Such employee benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company, including rights with respect to the Performance-Based Option and the Restricted Stock subject to the terms and conditions of Sections 3.4 and 3.5 hereof and of the Incentive Plan and the applicable option or agreement or notice, if relevant (the amounts described in clauses (a) through (d) hereof being referred to as the “Accrued Rights”).

Following such termination of Executive’s employment hereunder pursuant to this Section 4.1, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.2     Termination by the Company Other Than for Cause or Disability; Termination by Executive for Good Reason.

    (a)        If the Employment Period and Executive’s employment under this Agreement is terminated by the Company prior to the scheduled expiration of the Employment Period other than for Cause or Disability, or Executive terminates his or her employment prior to the end of the Employment Period for Good Reason, Executive shall be entitled to receive:

    (i)        The Accrued Rights;

    (ii)        A Severance Benefit pursuant to the terms and conditions set forth below, and the Company will reimburse the Executive for Executive’s cost of continuing medical insurance under COBRA (the “Welfare Benefit”) for eighteen (18) months; and

    (iii)        If the termination of employment occurs during the Initial Employment Period, any Pro Rata Deferred Bonus which Executive is eligible to receive pursuant to Section 3.6 hereof.

    (b)        The Company shall pay the Severance Benefit, without interest thereon, in eighteen (18) substantially equal monthly installments, which installments shall be payable on the first day of each month, with the first installment payable in the first full month commencing fifteen (15) days after the Termination Date. Payment of the Severance Benefit is subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes. Executive shall not be under any duty to mitigate damages in order to be eligible to receive the Severance Benefit.

    (c)        Notwithstanding the foregoing and the terms of Sections 3.5(b)(iii) and 3.6(d), Executive agrees that payment of the Severance Benefit, the Pro Rata Deferred Bonus and the delivery of any portion of the Restricted Stock under Section 3.5(b)(iii) is contingent upon the following:

    (i)        In the event of breach by Executive of Sections 5.1 through 5.3 hereof (or any breach of any agreements in the General Release or in the Nondisclosure and Noncompetition Agreement), Executive shall reimburse the Company for all compensation or other amounts previously paid, allocated, accrued, delivered or provided by the Company to Executive pursuant to Section 3.5(b)(ii), 3.6(d) or 4.2 (a) (ii or iii)hereof and the Company shall be entitled to discontinue the future payment, delivery, allocation, accrual or provision of the Severance Benefit, the Welfare Benefit, the Pro Rata Deferred Bonus (if any) and any Restricted Stock.

    (ii)        No later than thirty (30) days after the Termination Date, Executive must execute and deliver a General Release in the form attached hereto as Exhibit A.

Following such termination of Executive’s employment hereunder pursuant to this Section 4.2, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.3     Termination upon Death. If the Employment Period and Executive’s employment under this Agreement are terminated due to Executive’s death prior to the scheduled expiration of the Employment Period, Executive’s estate will receive:

    (a)        The Accrued Rights; and

    (b)        If the termination of employment occurs during the Initial Employment Period, any Pro Rata Deferred Bonus which Executive is entitled to receive pursuant to Section 3.6 hereof and/or any portion of the Restricted Stock which has vested in accordance with Section 3.5.

Following such termination of Executive’s employment hereunder pursuant to this Section 4.3, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.4     Termination for Disability. If the Employment Period and Executive’s employment under this Agreement is terminated by the Company or by Executive due to Executive’s Disability prior to the scheduled expiration of the Employment Period, then Executive will receive:

    (a)        The Accrued Rights; and

    (b)        If the termination of employment occurs during the Initial Employment Period, any Pro Rata Deferred Bonus which Executive is entitled to receive pursuant to Section 3.6 hereof and/or any portion of the Restricted Stock which has vested in accordance with Section 3.5.

Following such termination of Executive’s employment hereunder pursuant to this Section 4.4, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.5     Termination by Executive on Account of Retirement. If the Employment Period and Executive’s employment under this Agreement is terminated by Executive prior to the scheduled expiration of the Employment Period on account of Retirement, Executive shall be entitled to receive:

    (a)        The Accrued Rights; and

    (b)        If the termination of employment occurs during the Initial Employment Period, any Pro Rata Deferred Bonus which Executive is entitled to receive pursuant to Section 3.6 hereof.

        Following such termination of Executive’s employment hereunder pursuant to this Section 4.5, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

      4.6     Expiration of the Employment Period.

    (a)        In the event either party elects not to extend the Employment Period pursuant to Section 2.2, unless Executive’s employment is earlier terminated pursuant to Sections 4.1 through 4.5 of this Article IV, Executive’s term of employment hereunder (whether or not Executive continues as an employee of the Company thereafter) shall be deemed to close on the close of business on the day immediately preceding the next scheduled Anniversary Date and Executive shall be entitled to receive the Accrued Rights.

    (b)        Unless the parties otherwise agree in writing executed subsequent to the Effective Date, continuation of Executive’s employment with the Company beyond the expiration of the Employment Period shall be deemed an employment at-will and, subject only to Section 6.1, shall not be deemed to extend any of the provisions of this Agreement and Executive’s employment may thereafter be terminated at will by either Executive or the Company.

Following such termination of Executive’s employment hereunder pursuant to this Section 4.6, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.7     Notice of Termination. For purposes of this Agreement, any purported termination of Executive’s employment by the Company or by Executive, shall be communicated by written “Notice of Termination” to the other party hereto in accordance with Section 6.2 hereof. Any Notice of Termination shall set forth (a) the effective date of termination (for purposes of determining Executive’s entitlement to benefits hereunder), which shall not be less than fifteen (15) days after the date the Notice of Termination is delivered (the “Termination Date”); (b) the specific provision in this Agreement relied upon; and (c) in reasonable detail, the facts and circumstances claimed to provide a basis for such termination. If the Company terminates Executive’s employment pursuant to Section 4.2 or 4.4 hereof, the Termination Date shall be the date upon which the Company notifies Executive of such termination. If Executive terminates employment pursuant to Section 4.1, 4.3, 4.4, 4.5 or 4.6 hereof, the Termination Date shall be Executive’s last full day of work prior to such termination. Notwithstanding the foregoing, if within fifteen (15) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a good faith dispute exists concerning the termination, the “Termination Date” for purposes of determining the Executive’s entitlement to benefits under this Agreement shall be the date on which the dispute is finally determined by an independent arbitrator selected by the American Arbitration Association.

        4.8     Board/Committee Resignation. Upon termination of Executive’s employment for any reason, Executive agrees to resign, as of the Termination Date and to the extent applicable, from the Board (and any committees thereof) and the Board of Directors (and any committees thereof) of any of the Company’s affiliates.

ARTICLE V
RESTRICTIVE COVENANTS

For the purposes of this Article V, all references to the Company shall include the Company and its affiliates.

      5.1     Non-Solicitation and Non-Competition.

    (a)        Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and its affiliates and accordingly agrees as follows:

    (i)        During the period of Executive’s employment with the Company and, for a period of two (2) years after termination of Executive’s employment (the “Nonsolicit Period”), Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (“Person”), directly or indirectly solicit or assist in soliciting in competition with the Company, the business of any client or prospective client:

    (1)        with whom Executive had personal contact or dealings on behalf of the Company during the one (1) year period preceding Executive’s termination of employment;

    (2)        with whom employees reporting to Executive have had personal contact or dealings on behalf of the Company during the one (1) year immediately preceding the Executive’s termination of employment; or

    (3)        for whom Executive had direct or indirect responsibility during the one (1) year immediately preceding Executive’s termination of employment.

    (ii)        During the Nonsolicit Period, Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any Person, directly or indirectly:

    (1)        solicit or encourage any employee of the Company or its affiliates to leave the employment of the Company or its affiliates; or

    (2)        hire any such employee who was employed by the Company or its affiliates as of the date of Executive’s termination of employment with the Company or who left the employment of the Company or its affiliates coincident with, or within one year prior to or after, the termination of Executive’s employment with the Company.

    (iii)        During the Nonsolicit Period, Executive will not, directly or indirectly, solicit, or encourage to cease to work with the Company or its affiliates, any consultant then under contract with the Company or its affiliates.

    (iv)        During the period of Executive’s employment with the Company and, for a period of one (1) year after termination of Executive’s employment, if Executive remains in the employ of the Company at least until the expiration of the Employment Period, or for a period of eighteen (18) months after termination of Executive’s employment, if Executive’s employment is terminated (either by Executive or by the Company for any reason whatsoever) prior to the expiration of the Employment Period (the “Noncompete Period”), Executive will not directly or indirectly:

    (1)        engage in any business that is, or will be, engaged wholly or primarily in the business of manufacturing, purchasing, selling or supplying in the United States any product or service manufactured, purchased, sold, supplied or provided by the Company or its affiliates, and which is or will be directly in competition with the business of the Company or its affiliates (including, without limitation, businesses which the Company or its affiliates have specific plans to conduct in the future and as to which Executive is aware of such planning) in the United States (a “Competitive Business”);

    (2)        enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in a Competitive Business;

    (3)        acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or

    (4)        interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its affiliates and customers, clients, suppliers, partners, members or investors of the Company or its affiliates.

    (v)        Notwithstanding anything to the contrary herein, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in the business of the Company or its affiliates which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such Person and (ii) does not, directly or indirectly, own 5% or more of any class of securities of such Person.

      5.2     Confidentiality.

    (a)        Executive acknowledges that the identity of the clients and customers of the Company, the prices, terms and conditions at, or upon which, the Company sells its products or provides its services and other non-public, proprietary or confidential information relating to the business, financial and other affairs of the Company (including, without limitation, any idea, product, trade secret, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property; creative or conceptual business or marketing plan, strategy or other material developed for the Company by Executive; or information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals — concerning the past, current or future business, activities and operations of the Company or its affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis) (hereinafter collectively referred to as “Confidential Information”) are valuable, special unique assets of the Company and that such Confidential Information, if disclosed to others, may result in loss of business or other irreparable and consequential damage to the Company.

    (b)        Executive shall hold in fiduciary capacity, for the benefit of the Company, all Confidential Information and shall not, at any time during the Employment Period or thereafter (i) retain or use for the benefit, purposes or account of Executive of any other Person, or (ii) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any Confidential Information, without the prior written authorization of the Company.

    (c)        Notwithstanding the foregoing, the term Confidential Information shall not include information (i) generally known to the public or the trade other than as a result of Executive’s breach of this covenant or any breach of other confidentiality obligations by third parties, (ii) made legitimately available to Executive by a third party without breach of any confidentiality obligation, (iii) the release of which is deemed by the Board to be in the best interest of the Company, or (iv) the disclosure of which is required by applicable law; provided that Executive shall give prompt written notice to the Company of such legal requirement, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similar treatment.

    (d)        Notwithstanding anything herein to the contrary, any party to this Agreement (and any employee, representative, or other agent of any party to this Agreement) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. However, any such information relating to the tax treatment or tax structure is required to be kept confidential to the extent necessary to comply with any applicable federal or state securities laws.

    (e)        Upon termination of Executive’s employment with the Company for any reason, Executive shall (i) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company or its affiliates, (ii) immediately destroy, delete, or return to the Company, at the Company’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executive’s possession or control (including any of the foregoing stored or located in Executive’s office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or otherwise relate to the business of the Company or its affiliates, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information, and (iii) notify and fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information of which Executive is or becomes aware.

        5.3     Non-Disparagement. Executive agrees that Executive will not disparage the Company or its affiliates, or its or their current or former officers, directors, and employees in any way; further, Executive will not make or solicit any comments, statements, or the like to the media or to others that would be considered derogatory or detrimental to the good name or business reputation of any of the aforementioned entities or individuals; provided, that this Section does not prohibit statements which Executive is required to make under oath or which are otherwise required by law, provided that such statements are truthful and made in a professional manner; further provided that this Section does not prohibit Executive from making statements which would otherwise be in violation of this Section, provided such statements are made by Executive in response to public statements made by the Company, or its authorized representatives, which are derogatory or detrimental to the good name or business reputation of the Executive.

        5.4     Acknowledgment of Reasonable Covenants. It is expressly understood and agreed that Executive and the Company consider the restrictions and covenants contained herein to be reasonable and enforceable, because, among other things, (a) Executive will be receiving compensation under this Agreement or otherwise, (b) there are many other areas in which, and companies for which, Executive could work in view of Executive’s background, (c) the restrictions and covenants set forth herein do not impose any undue hardship on Executive, (d) the Company would not have entered into this Agreement but for the restrictions and covenants of Executive contained herein, and (e) the restrictions and covenants contained herein have been made in order to induce the Company to enter into this Agreement.

        5.5     Modification of the Restrictive Covenants. If, at the time of enforcement of the restrictive covenants set forth herein, a final judicial determination is made by a court or arbiter of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

ARTICLE VI
MISCELLANEOUS

        6.1     Survival. Sections 4.1 through 4.8 inclusive (as applicable to the relevant circumstance of termination only), 5.1 through 5.5 inclusive and 6.1 through 6.14 inclusive shall survive and continue in full force in accordance with their terms notwithstanding any termination of Executive’s employment hereunder or termination of the Initial Employment Period or the Employment Period.

        6.2     Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally, mailed by certified or registered mail, return receipt requested and postage prepaid, or sent via a nationally recognized overnight courier, or sent via facsimile to the recipient. Such notices, demands and other communications shall be sent to the address indicated below:

To the Company:

Express Scripts, Inc.

13900 Riverport Drive

Maryland Heights, MO 63403

Attention: Chief Executive Officer

To Executive:

Mr. Thomas M. Boudreau

XXXXXXXXXXXX

XXXXXXXXXXXX

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.

        6.3     Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

        6.4     Complete Agreement. This Agreement constitutes the complete agreement and understanding between the parties regarding the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by and between the parties, written or oral; provided, however, this Agreement shall not supersede or modify the terms of the Nondisclosure and Noncompetition Agreement, and the Options and Restricted Stock shall be subject to the applicable option and restricted stock notices or agreements. The applicable provisions of this Agreement amend the terms and provisions of the Express Scripts, Inc. 2000 Long-Term Incentive Plan to the extent addressed by this Agreement, as the same may have been amended prior to the date hereof, with respect to awards covered by this Agreement and made to Executive hereunder.

        6.5     Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

        6.6     Successors and Assigns. Except as otherwise provided herein, all covenants and agreements contained in this Agreement shall bind and inure to the benefit of and be enforceable by the Company and its respective successors and assigns. Except as otherwise specifically provided herein, this Agreement, including the obligations and benefits hereunder, may not be assigned to any party by Executive.

        6.7     No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied to this Agreement.

        6.8     Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

        6.9     Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Missouri, without regard to conflicts of laws principles thereof; provided, however, that issues related to the Incentive Plan or any grants thereunder shall be resolved in accordance with the laws of the State of Delaware.

        6.10     Specific Performance. The Company shall be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorneys’ fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The Executive agrees and acknowledges that money damages are an inadequate remedy for any breach of the provisions of this Agreement, including, without limitation, Sections 5.1 through 5.3 hereof, and that the Company shall be entitled to apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. Further, Executive acknowledges that the forfeiture provision set forth in the termination provisions hereof shall not be construed to limit or otherwise affect the Company’s right to seek legal or equitable remedies it may otherwise have, or the amount damages for which it may seek recovery, resulting from breach of this Agreement.

      6.11     Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive.

      6.12     Tax Indemnification.

    (a)        Notwithstanding anything to the contrary herein (or any other agreement entered into by and between Executive and the Company or any incentive arrangement or plan offered by the Company), in the event that any amount or benefit paid or distributed to Executive pursuant to this Agreement, taken together with any amounts or benefits otherwise paid or distributed to Executive by the Company or any of its subsidiaries (collectively, the “Covered Payments”), would constitute an “excess parachute payment” as defined in Section 280G of the Code, and would thereby subject Executive to an Excise Tax, the provisions of this Section 6.12 shall apply.

    (b)        If the aggregate present value (as determined for purposes of Section 280G of the Code) of the Covered Payments exceeds the amount which can be paid to Executive without Executive incurring an Excise Tax, but is less than 125% of such amount, then the amounts payable to Executive under this Agreement (or any other agreement by and between Executive and the Company or pursuant to any incentive arrangement or plan offered by the Company) may, in the discretion of the Company, be reduced (but not below zero) to the maximum amount which may be paid hereunder without Executive becoming subject to the Excise Tax (such reduced payments to be referred to as the “Payment Cap”). In the event Executive receives reduced payments and benefits as a result of application of this Section 6.12, Executive shall have the right to designate which of the payments and benefits otherwise set forth herein (or any other agreement between Executive and the Company or any incentive arrangement or plan offered by the Company) will be received in connection with the application of the Payment Cap.

    (c)        If the aggregate present value of all Covered Payments is equal to or exceeds 125% of the amount which can be paid to Executive without Executive incurring an Excise Tax, Executive shall be entitled to receive an additional amount (the “Tax Reimbursement Payment”) such that the net amount retained by Executive with respect to such Covered Payments, after deduction of any Excise Tax on the Covered Payments and any federal, state and local income tax and Excise Tax on the Tax Reimbursement Payment provided for by this Section 6.12, but before deduction for any federal, state or local income or employment tax withholding on such Covered Payments, shall be equal to the amount of the Covered Payments. Such additional amount may be paid by the Company directly to the applicable taxing authority.

    (d)        Immediately upon a Change in Control, the Company shall notify Executive of any modification or reduction as a result of the application of this Section 6.12. In the event Executive and the Company disagree as to the application of this Section 6.12, the Company shall select a law firm or accounting firm from among those regularly consulted (during the twelve-month period immediately prior to the Change in Control that resulted in the characterization of the Covered Payments as parachute payments) by the Company, and such law firm or accounting firm shall determine, at the Company’s expense, the amount to which Executive shall be entitled hereunder (and pursuant to any other agreements, incentive arrangements or plans), taking into consideration the application of this Section 6.12, and such determination shall be final and binding upon Executive and the Company.

        6.13     Executive Representation. Executive hereby represents to the Company that the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound.

        6.14     Cooperation. Each party shall provide reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executive’s employment hereunder.

_________________

        IN WITNESS WHEREOF, the parties hereto have executed this Executive Employment Agreement as of the date first above written.

THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

EXPRESS SCRIPTS, INC.

By: /s/ Barrett Toan                                                       

Name: Barrett Toan

Title: Chairman and Chief Executive Officer

EXECUTIVE

By: /s/ Thomas M.Boudreau                                         

Name: Thomas M. Boudreau

Title: Senior Vice President and General Counsel

EXHIBIT A

GENERAL RELEASE AND ACKNOWLEDGMENT

        THIS GENERAL RELEASE AND ACKNOWLEDGMENT (the “General Release”) is made this ___ day of ________, ___________, by Thomas M. Boudreau (the “Executive”) in favor of Express Scripts, Inc. (the “Company”) pursuant to Section 4.2(c)(ii) of the Executive’s Employment Agreement dated ______________, 2004 (the “Agreement”). Unless otherwise defined herein, capitalized terms appearing herein shall have the meanings given to them in the Agreement.

    1.        General Release of Claims. The Executive, for and on behalf of the Executive and the Executive’s heirs, beneficiaries, executors, administrators, successors, assigns, and anyone claiming through or under any of the foregoing, hereby agrees to, and does, release and forever discharge the Company, and its agents, officers, employees, successors and assigns, from any and all matters, claims, demands, damages, causes of action, debts, liabilities, controversies, judgments and suits of every kind and nature whatsoever, foreseen or unforeseen, known or unknown, arising out of or relating to any matter whatsoever, including, without limitation, the Executive’s termination from employment with the Company, matters arising from the offer and acceptance of the Agreement, matters relating to employment references or lack thereof from the Company, and those claims described in paragraph 3 hereof.

    2.        Agreement Not to File Suit. Except as otherwise expressly permitted in paragraph 3 hereof, the Executive, for and on behalf of the Executive and the Executive’s beneficiaries, executors, administrators, successors, assigns, and anyone claiming through or under any of the foregoing, agrees that he or she will not file or otherwise submit any charge, claim, complaint, or action to any agency, court, organization, or judicial forum (nor will the Executive permit any person, group of persons, or organization to take such action on the Executive’s behalf) against the Company arising out of any actions or non-actions on the part of the Company prior to or as of the date hereof arising out of or relating to any matter whatsoever. The Executive further agrees that in the event that any person or entity should bring such a charge, claim, complaint, or action on the Executive’s behalf, the Executive hereby waives and forfeits any right to recovery under said claim and will exercise every good faith effort (but will not be obliged to incur any expense) to have such claim dismissed.

    3.        Claims Covered. The charges, claims, complaints, matters, demands, damages, and causes of action referenced in paragraphs 1 and 2 above include, but are not limited to:

    (a)        any breach of an actual or implied contract of employment between the Executive and the Company;

    (b)        any claim of unjust, wrongful, or tortious discharge (including any claim of fraud, negligence, retaliation for whistleblowing, or intentional infliction of emotional distress);

    (c)        any claim of defamation or other common-law action;

    (d)        any claims of violations arising under the Civil Rights Act of 1964, as amended, 42 U.S.C.ss.2000e et seq., the Age Discrimination in Employment Act, 29 U.S.C.ss.621 et seq. (only with respect to claims regarding acts of discrimination arising prior to the execution of this General Release), the Americans with Disabilities Act of 1990, 42 U.S.C.ss.12101 et seq., the Fair Labor Standards Act of 1938, as amended, 29 U.S.C.ss.201 et seq., the Rehabilitation Act of 1973, as amended, 29 U.S.C.ss.701 et seq., the Missouri Human Rights Act,ss.213.000 R.S.Mo. et seq., or any other relevant federal, state, or local statutes or ordinances; provided, however, that for purposes of the Age Discrimination in Employment Act only, this General Release does not affect the rights and responsibilities of the Equal Employment Opportunity Commission (the “EEOC”) to enforce the Age Discrimination in Employment Act, nor does this General Release prohibit the Executive from filing a charge or complaint under the Age Discrimination in Employment Act with the EEOC or participating in any investigation or proceeding conducted by the EEOC;

    (e)        any claims for salary, bonus pay, vacation pay, severance pay or welfare benefits, other than those payments and benefits specifically provided in the Agreement; and

    (f)        any other matter whatsoever, whether related or unrelated to employment matters.

    4.        Claims Excluded. Notwithstanding anything else herein to the contrary, this General Release shall not:

    (a)        apply to the obligations of the Company described in Sections 3.4, 3.5, 3.6 and Article IV of the Agreement; or

    (b)        affect, alter or extinguish any vested rights that the Executive may have with respect to any benefits, rights or entitlements under the terms of any employee benefit programs of the Company to which the Executive is or will be entitled by virtue of his or her employment with the Company or any of its subsidiaries, and nothing in this General Release will prohibit or be deemed to restrict the Executive from enforcing his or her rights to any such benefits, rights or entitlements; or

    (c)        limit the Executive’s right to indemnification to the extent provided in the Company’s Certificate of Incorporation and/or bylaws.

    5.        Acknowledgments. By signing this General Release, the Executive hereby represents, certifies and acknowledges that the Executive:

    (a)        has received a copy of the Agreement and this General Release for review and study before executing the Agreement;

    (b)        has read the Agreement and this General Release carefully before signing this General Release;

    (c)        has had sufficient opportunity before signing this General Release to ask any questions the Executive has about the Agreement or this General Release and has received satisfactory answers to all such questions;

    (d)        understands the Executive’s rights and obligations under the Agreement and this General Release;

    (e)        understands that the Agreement and this General Release are legal documents, and that by signing this General Release the Executive is giving up certain legal rights including but not limited to rights under the Age Discrimination in Employment Act, 29 U.S.C. ss. 621 et seq. and the other matters covered in paragraph 3 hereof;

    (f)        understands and agrees that the execution of this General Release is a condition precedent, and material inducement to the Company’s provision of payments made to Executive pursuant to Section 3.5, 3.6 or 4.2 of the Agreement and such payments, subject to the conditions stated therein, constitute sufficient additional consideration in exchange for the Executive’s promises and obligations contained herein;

    (g)        knowingly and voluntarily agreed to accept the payments described in Section 3.5, 3.6 or 4.2 of the Agreement, subject to the conditions stated therein, as a full and final compromise, adjustment and settlement of all potential claims herein described;

    (h)        has been given at least twenty-one (21) days to consider this General Release and that he or she has been advised to consult with an attorney about its terms, and if the Executive has executed this General Release prior to the expiration of the twenty-one (21) day period, that he or she was afforded the opportunity to consider this General Release for twenty-one (21) days before executing it and that the Executive’s execution of this General Release prior to the expiration of such twenty-one (21) day period was his or her free and voluntary act; and

    (i)        understands that he or she may revoke this General Release within seven (7) days after he or she signs it and that if the Executive does not revoke this General Release within that time, this General Release becomes effective and enforceable by both parties immediately after the expiration of such seven-day period. The Executive also understands that any revocation must be in writing and must be received by the Company no later than the close of business on the seventh day after his or her execution of this General Release. The Executive acknowledges that the Company has given the Executive enough time to consult with his or her family and other advisers and to consider whether he or she should agree to the terms of this General Release.

    6.        Governing Law. The validity, interpretation, construction and performance of this General Release shall be governed by the laws of the State of Missouri, without regard to principles of conflicts of laws.

    7.        Severability. If any provision of this General Release or the application thereof to any person or circumstance shall to any extent be held to be invalid or unenforceable, the remainder of this General Release shall not be affected thereby, and each provision of this General Release shall be valid and enforceable to the fullest extent permitted by law.

    8.        Binding Effect. Executive acknowledges that the terms and provisions of this General Release shall be binding upon the Executive’s heirs, executors, administrators, personal representatives, successors and assigns, and that the terms and provisions of this General Release shall inure to the benefit of the Company’s affiliates, successors, assigns, officers, directors, agents, attorneys and employees.

_________________

THIS GENERAL RELEASE HAS IMPORTANT LEGAL CONSEQUENCES, INCLUDING THE EXECUTIVE’S WAIVER TO PURSUE CERTAIN LEGAL CLAIMS. THE EXECUTIVE IS ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS GENERAL RELEASE.

        IN WITNESS WHEREOF, the undersigned has caused this General Release to be executed and delivered as of the day and year first above set forth.

EXECUTIVE:

EX-10

EXECUTIVE EMPLOYMENT AGREEMENT

        This Executive Employment Agreement (the “Agreement”) dated as of October 29, 2004 and effective as of April, 2004(the “Effective Date”), by and between Express Scripts, Inc., a Delaware corporation (the “Company”), and Edward B. Ignaczak (“Executive”).

        WHEREAS, Executive is now and has been employed by the Company as Senior Vice President, Sales and Account Management; and

        WHEREAS, the Company and Executive mutually desire to provide for the continued employment of Executive on the terms and conditions set forth herein;

        NOW, THEREFORE, in consideration of the premises and the mutual covenants herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

      As used herein, the following terms shall have the following meanings:

        1.1     “Annual Base Salary”means the base salary set forth in Section 3.1 hereof.

        1.2     “Annual Bonus” means Executive’s annual bonus granted pursuant to the Annual Bonus Plan, as described in Section 3.2 hereof.

        1.3     “Annual Bonus Plan” means the annual bonus program established for senior executives by the Board of Directors of the Company (the “Board”) or by the Committee, as adopted or amended from time to time.

        1.4     “Bonus Potential” means the maximum bonus amount Executive could receive pursuant to Section 3.2 hereof for achieving 100% of “base” or “targeted” performance goals established by the Board or Committee under the Annual Bonus Plan with respect to the applicable fiscal year; provided, however, in no event shall Executive’s Bonus Potential for the year in which the Bonus Potential is being determined (a) be less than 50% of Executive’s Annual Base Salary as in effect on January 1 of such year, or (b) take into account, or include in any way, any increase in Executive’s bonus amount due to the Company exceeding its “base” or “target” goals for such year (e.g., if Executive’s “base” or “target” Bonus Potential is stated at $50,000, but Executive is eligible to receive more than $50,000 if certain targets are exceeded then Executive’s Bonus Potential for purposes of this definition is $50,000).

        1.5     “Cause ” means:

                   (a)     any act or acts by Executive, whether or not in connection with his employment by the Company, constituting, or Executive’s conviction or plea of guilty or nolo contendere (no contest) to, (i) a felony under applicable law or (ii) a misdemeanor involving moral turpitude;

                   (b)      any act or acts of gross dishonesty or gross misconduct in the performance of Executive’s duties hereunder;

                   (c)      any willful malfeasance or willful misconduct by Executive in connection with Executive’s duties hereunder or any act or omission which is injurious to the financial condition or business reputation of the Company or its affiliates; or

                   (d)      any breach by Executive of the provisions of Sections 5.1 through 5.3 of this Agreement, or of the terms and provisions of the Nondisclosure and Noncompetition Agreement (as defined in Section 1.24 hereof).

                   Notwithstanding the foregoing, the event(s) described in clause (c) of this Section 1.5 shall not be deemed to constitute “Cause” if such event is (i) solely as the result of bad judgment or negligence on the part of Executive not rising to the level of gross negligence; or (ii) solely because of an act or omission believed by Executive in good faith to have been in, or not opposed to, the interests of the Company and its affiliates.

        1.6     “Change in Control” means a Change in Control as that term is defined in the Incentive Plan (as defined in Section 1.22 hereof).

        1.7     “Change in Control Date” means the Change in Control Date as that term is defined in the Incentive Plan.

        1.8     “Change in Control Period” means the ninety (90) day period commencing on the Change in Control Date.

        1.9     “Change in Control Price” means the value, expressed in dollars, as of the date of receipt of the per share consideration received by the Company’s stockholders whose stock is acquired in a transaction constituting a Change in Control.

        1.10     “Code” means the Internal Revenue Code of 1986, as amended.

        1.11     “Committee” means the Compensation and Development Committee of the Board.

        1.12     “Covered Payments” means the amounts described in Section 6.12(a) hereof.

        1.13     “Deferred Compensation Plan” means the Express Scripts, Inc. Executive Deferred Compensation Plan, as amended from time to time, or any successor plan.

        1.14     “Disability” has the meaning ascribed to such term in the Incentive Plan.

        1.15     “EBITDA” means earnings before interest, taxes, depreciation and amortization.

        1.16     “Effective Date” means the date specified in the recitals to this Agreement.

        1.17     “Employment Period” means the Initial Employment Period (as defined in Section 1.23 hereof) plus any additional Renewal Periods (as defined in Section 1.27 hereof).

        1.18     “EPS” means the earnings per share of the Company.

        1.19     “Excise Tax” means the excise tax imposed by Section 4999 of the Code or any similar state or local tax that may be imposed.

        1.20     “General Release” means the General Release and Acknowledgment attached hereto as Exhibit A.

        1.21     “Good Reason” means the occurrence of any one or more of the following:

                    (a)     Any material breach by the Company of any of the provisions of this Agreement or any material failure by the Company to carry out any of its obligations hereunder;

                    (b)     The Company’s requiring Executive to be based at any office or location more than 50 miles from 13900 Riverport Drive, Maryland Heights, Missouri (the “Current Headquarters”), except for travel reasonably required in the performance of Executive’s responsibilities to the extent substantially consistent with Executive’s business travel obligations;

                    (c)     Any substantial and sustained diminution in Executive’s authority or responsibilities from those described in Section 2.3 hereof; provided, however, notwithstanding the foregoing, (i) in the event a Change in Control shall occur which results in the Company becoming a subsidiary of another pharmacy benefit management company (“PBM”), or which is in the form of a merger in which the surviving corporation or entity is a PBM (x) so long as Executive is offered a position as an officer of the parent PBM (or surviving corporation or entity) with duties and responsibilities which are not inconsistent in any material adverse respect with his or her duties and responsibilities immediately prior to such Change in Control, and such position is based at an office or location not more than 50 miles from the Current Headquarters, such change in position shall not constitute Good Reason, but (y) if Executive is not offered a position as an officer of the parent PBM or surviving corporation or entity as described in (x), a substantial and sustained dimunition in Executive’s authority or responsibility shall be deemed to have occurred; or (ii) in the event a Change in Control shall occur which results in the Company becoming a subsidiary of a non-PBM or is in the form of a merger in which the surviving corporation or entity is not a PBM, failure to receive an offer to serve as an officer of the non-PBM parent or surviving corporation or entity shall not constitute Good Reason provided Executive’s duties subsequent to the Change in Control are not inconsistent in any material adverse respect with his or her duties immediately prior to the Change in Control, and such position is based at an office or location not more than 50 miles from the Current Headquarters;

                    (d)     The failure by the Company to continue to provide Executive with substantially similar perquisites or benefits Executive enjoyed in the aggregate under the Company’s benefit programs (other than long-term incentive compensation programs), such as any of the Company’s pension, savings, vacation, life insurance, medical, health and accident, or disability plans in which he or she was participating at the time of any such discontinuation (or, alternatively, if such plans are amended, modified or discontinued, substantially similar equivalent benefits thereto in the aggregate), or the taking of any action by the Company which would directly or indirectly cause such benefits to be no longer substantially equivalent in the aggregate to the benefits in effect immediately prior to taking such action; provided, that any amendment, modification or discontinuation of any plans or benefits referred to in this subsection (d) hereof that generally affect substantially all other domestic salaried employees of the Company who were eligible to participate, and participated, in the affected Company benefit program(s) shall not be deemed to constitute Good Reason; and

Provided that the events described in Section 1.21 (a), (b), (c) or (d) above shall only constitute Good Reason if the Company fails to cure such event within 30 days after receipt from Executive of written notice of the event which constitutes Good Reason; and provided further that, “Good Reason” shall cease to exist for an event on the 60th day following the later of its occurrence or Executive’s knowledge thereof, unless Executive has given the Company written notice thereof prior to such date.

         1.22    “Incentive Plan” means the Express Scripts, Inc. 2000 Long-Term Incentive Plan, as amended from time to time.

         1.23    “Initial Employment Period” has the meaning set forth in Section 2.2 hereof.

         1.24    “Nondisclosure and Noncompetition Agreement” means the Form of Nondisclosure and Noncompetition Agreement entered into by and between Executive and the Company dated as of September 11, 2002.

        1.25     “Options” means the options to purchase the number of shares of the Company’s common stock as set forth in Section 3.4 hereof.

        1.26     “Payment Cap” means the maximum amount described in Section 6.12(b) hereof

        1.27     “Renewal Period” has the meaning set forth in Section 2.2 hereof.

        1.28     “Restricted Stock” means shares of the Company’s common stock, $0.01 par value per share, which are issued pursuant to the Incentive Plan and subject to one or more restrictions prescribed by the Board or the by Committee, in the sole discretion of either, as applicable.

        1.29     “Retirement” means the voluntary termination of employment by Executive on or after attaining age 59 1/2 which does not occur during a Change in Control Period.

        1.30     “Severance Benefit” means a severance payment in an amount equal to:

        (a)   eighteen (18) months of Executive’s Annual Base Salary as in effect immediately prior to the Termination Date, plus

        (b)   an amount equal to the product of (i) Executive’s Bonus Potential for the year in which the Termination Date occurs (the “Termination Year”), multiplied by (ii) the average percentage of the Bonus Potential earned by the Executive for the three (3) full years immediately preceding the Termination Year, (or such shorter period if Executive was employed by the Company for less than three (3) full years and received, or was eligible to receive, a bonus during such period), which product shall be prorated for the portion of the Termination Year in which Executive was employed by the Company. Notwithstanding anything to the contrary herein, neither the three-year average percentage of Bonus Potential described in (ii) above, nor the percentage for any single year used to compute such three-year average, may exceed 100%.

        1.31     “Tax Reimbursement Payment” means the payment described in Section 6.12(c) hereof.

        1.32     “Termination Date” means the effective date of termination of Executive’s employment as determined in accordance with Section 4.7 hereof.

ARTICLE II
TERM/POSITION

        2.1     Employment; Effectiveness of Agreement. Effective as of the Effective Date, the Company hereby employs Executive, and Executive hereby accepts such employment, according to the terms and conditions set forth in this Agreement.

        2.2     Term. Subject to the provisions of Sections 4.1 through 4.7 of this Agreement, the term of Executive’s employment hereunder shall commence on the Effective Date and continue through March 31, 2007 (the “Initial Employment Period”). On April 1st of each year, commencing with April 1, 2007 and on each subsequent April 1st thereafter (each, an “Anniversary Date”), this Agreement shall be extended automatically at such time for an additional twelve (12) month period (each, a “Renewal Period”) unless either party hereto delivers written notice in accordance with Section 6.2 hereof to the other party hereto at least 180 days prior to such Anniversary Date of his, her or its desire not to renew this Agreement for an additional Renewal Period. The Initial Employment Period and any Renewal Periods, if any, shall constitute the “Employment Period” for purposes of this Agreement. If there are no Renewal Periods, then the Employment Period shall have the same meaning as Initial Employment Period. Except as set forth in Section 6.1 hereof, upon termination of Executive’s employment with the Company in accordance with the terms hereof or upon termination of the Initial Employment Period or the Employment Period without extension thereof, this Agreement shall terminate and no longer be of any force or effect

        2.3     Position and Duties. Executive shall hold the position of Senior Vice President, Sales and Account Management and shall report to, and at all times be subject to the lawful direction of, the Chief Executive Officer, President, or Chief Operating Officer of the Company (as designated by the Chief Executive Officer of the Company). Additionally, Executive shall serve as a member of the executive staff and participate in the strategic decision-making of the Company from time to time. If requested, Executive shall also serve as a member of the Board without additional compensation. During the Employment Period, Executive shall devote his or her best efforts and his or her full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business affairs of the Company. Executive shall perform his or her duties and responsibilities to the best of his or her abilities in a diligent, trustworthy, businesslike and efficient manner. Nothing herein shall preclude Executive from, subject to the prior written consent of the Board, (a) serving on any corporate or governmental board of directors (b) serving on the board of, or working for, any charitable, not-for-profit or community organization, (c) pursuing his or her personal, financial and legal affairs, or (d) pursuing any other activity; provided that Executive shall not engage in any other business, profession, occupation or other activity, for compensation or otherwise, which would violate the provisions of Section 5.1 or would, in each case, and in the aggregate, otherwise conflict or interfere with the performance of Executive’s duties and responsibilities hereunder, either directly or indirectly, without the prior written consent of the Board

ARTICLE III
COMPENSATION AND BENEFITS

        3.1     Annual Base Salary. During the Employment Period, the Company shall pay Executive a base salary (the “Annual Base Salary”) at the annual rate of two hundred seventy-five thousand dollars ($275,000), which shall be payable in regular installments in accordance with the Company’s usual payroll practices and shall be subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes. Executive shall be eligible for such merit-based increases in Executive’s Annual Base Salary, if any, as may be determined from time to time in the sole discretion of the Board; provided that any such increase shall not serve to limit or reduce any other obligation to Executive under this Agreement. The term “Annual Base Salary” as used in this Agreement shall refer to the Annual Base Salary as in effect from time to time during the Employment Period. Executive’s Annual Base Salary shall not be reduced after any such increase without Executive’s express written consent.

        3.2     Annual Incentive Compensation. Executive shall be eligible to participate in the Company’s Annual Bonus Plan established for senior executives by the Board or the Committee. The size of Executive’s bonus opportunity, which shall be no less than the Bonus Potential, and the terms of Executive’s participation in the Annual Bonus Plan, shall be determined based on the terms and conditions of the Annual Bonus Plan, subject to adjustment as described therein. Executive’s Annual Bonus shall be based upon performance of Executive, Executive’s department, and/or the Company in relation to the financial and non-financial objectives to be established by the Board or by the Committee, at the sole discretion of either, as applicable, pursuant to the terms of the Annual Bonus Plan. Executive’s Annual Bonus shall be subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes. Subject to the achievement or failure to achieve the relevant financial and non-financial objectives under the Annual Bonus Plan, Executive may receive, for any given year, from 0% to 200% of Executive's Bonus Potential (or such higher percentage as may be achievable pursuant to the terms of the Annual Bonus Plan), as further set forth in the Annual Bonus Plan.

        3.3     Participation in Benefit and Incentive Plans. During the Employment Period, Executive shall be entitled to participate in the Company’s employee benefit plans (other than bonus and incentive plans) as in effect from time to time, on the same basis as those benefits are generally made available to similarly situated senior executives of the Company. The payments provided in Article III hereof are in addition to benefits which Executive is entitled to receive pursuant to the terms of any pension plan or group hospitalization, health, dental care, disability insurance, death benefit, travel and/or accident insurance, or executive compensation plan or arrangement, including, without limitation, the Incentive Plan and the Deferred Compensation Plan.

        3.4     Stock Options.

                    (a)     Executive will receive a non-qualified option to purchase eight thousand, seven hundred and seventy-seven (8,777) shares of the Company’s common stock (the “Performance-Based Option”), subject to approval by the Committee and to the terms and conditions of this Agreement, the applicable option agreement or notice and the Incentive Plan, with a purchase price equal to the Fair Markeet Value (as defined in the Incentive Plan) of the Company's common stock on the date of grant subject to adjustment pursuant to the terms of the Incentive Plan. The Performance-Based Option shall vest on December 31, 2010 (subject to acceleration as set forth in Section 3.4(b) below), provided Executive is still employed by the Company on such date and subject to such other vesting terms as may be provided in the Incentive Plan and the applicable option agreement or notice. The Performance-Based Option shall expire seven (7) years from the date of grant, subject to earlier expiration following Executive’s termination of employment as may be provided in the Incentive Plan and the applicable option agreement or notice.

                    (b)     Notwithstanding the foregoing, the vesting of the Performance-Based Option may be accelerated if certain financial targets and other conditions are met in accordance with vesting provisions adopted by the Board or the Committee and set forth in the applicable option agreement or notice, subject to the terms of the Incentive Plan and the applicable option agreement or notice.

                    (c)     Notwithstanding the standard provisions of the Incentive Plan, the Performance-Based Option shall not vest or otherwise become exercisable solely as a result of either Executive’s Retirement hereunder or Executive’s “Retirement” under the Incentive Plan (as such term is defined therein).

        3.5     Restricted Stock.

                    (a)     Executive will receive Ten Thousand Five Hundred Seventy Three (10,573) shares of Restricted Stock, subject to approval by the Committee and to the terms and conditions of this Agreement, the applicable restricted stock agreement and the Incentive Plan. For the purposes hereof, Four Thousand Twenty-Four (4,024) shares of the above-described Restricted Stock shall be referred to as the "Target Shares."

                    (b)     Notwithstanding the standard provisions in the Incentive Plan, the Restricted Stock awarded pursuant to Section 3.5(a) hereof shall vest or be forfeited in accordance with the following:

                                (i)     If Executive remains in the employ of the Company until the tenth anniversary of the date the Restricted Stock is granted by the Committee (the “Restricted Stock Vesting Date”), Executive shall become fully vested in the Restricted Stock subject to this Agreement. Unless either Section 3.5(b)(ii) or 3.5(b)(iii) shall apply, if Executive’s employment is terminated prior to the Restricted Stock Vesting Date, all shares of Restricted Stock awarded pursuant to Section 3.5(a) hereof shall be forfeited without payment of consideration by the Company.

                                (ii)     Notwithstanding the foregoing, the vesting of the Restricted Stock may be accelerated if certain financial targets and other conditions are met in accordance with vesting provisions adopted by the Board or the Committee and set forth in the applicable restricted stock agreement.

                                (iii)     To the extent the Restricted Stock awarded pursuant to Section 3.5(a) hereof does not otherwise vest pursuant to Section 3.5 (b)(ii), if, prior to the Restricted Stock Vesting Date, either Executive terminates employment on account of Retirement, death, Disability or for Good Reason, or Executive is terminated by the Company on account of Disability or other than for Cause, Executive shall become vested in a portion of the unvested Restricted Stock awarded pursuant to Section 3.5(a) hereof equal to the product of (x) the Target Shares, multiplied by (y) a fraction, the numerator of which is the number of days which have elapsed in the Initial Employment Period through the Termination Date and the denominator of which is the total number of days in the Initial Employment Period; provided, however, that notwithstanding such formula, in the event such termination is on account of Executive's death, the product of (x) and (y) above shall be deemed to be the full amount of the Target Shares.   Shares of Restricted Stock awarded pursuant to Section 3.5 (a) hereof which have not otherwise vested pursuant to either Section 3.5(b)(ii) hereof or the preceding sentence of this Section 3.5(b)(iii) shall be forfeited without payment of consideration by the Company.

        3.6     Business Expenses. During the Employment Period, Executive shall be reimbursed for all reasonable expenses incurred by him in performing his or her duties hereunder provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company.

        3.7     Perquisites. During the Employment Period, Executive shall be entitled to receive such perquisites and fringe benefits which similarly situated executives of the Company are entitled to receive and such other perquisites which are suitable to the character of Executive’s position with the Company and adequate for the performance of Executive’s duties hereunder.

ARTICLE IV
TERMINATION OF EMPLOYMENT

        4.1     Termination by the Company for Cause; Termination by Executive Other Than for Good Reason or Retirement. If the Employment Period and Executive’s employment under this Agreement is terminated by the Company for Cause or by Executive other than for Good Reason or Retirement, prior to the scheduled expiration of the Employment Period, Executive shall be entitled to receive:

                    (a)     The Annual Base Salary through the Termination Date;

                    (b)     Any Annual Bonus earned for a previously completed fiscal year, but unpaid as of the Termination Date;

                    (c)     Reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the Termination Date; and

                    (d)     Such employee benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company, including rights with respect to the Performance-Based Option and the Restricted Stock subject to the terms and conditions of Sections 3.4 and 3.5 hereof and of the Incentive Plan and the applicable option or restricted stock agreement or notice, if relevant (the amounts described in clauses (a) through (d) hereof being referred to as the “Accrued Rights”).

Following such termination of Executive’s employment hereunder pursuant to this Section 4.1, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.2     Termination by the Company Other Than for Cause or Disability; Termination by Executive for Good Reason.

                    (a)     If the Employment Period and Executive’s employment of under this Agreement is terminated by the Company prior to the scheduled expiration of the Employment Period other than for Cause or Disability, or Executive terminates his employment prior to the end of the Employment Period for Good Reason, Executive shall be entitled to receive:

                                (i)    The Accrued Rights; and

                                (ii)     A Severance Benefit pursuant to the terms and conditions set forth below, and the Company will reimburse the Executive for Executive’s cost of continuing medical insurance under COBRA (the “Welfare Benefit”) for eighteen (18) months.

                    (b)     The Company shall pay the Severance Benefit, without interest thereon, in eighteen (18) substantially equal monthly installments, which installments shall be payable on the first day of each month, with the first installment payable in the first full month commencing fifteen (15) days after the Termination Date. Payment of the Severance Benefit is subject to deductions for customary withholdings, including, without limitation, federal, state and local withholding taxes, social security taxes and Medicare taxes. Executive shall not be under any duty to mitigate damages in order to be eligible to receive the Severance Benefit.

                    (c)     Notwithstanding the foregoing and the terms of Section 3.5(b)(iii), Executive agrees that payment of the Severance Benefit and the delivery of any portion of the Restricted Stock under Section 3.5(b)(iii) is contingent upon the following:

                                (i)     In the event of breach by Executive of Sections 5.1 through 5.3 hereof (or any breach of any agreements in the General Release or in the Nondisclosure and Noncompetition Agreement), Executive shall reimburse the Company for all compensation previously paid, allocated, accrued, delivered or provided by the Company to Executive pursuant to Section 4.2 (a)(ii) or Section 3.5(b)(iii)hereof and the Company shall be entitled to discontinue the future payment, delivery, allocation, accrual or provision of the Severance Benefit, the Welfare Benefit and any Restricted Stock.

                                (ii)     No later than thirty (30) days after the Termination Date, Executive must execute and deliver a General Release in the form attached hereto as Exhibit A.

Following such termination of Executive’s employment hereunder pursuant to this Section 4.2, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.3     Termination upon Death. If the Employment Period and Executive’s employment under this Agreement are terminated due to Executive’s death prior to the scheduled expiration of the Employment Period, Executive will receivethe Accrued Rights and any portion of the Restricted Stock which has vested in accordance with Section 3.5.

        Following such termination of Executive’s employment hereunder pursuant to this Section 4.3, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.4     Termination for Disability. If the Employment Period and Executive’s employment under this Agreement is terminated by the Company or by Executive due to Executive’s Disability prior to the scheduled expiration of the Employment Period, then Executive will receive the Accrued Rights and any portion of the Restricted Stock which has vested in accordance with Section 3.5

        Following such termination of Executive’s employment hereunder pursuant to this Section 4.4, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.5     Termination by Executive on Account of Retirement. If the Employment Period and Executive’s employment under this Agreement is terminated by Executive prior to the scheduled expiration of the Employment Period on account of Retirement, Executive shall be entitled to receive the Accrued Rights and any portion of the Restricted Stock which has vested in accordance with Section 3.5.

        Following such termination of Executive’s employment hereunder pursuant to this Section 4.5, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

      4.6     Expiration of the Employment Period.

                    (a)     In the event either party elects not to extend the Employment Period pursuant to Section 2.2, unless Executive’s employment is earlier terminated pursuant to Sections 4.1 through 4.5 of this Article IV, Executive’s termination of employment hereunder (whether or not Executive continues as an employee of the Company thereafter) shall be deemed to close on the close of business on the day immediately preceding the next scheduled Anniversary Date and Executive shall be entitled to receive the Accrued Rights.

                    (b)     Unless the parties otherwise agree in writing executed subsequent to the Effective Date, continuation of Executive’s employment with the Company beyond the expiration of the Employment Period shall be deemed an employment at-will and, subject only to Section 6.1, shall not be deemed to extend any of the provisions of this Agreement and Executive’s employment may thereafter be terminated at will by either Executive or the Company.

Following such termination of Executive’s employment hereunder pursuant to this Section 4.6, Executive shall have no further rights to any compensation or any other benefits under this Agreement.

        4.7     Notice of Termination. For purposes of this Agreement, any purported termination of Executive’s employment by the Company or by Executive, shall be communicated by written “Notice of Termination” to the other party hereto in accordance with Section 6.2 hereof. Any Notice of Termination shall set forth (a) the effective date of termination (for purposes of determining Executive’s entitlement to benefits hereunder), which shall not be less than fifteen (15) days after the date the Notice of Termination is delivered (the “Termination Date”); (b) the specific provision in this Agreement relied upon; and (c) in reasonable detail, the facts and circumstances claimed to provide a basis for such termination. If the Company terminates Executive's employment pursuant to Section 4.2 or 4.4 hereof, the Termination Date shall be the date upon which the Company notifies Executive of such termination. If Executive terminates employment pursuant to Section 4.1, 4.3, 4.4, 4.5 or 4.6 hereof, the Termination Date shall be Executive's last full day of work prior to such termination. Notwithstanding the foregoing, if within fifteen (15) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a good faith dispute exists concerning the termination, the “Termination Date” for purposes of determining the Executive’s entitlement to benefits under this Agreement shall be the date on which the dispute is finally determined by an independent arbitrator selected by the American Arbitration Association.

        4.8     Board/Committee Resignation. Upon termination of Executive’s employment for any reason, Executive agrees to resign, as of the Termination Date and to the extent applicable, from the Board (and any committees thereof) and the Board of Directors (and any committees thereof) of any of the Company’s affiliates.

ARTICLE V
RESTRICTIVE COVENANTS

For the purposes of this Article V, all references to the Company shall include the Company and its affiliates.

        5.1     Non-Solicitation and Non-Competition.

                    (a)     Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and its affiliates and accordingly agrees as follows:

                               (i)     During the period of Executive’s employment with the Company and, for a period of two (2) years after termination of Executive’s employment (the “Nonsolicit Period”), Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (“Person”), directly or indirectly solicit or assist in soliciting in competition with the Company, the business of any client or prospective client:

(1)        with whom Executive had personal contact or dealings on behalf of the Company during the one (1) year period preceding Executive’s termination of employment;

(2)        with whom employees reporting to Executive have had personal contact or dealings on behalf of the Company during the one (1) year immediately preceding the Executive’s termination of employment; or

(3)        for whom Executive had direct or indirect responsibility during the one (1) year immediately preceding Executive’s termination of employment.

                               (ii)     During the Nonsolicit Period, Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any Person, directly or indirectly:

(1)        solicit or encourage any employee of the Company or its affiliates to leave the employment of the Company or its affiliates; or

(2)        hire any such employee who was employed by the Company or its affiliates as of the date of Executive’s termination of employment with the Company or who left the employment of the Company or its affiliates coincident with, or within one year prior to or after, the termination of Executive’s employment with the Company.

                               (iii)     During the Nonsolicit Period, Executive will not, directly or indirectly, solicit or encourage to cease to work with the Company or its affiliates any consultant then under contract with the Company or its affiliates.

                               (iv)     During the period of Executive’s employment with the Company and, for a period of one (1) year after termination of Executive’s employment, if Executive remains in the employ of the Company at least until the expiration of the Employment Period, or for a period of eighteen (18) months after termination of Executive’s employment, if Executive’s employment is terminated (either by Executive or by the Company for any reason whatsoever) prior to the expiration of the Employment Period (the “Noncompete Period”), Executive will not directly or indirectly:

(1)        engage in any business that is, or will be, engaged wholly or primarily in the business of manufacturing, purchasing, selling or supplying in the United States any product or service manufactured, purchased, sold, supplied or provided by the Company or its affiliates, and which is or will be directly in competition with the business of the Company or its affiliates (including, without limitation, businesses which the Company or its affiliates have specific plans to conduct in the future and as to which Executive is aware of such planning) in the United States (a “Competitive Business”);

(2)        enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in a Competitive Business;

(3)        acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or

(4)         interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its affiliates and customers, clients, suppliers, partners, members or investors of the Company or its affiliates.

                               (v)     Notwithstanding anything to the contrary herein, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in the business of the Company or its affiliates which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such Person and (ii) does not, directly or indirectly, own 5% or more of any class of securities of such Person.

      5.2     Confidentiality.

                    (a)     Executive acknowledges that the identity of the clients and customers of the Company, the prices, terms and conditions at, or upon which, the Company sells its products or provides its services and other non-public, proprietary or confidential information relating to the business, financial and other affairs of the Company (including, without limitation, any idea, product, trade secret, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property; creative or conceptual business or marketing plan, strategy or other material developed for the Company by Executive; or information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals — concerning the past, current or future business, activities and operations of the Company or its affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis) (hereinafter collectively referred to as “Confidential Information”) are valuable, special unique assets of the Company and that such Confidential Information, if disclosed to others, may result in loss of business or other irreparable and consequential damage to the Company.

                    (b)     Executive shall hold in fiduciary capacity, for the benefit of the Company, all Confidential Information and shall not, at any time during the Employment Period or thereafter (i) retain or use for the benefit, purposes or account of Executive of any other Person, or (ii) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any Confidential Information, without the prior written authorization of the Company.

                    (c)     Notwithstanding the foregoing, the term Confidential Information shall not include information (i) generally known to the public or the trade other than as a result of Executive’s breach of this covenant or any breach of other confidentiality obligations by third parties, (ii) made legitimately available to Executive by a third party without breach of any confidentiality obligation, (iii) the release of which is deemed by the Board to be in the best interest of the Company, or (iv) the disclosure of which is required by applicable law; provided that Executive shall give prompt written notice to the Company of such legal requirement, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similar treatment.

                    (d)     Notwithstanding anything herein to the contrary, any party to this Agreement (and any employee, representative, or other agent of any party to this Agreement) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. However, any such information relating to the tax treatment or tax structure is required to be kept confidential to the extent necessary to comply with any applicable federal or state securities laws.

                    (e)     Upon termination of Executive’s employment with the Company for any reason, Executive shall (i) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company or its affiliates, (ii) immediately destroy, delete, or return to the Company, at the Company’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executive’s possession or control (including any of the foregoing stored or located in Executive’s office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or otherwise relate to the business of the Company or its affiliates, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information, and (iii) notify and fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information of which Executive is or becomes aware.

        5.3     Non-Disparagement. Executive agrees that Executive will not disparage the Company or its affiliates, or its or their current or former officers, directors, and employees in any way; further, Executive will not make or solicit any comments, statements, or the like to the media or to others that would be considered derogatory or detrimental to the good name or business reputation of any of the aforementioned entities or individuals; provided, that this Section does not prohibit statements which Executive is required to make under oath or which are otherwise required by law, provided that such statements are truthful and made in a professional manner.

        5.4     Acknowledgment of Reasonable Covenants. It is expressly understood and agreed that Executive and the Company consider the restrictions and covenants contained herein to be reasonable and enforceable, because, among other things, (a) Executive will be receiving compensation under this Agreement or otherwise, (b) there are many other areas in which, and companies for which, Executive could work in view of Executive’s background, (c) the restrictions and covenants set forth herein do not impose any undue hardship on Executive, (d) the Company would not have entered into this Agreement but for the restrictions and covenants of Executive contained herein, and (e) the restrictions and covenants contained herein have been made in order to induce the Company to enter into this Agreement.

        5.5     Modification of the Restrictive Covenants. If, at the time of enforcement of the restrictive covenants set forth herein, a final judicial determination is made by a court or arbiter of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

ARTICLE VI
MISCELLANEOUS

        6.1     Survival. Sections 4.1 through 4.8 inclusive (as applicable to the relevant circumstance of termination only), 5.1 through 5.5 inclusive and 6.1 through 6.14 inclusive shall survive and continue in full force in accordance with their terms notwithstanding any termination of Executive’s employment hereunder or termination of the Initial Employment Period or the Employment Period.

        6.2     Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally, mailed by certified or registered mail, return receipt requested and postage prepaid, or sent via a nationally recognized overnight courier, or sent via facsimile to the recipient. Such notices, demands and other communications shall be sent to the address indicated below:

To the Company:

Express Scripts, Inc.

13900 Riverport Drive

Maryland Heights, MO 63403

Attention: Chief Executive Officer

To Executive:

Mr. Edward Ignaczak

XXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXX

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.

        6.3     Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

        6.4     Complete Agreement. This Agreement constitutes the complete agreement and understanding between the parties regarding the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by and between the parties, written or oral; provided, however, this Agreement shall not supersede or modify the terms of the Nondisclosure and Noncompetition Agreement, and the Options and Restricted Stock shall be subject to the applicable option and restricted stock notices or agreements. The applicable provisions of this Agreement amend the terms and provisions of the Express Scripts, Inc. 2000 Long-Term Incentive Plan to the extent addressed by this Agreement, as the same may have been amended prior to the date hereof, with respect to awards covered by this Agreement and made to Executive hereunder.

        6.5     Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

        6.6     Successors and Assigns. Except as otherwise provided herein, all covenants and agreements contained in this Agreement shall bind and inure to the benefit of and be enforceable by the Company and its respective successors and assigns. Except as otherwise specifically provided herein, this Agreement, including the obligations and benefits hereunder, may not be assigned to any party by Executive.

        6.7     No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied to this Agreement.

        6.8     Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

        6.9     Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Missouri, without regard to conflicts of laws principles thereof; provided, however, that issues related to the Incentive Plan or any grants thereunder shall be resolved in accordance with the laws of the State of Delaware.

        6.10     Specific Performance. The Company shall be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorneys’ fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The Executive agrees and acknowledges that money damages are an inadequate remedy for any breach of the provisions of this Agreement, including, without limitation, Sections 5.1 through 5.3 hereof, and that the Company shall be entitled to apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. Further, Executive acknowledges that the forfeiture provision set forth in the termination provisions hereof shall not be construed to limit or otherwise affect the Company’s right to seek legal or equitable remedies it may otherwise have, or the amount damages for which it may seek recovery, resulting from breach of this Agreement.

        6.11     Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive.

        6.12     Tax Indemnification.

                    (a)     Notwithstanding anything to the contrary herein (or any other agreement entered into by and between Executive and the Company or any incentive arrangement or plan offered by the Company), in the event that any amount or benefit paid or distributed to Executive pursuant to this Agreement, taken together with any amounts or benefits otherwise paid or distributed to Executive by the Company or any of its subsidiaries (collectively, the “Covered Payments”), would constitute an “excess parachute payment” as defined in Section 280G of the Code, and would thereby subject Executive to an Excise Tax, the provisions of this Section 6.12 shall apply.

                    (b)     If the aggregate present value (as determined for purposes of Section 280G of the Code) of the Covered Payments exceeds the amount which can be paid to Executive without Executive incurring an Excise Tax, but is less than 125% of such amount, then the amounts payable to Executive under this Agreement (or any other agreement by and between Executive and the Company or pursuant to any incentive arrangement or plan offered by the Company) may, in the discretion of the Company, be reduced (but not below zero) to the maximum amount which may be paid hereunder without Executive becoming subject to the Excise Tax (such reduced payments to be referred to as the “Payment Cap”). In the event Executive receives reduced payments and benefits as a result of application of this Section 6.12, Executive shall have the right to designate which of the payments and benefits otherwise set forth herein (or any other agreement between Executive and the Company or any incentive arrangement or plan offered by the Company) will be received in connection with the application of the Payment Cap.

                    (c)     If the aggregate present value of all Covered Payments is equal to or exceeds 125% of the amount which can be paid to Executive without Executive incurring an Excise Tax, Executive shall be entitled to receive an additional amount (the “Tax Reimbursement Payment”) such that the net amount retained by Executive with respect to such Covered Payments, after deduction of any Excise Tax on the Covered Payments and any federal, state and local income tax and Excise Tax on the Tax Reimbursement Payment provided for by this Section 6.12, but before deduction for any federal, state or local income or employment tax withholding on such Covered Payments, shall be equal to the amount of the Covered Payments. Such additional amount may be paid by the Company directly to the applicable taxing authority.

                    (d)     Immediately upon a Change in Control, the Company shall notify Executive of any modification or reduction as a result of the application of this Section 6.12. In the event Executive and the Company disagree as to the application of this Section 6.12, the Company shall select a law firm or accounting firm from among those regularly consulted (during the twelve-month period immediately prior to the Change in Control that resulted in the characterization of the Covered Payments as parachute payments) by the Company, and such law firm or accounting firm shall determine, at the Company’s expense, the amount to which Executive shall be entitled hereunder (and pursuant to any other agreements, incentive arrangements or plans), taking into consideration the application of this Section 6.12, and such determination shall be final and binding upon Executive and the Company.

        6.13     Executive Representation. Executive hereby represents to the Company that the execution and delivery of this Agreement by Executive and the Company and the performance by Executive of Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound.

        6.14     Cooperation. Each party shall provide reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executive’s employment hereunder.

_________________

        IN WITNESS WHEREOF, the parties hereto have executed this Executive Employment Agreement as of the date first above written.

THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

EXPRESS SCRIPTS, INC.

By: /s/ Barrett Toan                                                   

Name: Barrett Toan

Title: Chairman and Chief Executive Officer

EXECUTIVE

/s/ Edward B. Ignaczak                                

Name: Edward B. Ignaczak

Title: Senior Vice President, Sales and Account Management

EXHIBIT A

GENERAL RELEASE AND ACKNOWLEDGMENT

        THIS GENERAL RELEASE AND ACKNOWLEDGMENT (the “General Release”) is made this ___ day of ________, ___________, by Edward B. Ignaczak (the “Executive”) in favor of Express Scripts, Inc. (the “Company”) pursuant to Section 4.2(c)(ii) of the Executive’s Employment Agreement dated October 29, 2004 (the “Agreement”). Unless otherwise defined herein, capitalized terms appearing herein shall have the meanings given to them in the Agreement.

        1.     General Release of Claims. The Executive, for and on behalf of the Executive and the Executive’s heirs, beneficiaries, executors, administrators, successors, assigns, and anyone claiming through or under any of the foregoing, hereby agrees to, and does, release and forever discharge the Company, and its agents, officers, employees, successors and assigns, from any and all matters, claims, demands, damages, causes of action, debts, liabilities, controversies, judgments and suits of every kind and nature whatsoever, foreseen or unforeseen, known or unknown, arising out of or relating to any matter whatsoever, including, without limitation, the Executive’s termination from employment with the Company, matters arising from the offer and acceptance of the Agreement, matters relating to employment references or lack thereof from the Company, and those claims described in paragraph 3 hereof.

        2.     Agreement Not to File Suit. Except as otherwise expressly permitted in paragraph 3 hereof, the Executive, for and on behalf of the Executive and the Executive’s beneficiaries, executors, administrators, successors, assigns, and anyone claiming through or under any of the foregoing, agrees that he or she will not file or otherwise submit any charge, claim, complaint, or action to any agency, court, organization, or judicial forum (nor will the Executive permit any person, group of persons, or organization to take such action on the Executive’s behalf) against the Company arising out of any actions or non-actions on the part of the Company prior to or as of the date hereof arising out of or relating to any matter whatsoever. The Executive further agrees that in the event that any person or entity should bring such a charge, claim, complaint, or action on the Executive’s behalf, the Executive hereby waives and forfeits any right to recovery under said claim and will exercise every good faith effort (but will not be obliged to incur any expense) to have such claim dismissed.

        3.     Claims Covered. The charges, claims, complaints, matters, demands, damages, and causes of action referenced in paragraphs 1 and 2 above include, but are not limited to:

                    (a)     any breach of an actual or implied contract of employment between the Executive and the Company;

                    (b)     any claim of unjust, wrongful, or tortious discharge (including any claim of fraud, negligence, retaliation for whistleblowing, or intentional infliction of emotional distress);

                    (c)     any claim of defamation or other common-law action;

                    (d)     any claims of violations arising under the Civil Rights Act of 1964, as amended, 42 U.S.C.ss.2000e et seq., the Age Discrimination in Employment Act, 29 U.S.C.ss.621 et seq. (only with respect to claims regarding acts of discrimination arising prior to the execution of this General Release), the Americans with Disabilities Act of 1990, 42 U.S.C.ss.12101 et seq., the Fair Labor Standards Act of 1938, as amended, 29 U.S.C.ss.201 et seq., the Rehabilitation Act of 1973, as amended, 29 U.S.C.ss.701 et seq., the Missouri Human Rights Act,ss.213.000 R.S.Mo. et seq., or any other relevant federal, state, or local statutes or ordinances; provided, however, that for purposes of the Age Discrimination in Employment Act only, this General Release does not affect the rights and responsibilities of the Equal Employment Opportunity Commission (the “EEOC”) to enforce the Age Discrimination in Employment Act, nor does this General Release prohibit the Executive from filing a charge or complaint under the Age Discrimination in Employment Act with the EEOC or participating in any investigation or proceeding conducted by the EEOC;

                    (e)     any claims for salary, bonus pay, vacation pay, severance pay or welfare benefits, other than those payments and benefits specifically provided in the Agreement; and

                    (f)     any other matter whatsoever, whether related or unrelated to employment matters.

        4.     Claims Excluded. Notwithstanding anything else herein to the contrary, this General Release shall not:

                    (a)     apply to the obligations of the Company described in Sections 3.4, 3.5, and Article IV of the Agreement; or

                    (b)     affect, alter or extinguish any vested rights that the Executive may have with respect to any benefits, rights or entitlements under the terms of any employee benefit programs of the Company to which the Executive is or will be entitled by virtue of his or her employment with the Company or any of its subsidiaries, and nothing in this General Release will prohibit or be deemed to restrict the Executive from enforcing his or her rights to any such benefits, rights or entitlements; or

                    (c)     limit the Executive’s right to indemnification to the extent provided in the Company’s Certificate of Incorporation and/or bylaws.

        5.     Acknowledgments. By signing this General Release, the Executive hereby represents, certifies and acknowledges that the Executive:

                    (a)     has received a copy of the Agreement and this General Release for review and study before executing the Agreement;

                    (b)     has read the Agreement and this General Release carefully before signing this General Release;

                    (c)     has had sufficient opportunity before signing this General Release to ask any questions the Executive has about the Agreement or this General Release and has received satisfactory answers to all such questions;

                    (d)     understands the Executive’s rights and obligations under the Agreement and this General Release;

                    (e)     understands that the Agreement and this General Release are legal documents, and that by signing this General Release the Executive is giving up certain legal rights including but not limited to rights under the Age Discrimination in Employment Act, 29 U.S.C. ss. 621 et seq. and the other matters covered in paragraph 3 hereof;

                    (f)     understands and agrees that the execution of this General Release is a condition precedent, and material inducement to the Company’s provision of payments made to Executive pursuant to Section 3.5, or 4.2 of the Agreement and such payments, subject to the conditions stated therein, constitute sufficient additional consideration in exchange for the Executive’s promises and obligations contained herein;

                    (g)     knowingly and voluntarily agreed to accept the payments described in Section 3.5, or 4.2 of the Agreement, subject to the conditions stated therein, as a full and final compromise, adjustment and settlement of all potential claims herein described;

                    (h)     has been given at least twenty-one (21) days to consider this General Release and that he or she has been advised to consult with an attorney about its terms, and if the Executive has executed this General Release prior to the expiration of the twenty-one (21) day period, that he or she was afforded the opportunity to consider this General Release for twenty-one (21) days before executing it and that the Executive’s execution of this General Release prior to the expiration of such twenty-one (21) day period was his or her free and voluntary act; and

                    (i)     understands that he or she may revoke this General Release within seven (7) days after he or she signs it and that if the Executive does not revoke this General Release within that time, this General Release becomes effective and enforceable by both parties immediately after the expiration of such seven-day period. The Executive also understands that any revocation must be in writing and must be received by the Company no later than the close of business on the seventh day after his or her execution of this General Release. The Executive acknowledges that the Company has given the Executive enough time to consult with his or her family and other advisers and to consider whether he or she should agree to the terms of this General Release.

        6.     Governing Law. The validity, interpretation, construction and performance of this General Release shall be governed by the laws of the State of Missouri, without regard to principles of conflicts of laws.

        7.     Severability. If any provision of this General Release or the application thereof to any person or circumstance shall to any extent be held to be invalid or unenforceable, the remainder of this General Release shall not be affected thereby, and each provision of this General Release shall be valid and enforceable to the fullest extent permitted by law.

        8.     Binding Effect. Executive acknowledges that the terms and provisions of this General Release shall be binding upon the Executive’s heirs, executors, administrators, personal representatives, successors and assigns, and that the terms and provisions of this General Release shall inure to the benefit of the Company’s affiliates, successors, assigns, officers, directors, agents, attorneys and employees.

_________________

THIS GENERAL RELEASE HAS IMPORTANT LEGAL CONSEQUENCES, INCLUDING THE EXECUTIVE’S WAIVER TO PURSUE CERTAIN LEGAL CLAIMS. THE EXECUTIVE IS ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS GENERAL RELEASE.

        IN WITNESS WHEREOF, the undersigned has caused this General Release to be executed and delivered as of the day and year first above set forth.

EXECUTIVE:

______________________________

EX-10

FORM OF RESTRICTED STOCK AGREEMENT
UNDER THE
EXPRESS SCRIPTS, INC. 2000 LONG-TERM INCENTIVE PLAN

[NOTE: Bracketed language to be used when Restricted Stock is issued in connection with an Employment Agreement]

                    THIS AGREEMENT, made as of the _____ day of _______, 20___, by and between Express Scripts, Inc., a Delaware corporation (hereinafter called the “Company”), and ________________ (hereinafter called the “Grantee”);

                    WITNESSETH THAT:

                    WHEREAS, the Board of Directors of the Company (the “Board”) has adopted, and the stockholders of the Company have approved, the Express Scripts, Inc. 2000 Long-Term Incentive Plan (the “Plan”) pursuant to which options, stock appreciation rights, restricted stock, performance shares or any other stock based awards may be granted to key personnel of the Company at the discretion of the Committee appointed by the Board to administer the Plan (the “Committee”); and

                    [WHEREAS, the Company and the Grantee have entered into a certain employment agreement dated _____________ (the “Employment Agreement”), in which, pursuant to Section _______ thereof, the Company has agreed to award the Grantee restricted stock pursuant to certain terms and conditions set forth in the Employment Agreement;]

                    WHEREAS, the Grantee is materially important to the development of the Company’s business, and the Board believes it is in the best interest of the Company to create an incentive for him or her to remain in the employ of the Company and to work to the very best of his or her abilities for the achievement of the Company’s strategic objectives; and

                    WHEREAS, to further this purpose, the Company desires to make a restricted stock award to the Grantee under the terms hereinafter set forth:

                    NOW, THEREFORE, in consideration of the premises, and of the mutual agreements hereinafter set forth, it is covenanted and agreed as follows:

                    1.        Share Award. Pursuant to action of the Board and/or the Committee, which action was taken on the date specified on Schedule A (“Date of Award”), the Company awards to the Grantee the amount of shares listed on Schedule A (the “Shares”) of the Company’s common stock, $0.01 par value per share (the “Common Stock”). [This award is granted under, and is expressly subject to, the terms and provisions of the Employment Agreement and, to the extent the Employment Agreement is not otherwise controlling, the terms and provisions of the Plan, which terms and provisions are incorporated herein by reference.] The Grantee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof [to the extent the terms and provisions of the Employment Agreement are not otherwise controlling].

                    2.        Restrictions on Transfer and Restricted Period. Shares may not be sold, assigned, transferred, pledged or otherwise encumbered (collectively, the “Restrictions”) during the period commencing on the Date of Award and ending on the date the Restrictions lapse with respect to such Shares (the “Restricted Period”). The Restrictions shall lapse and the Shares shall become fully vested and transferable only at such time(s) as set forth [in Section ______ of the Employment Agreement or] pursuant to the vesting provisions set forth on Schedule A. Upon vesting, the Restrictions on such vested Shares shall lapse and the Shares shall become fully transferable. Any portion of the Shares which do not become fully vested and transferable in accordance with the criteria set forth [in Section 3.5 of the Employment Agreement or] on Schedule A shall be forfeited to the Company and the Grantee shall have no further right, title and interest in and to the Shares.

                    3.        Certificates for the Shares. The Company may, in its discretion, either (i) issue a certificate in respect of the Shares in the name of the Grantee, and shall hold such certificate on deposit for the account of the Grantee until the expiration of the Restricted Period with respect to the Shares, or (ii) maintain book-entry records of the Grantee’s interest in the shares in a manner determined by the Company. Any certificate issued in respect of the shares shall bear the following legend:

“The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) contained in the Express Scripts, Inc. 2000 Long-Term Incentive Plan and an Agreement entered into between the registered owner and Express Scripts, Inc. Copies of such Plan and Agreement are on file in the offices of the secretary of Express Scripts, Inc.”

                    4.        Grantee’s Rights. Except as otherwise provided herein, the Grantee shall have all rights of a stockholder with respect to the Shares during the Restricted Period, including, but not limited to, the right to receive all dividends paid on the Shares and the right to vote the Shares.

                    5.        Lapse of Restrictions. If, and when, the Restrictions lapse and the Shares become vested and transferable pursuant to the terms hereof, the Company shall either (i) deliver to the Grantee the certificate in respect of such Shares held by the Company pursuant to Section 3 hereof, or (ii) otherwise provide Grantee with the ability to access and exercise Grantee’s ownership rights with respect to such Shares. The Shares which have become vested and transferable shall not bear the legend set forth in Section 3 hereof.

                    6.        Committee Discretion. This award has been made pursuant to a determination made by the Committee. The Committee shall have plenary authority to (a) interpret any provision of this Agreement, (b) make any determinations necessary or advisable for the administration of this Agreement, and (c) modify or amend any provision hereof in any manner which does not materially and adversely affect any right granted to the Grantee by the express terms hereof [and the express terms of the Employment Agreement], unless required as a matter of law.

                    7.        Adjustments Upon Changes in Capitalization or Corporate Acquisitions. Notwithstanding anything to the contrary herein, in the event of a Fundamental Change (as defined in the Plan), reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, stock combination, rights offering, spin-off or other relevant change, the Committee, in its sole discretion, shall make adjustments as it deems appropriate to the aggregate number and type of securities available under this Agreement; provided, however, fractional shares of Common Stock received pursuant to this Section 7 shall be rounded to the nearest whole share of Common Stock, for which purpose one-half share shall be rounded down to the nearest whole share of Common Stock.

                    8.        Tax Withholding. Upon the termination of the Restrictions (or any such earlier time, if any, that an election is made under Section 83(b) of the Code, or any successor provision thereto, to include the value of such Shares in taxable income), the Company shall be entitled to withhold from the Grantee’s compensation any required taxes, including the Grantee’s social security and Medicare taxes (collectively, “FICA”) and federal, state and local income tax with respect to the income arising from the grant of the Shares under this Agreement. The Company shall have the right to require the payment of any such taxes before delivering the stock certificate with respect to the Shares and the related stock power held by the Company in accordance with Section 5 hereof. Alternatively, in lieu of such withholding, the Grantee shall be entitled to cover Grantee’s required minimum statutory withholding taxes arising from the grant of the Shares under this Agreement through a reduction of the number of Shares delivered to the Grantee or a delivery, or tender, to the Company of shares of Common Stock already held by the Grantee for at least six months, in each case valued in the same manner as used in computing withholding taxes under the applicable laws.

                    9.        No Right to Continued Employment. Nothing in this Agreement shall be deemed to create any limitation or restriction on such rights as the Company otherwise would have to terminate the employment of the Grantee at any time for any reason.

                    10.        Governing Law. To the extent federal law does not otherwise control, this Agreement shall be governed by the laws of Delaware, without giving effect to principles of conflicts of laws.

                    IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf and the Grantee has signed this Agreement to evidence his or her acceptance of the terms hereof, all as of the date first above written.

EXPRESS SCRIPTS, INC.

By____________________________________

_________________________________

EX-31

Exhibit 31.1

I, Barrett Toan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Express Scripts, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) [Reserved]

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 3, 2004

/s/ Barrett Toan                                  
Barrett Toan, Chairman and
Chief Executive Officer

EX-31

Exhibit 31.2

I, Edward Stiften, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Express Scripts, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) [Reserved]

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 3, 2004

/s/ Edward Stiften                                  
Edward Stiften, Senior Vice President and
Chief Financial Officer

EX-32

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AND EXCHANGE ACT RULE 13a-14(b)

        In connection with the accompanying Form 10-Q (the “Report”) of Express Scripts, Inc. (the “Company”) for the period ended September 30, 2004, I, Barrett Toan, Chairman and Chief Executive Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, and Exchange Act Rule 13a-14(b) that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

BY: /s/ Barrett Toan                                      
        Barrett Toan
        Chairman and Chief Executive Officer
        Express Scripts, Inc.

Date:        November 3, 2004

A signed original of this written statement required by Section 906 has been provided to Express Scripts, Inc. and will be retained by Express Scripts, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AND EXCHANGE ACT RULE 13a-14(b)

        In connection with the accompanying Form 10-Q (the “Report”) of Express Scripts, Inc. (the “Company”) for the period ended September 30, 2004, I, Edward Stiften, Senior Vice President and Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, and Exchange Act Rule 13a-14(b) that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

BY: /s/ Edward Stiften                                      
        Edward Stiften
        Senior Vice President and Chief Financial Officer
        Express Scripts, Inc.

Date:        November 3, 2004

A signed original of this written statement required by Section 906 has been provided to Express Scripts, Inc. and will be retained by Express Scripts, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.