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 June 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 June 30, 2004:                                                             77,587,507 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.    Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
	Item 3.    Defaults Upon Senior Securities – (Not Applicable)
	Item 4.    Submission of Matters to a Vote of Security Holders
	Item 5.    Other Information – (Not Applicable)
	Item 6.     Exhibits and Reports on Form 8-K

Signatures

Index to Exhibits

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EXPRESS SCRIPTS, INC.
Unaudited Consolidated Balance Sheet

(in thousands, except share data)	June 30, 2004			December 31, 2003
Assets
Current assets:
Cash and cash equivalents	$	117,713		$	396,040
Receivables, net		1,082,532			1,011,154
Inventories		137,208			116,375
Deferred taxes		16,024			15,346
Prepaid expenses and other current assets		27,948			21,220
Total current assets		1,381,425			1,560,135
Property and equipment, net		174,666			177,312
Goodwill, net		1,705,649			1,421,493
Other intangible assets, net		251,073			232,059
Other assets		31,842			18,175
Total assets	$	3,544,655		$	3,409,174
Liabilities and Stockholders' Equity
Current liabilities:
Claims and rebates payable	$	1,169,021		$	1,178,321
Accounts payable		285,697			232,290
Accrued expenses		195,250			215,797
Current maturities of long-term debt		22,000			--
Total current liabilities		1,671,968			1,626,408
Long-term debt		397,650			455,018
Other liabilities		156,677			133,755
Total liabilities		2,226,295			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 79,782,000 and 79,795,000 shares
issued and outstanding, respectively		797			798
Additional paid-in capital		479,874			484,663
Unearned compensation under employee compensation plans		(22,427	)		(23,302	)
Accumulated other comprehensive income		3,585			3,638
Retained earnings		999,933			864,550
		1,461,762			1,330,347
Common Stock in treasury at cost, 2,194,000 and 2,223,000
shares, respectively		(143,402	)		(136,354	)
Total stockholders' equity		1,318,360			1,193,993
Total liabilities and stockholders' equity	$	3,544,655		$	3,409,174

EXPRESS SCRIPTS, INC.
Unaudited Consolidated Statement of Operations

	Three Months Ended       June 30,						Six Months Ended       June 30,
(in thousands, except per share data)	2004			2003			2004			2003
Revenues 1	$	3,779,505		$	3,334,197		$	7,407,320		$	6,558,178
Cost of revenues 1		3,555,983			3,116,962			6,962,011			6,131,330
Gross profit		223,522			217,235			445,309			426,848
Selling, general and administrative		96,723			106,955			191,967			208,741
Operating income		126,799			110,280			253,342			218,107
Other (expense) income:
Undistributed loss from joint venture		(1,460	)		(1,545	)		(2,800	)		(3,084	)
Interest income		801			721			1,625			1,589
Interest expense		(20,160	)		(14,040	)		(32,870	)		(24,742	)
		(20,819	)		(14,864	)		(34,045	)		(26,237	)
Income before income taxes		105,980			95,416			219,297			191,870
Provision for income taxes		40,560			36,410			83,914			73,215
Income before cumulative effect of accounting change		65,420			59,006			135,383			118,655
Cumulative effect of accounting change, net of tax		--			--			--			(1,028	)
Net income	$	65,420		$	59,006		$	135,383		$	117,627
Basic earnings per share:
Before cumulative effect of accounting change	$	0.85		$	0.75		$	1.75		$	1.52
Cumulative effect of accounting change		--			--			--			(0.01	)
Net income	$	0.85		$	0.75		$	1.75		$	1.51
Weighted average number of common shares
Outstanding during the period - Basic EPS		77,254			78,366			77,293			77,959
Diluted earnings per share:
Before cumulative effect of accounting change	$	0.83		$	0.74		$	1.72		$	1.49
Cumulative effect of accounting change		--			--			--			(0.01	)
Net income	$	0.83		$	0.74		$	1.72		$	1.48
Weighted average number of common shares
Outstanding during the period - Diluted EPS		78,552			80,021			78,529			79,366

¹ Excludes estimated retail pharmacy co-payments of $1,387,488 and $1,338,804 for the three months ended June 30, 2004 and 2003, respectively, and $2,784,599 and $2,669,558 for the six months ended June 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		--			--			--			--			--			135,383		--			135,383
Other comprehensive income:
Foreign currency
translation adjustment		--			--			--			--			(1,032	)		--		--			(1,032	)
Realized and unrealized gains
on derivative financial
instruments, net of taxes		--			--			--			--			979			--		--			979
Comprehensive income		--			--			--			--			(53	)		135,383		--			135,330
Treasury stock acquired		--			--			--			--			--			--		(52,146	)		(52,146	)
Changes in stockholders' equity
related to employee stock plans		(13	)		(1	)		(4,789	)		875			--			--		45,098			41,183
Balance at June 30, 2004		79,782		$	797		$	479,874		$	(22,427	)	$	3,585		$	999,933	$	(143,402	)	$	1,318,360

See accompanying Notes to Unaudited Consolidated Financial Statements

EXPRESS SCRIPTS, INC.
Unaudited Consolidated Statement of Cash Flows

	Six Months Ended June 30,
(in thousands)	2004			2003
Cash flows from operating activities:
Net income	$	135,383		$	117,627
Adjustments to reconcile net income to net cash
provided by operating activities, excluding
the effect of the acquisition:
Depreciation and amortization		32,825			26,394
Non-cash adjustments to net income		43,512			48,546
Net changes in operating assets and liabilities		(58,409	)		(71,969	)
Net cash provided by operating activities		153,311			120,598
Cash flows from investing activities:
Purchases of property and equipment		(17,354	)		(21,562	)
Acquisition, net of cash acquired, and investment in joint venture		(331,058	)		2,924
Loan to Pharmacy Care Alliance		(11,300	)		--
Other		96			10
Net cash used in investing activities		(359,616	)		(18,628	)
Cash flows from financing activities:
Proceeds from long-term debt		675,000			--
Repayment of long-term debt		(734,955	)		(110,430	)
Proceeds from revolving credit line, net		25,000			25,000
Treasury stock acquired		(52,146	)		(45,228	)
Deferred financing fees		(6,032	)		--
Net proceeds from employee stock plans		21,515			30,422
Net cash used in financing activities		(71,618	)		(100,236	)
Effect of foreign currency translation adjustment		(404	)		2,174
Net (decrease) increase in cash and cash equivalents		(278,327	)		3,908
Cash and cash equivalents at beginning of period		396,040			190,654
Cash and cash equivalents at end of period	$	117,713		$	194,562

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 June 30, 2004, the Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2004 and 2003, the Unaudited Consolidated Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2004, and the Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2004 and 2003. Operating results for the three and six months ended June 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 June 30, 2004 and 2003, respectively, and $2.8 billion and $2.7 billion for the six months ended June 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 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 “—Rebate Accounting”).

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 June 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 the costs of uninsured claims incurred using certain actuarial assumptions followed in the insurance industry and our historical experience. 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 six months ended June 30, 2004 and 2003 (see also Note 8):

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share data)	2004			2003			2004			2003
Net income, as reported(1)	$	65,420		$	59,006		$	135,383		$	117,627
Less: Employee stock-based
compensation expense determined
using fair-value based method for
stock-based awards, net of tax(2)		(369	)		(2,223	)		(1,352	)		(5,326	)
Pro forma net income	$	65,051		$	56,783		$	134,031		$	112,301
Basic earnings per share
As reported	$	0.85		$	0.75		$	1.75		$	1.51
Pro forma		0.84			0.73			1.73			1.44
Diluted earnings per share
As reported	$	0.83		$	0.74		$	1.72		$	1.48
Pro forma		0.83			0.71			1.71			1.41

⁽¹⁾     Net income, as reported, includes stock-based compensation expense for the three months ended June 30, 2004 and 2003 of $1,352 ($2,190 pre-tax) and $1,177 ($1,904 pre-tax), respectively, and for the six months ended June 30, 2004 and 2003 of $2,738 ($4,434 pre-tax) and $1,710 ($2,765 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 $876 and $3,190 during the three and six months ended June 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, we do not expect the adoption of these standards to 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. 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 will be 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 $284.7 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 June 30, 2004, we have loaned PCA $11.3 million, which is included in other long-term assets on the Unaudited Consolidated Balance Sheet.

Note 3 – Receivables, net

        Included in receivables, net, as of June 30, 2004 and December 31, 2003, is an allowance for doubtful accounts of $32.9 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 June 30, 2004 and December 31, 2003, unbilled receivables were $605.7 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).

	June 30, 2004				December 31, 2003
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Goodwill
PBM (1)	$	1,790,348	$	106,835	$	1,506,242	$	106,885
Non-PBM		22,136		--		22,136		--
	$	1,812,484	$	106,835	$	1,528,378	$	106,885
Other intangible assets
PBM (1)
Customer contracts (1)	$	293,400	$	77,425	$	264,831	$	70,180
Other (1)		64,348		33,859		67,592		35,064
		357,748		111,284		332,423		105,244
Non-PBM
Customer contracts		4,000		1,166		4,000		917
Other		1,880		105		1,880		83
		5,880		1,271		5,880		1,000
Total other intangible assets	$	363,628	$	112,555	$	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 $284.7 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 June 30, 2004. Changes in goodwill and accumulated amortization from December 31, 2003 to June 30, 2004 are also a result of changes in foreign currency exchange rates.

        The aggregate amount of amortization expense of other intangible assets was $7.0 million and $6.9 million for the three months ended June 30, 2004 and 2003, respectively, and $13.7 million and $13.2 million for the six months ended June 30, 2004 and 2003, respectively. The future aggregate amount of amortization expense of other intangible assets is approximately $14.2 million for 2004, $26.5 million for 2005, $22.4 million for 2006, $17.6 million for 2007, $17.2 million for 2008, and $16.0 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 June 30,				Six Months Ended June 30,
	2004		2003		2004		2003
Weighted average number of common shares
outstanding during the period - Basic EPS		77,254		78,366		77,293		77,959
Outstanding stock options		1,085		1,479		1,032		1,244
Executive deferred compensation plan		46		48		45		47
Restricted stock awards		167		128		159		116
Weighted average number of common shares
outstanding during the period - Diluted EPS		78,552		80,021		78,529		79,366

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 2004, we made scheduled payments on our Term A and Term B loans of $5.0 million and $0.5 million, respectively. We had net borrowings of $25.0 million under our revolving credit facility during the three months ended June 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. 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 ($375.0 million at June 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 June 30, 2004, the weighted average interest rate on the new facility was 2.73%. 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 June 30, 2004, we are in compliance with all covenants associated with our credit facility.

        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.

        The following represents the schedule of current maturities for our long-term debt at June 30, 2004 excluding the deferred gain ($0.2 million at June 30, 2004) from the restructuring of an interest rate swap agreement in 2000 (amounts in thousands):

Year Ended December 31,
2004	$	11,000
2005		22,000
2006		29,500
2007		39,500
2008		79,500
Thereafter		238,000
	$	419,500

Note 7 – Derivative financial instruments

        We use an interest rate swap agreement to manage our interest rate risk on future variable interest payments. At June 30, 2004, our swap agreement fixes the variable interest rate payments on approximately $20 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 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, $0.9 million at June 30, 2004, is reported on the balance sheet in other liabilities. The related deferred loss on our swap agreements, $0.6 million at June 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 six months ended June 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 – 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 June 30, 2004 and 2003 would have been $65.1 million, or $0.83 per diluted share and $56.8 million or $0.71 per diluted shares, respectively, and our net income and earnings per share for the six months ended June 30, 2004 and 2003 would have been $134.0 million or $1.71 per diluted share and $112.3 million or $1.41 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 June 30,				Six Months Ended June 30,
	2004		2003		2004		2003
Expected life of option		3-5 years		3-10 years		3-5 years		3-10 years
Risk-free interest rate		1.97%-3.85%		1.23%-3.71%		1.97%-3.85%		1.23%-3.71%
Expected volatility of stock		46%-47%		53		46%-47%		53%
Expected dividend yield		None		None		None		None

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

	Six Months Ended June 30, 2004						Six Months Ended June 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		468		$	73	.69		73		$	64	.36
Exercised		(635	)	$	32	.19		(1,402	)	$	22	.89
Forfeited/Cancelled		(194	)	$	50	.77		(35	)	$	42	.70
Outstanding at end of period		3,655		$	40	.66		4,230		$	34	.83
Options exercisable at period end		2,277						2,151
Weighted-average fair value of
options granted during the year	$	28.95					$	31.28

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

		Options Outstanding						Options Exercisable
Range of Exercise Prices (share data in thousands)		Number Outstanding at 6/30/04		Weighted-Average Remaining Contractual Life		Weighted-Average Exercise Price		Number Exercisable at 6/30/04		Weighted-Average Exercise Price
$	7.44-21.20		519		3.1	$	16.63		507	$	16.57
	25.81-32.84		883		5.0		28.13		764		28.39
	33.69-46.44		783		4.2		38.51		537		38.01
	46.48-54.19		841		4.2		48.17		406		47.98
	54.90-78.36		629		6.1		70.70		63		58.39
$	7.44-78.36		3,655		4.6	$	40.66		2,277	$	32.35

Note 9 – 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 six months ended June 30, 2004 and 2003:

(in thousands)	PBM		Non-PBM		Total
Three months ended June 30, 2004
Product revenues
Network revenues	$	2,365,476	$	--	$	2,365,476
Mail revenues		1,337,237		--		1,337,237
Other revenues		--		27,130		27,130
Service revenues		19,022		30,640		49,662
Total revenues		3,721,735		57,770		3,779,505
Depreciation and amortization expense		16,030		1,090		17,120
Operating income		116,143		10,656		126,799
Interest income						801
Interest expense						(20,160	)
Undistributed loss from joint venture						(1,460	)
Income before income taxes						105,980
Capital expenditures		8,560		1,055		9,615
Three months ended June 30, 2003
Product revenue:
Network revenues	$	2,303,311	$	--	$	2,303,311
Mail revenues		964,119		--		964,119
Other revenues		--		20,343		20,343
Service revenues		17,787		28,637		46,424
Total revenues		3,285,217		48,980		3,334,197
Depreciation and amortization expense		12,461		770		13,231
Operating income		100,328		9,952		110,280
Interest income						721
Interest expense						(14,040	)
Undistributed loss from joint venture						(1,545	)
Income before income taxes						95,416
Capital expenditures		10,838		1,530		12,368
Six months ended June 30, 2004
Product revenues
Network revenues	$	4,702,729	$	--	$	4,702,729
Mail revenues		2,550,317		--		2,550,317
Other revenues		--		55,093		55,093
Service revenues		40,986		58,195		99,181
Total revenues		7,294,032		113,288		7,407,320
Depreciation and amortization expense		30,784		2,041		32,825
Operating income		233,713		19,629		253,342
Interest income						1,625
Interest expense						(32,870	)
Undistributed loss from joint venture						(2,800	)
Income before income taxes						219,297
Capital expenditures		12,578		4,776		17,354
Six months ended June 30, 2003
Product revenue:
Network revenues	$	4,491,519	$	--	$	4,491,519
Mail revenues		1,936,374		--		1,936,374
Other revenues		--		37,257		37,257
Service revenues		36,598		56,430		93,028
Total revenues		6,464,491		93,687		6,558,178
Depreciation and amortization expense		24,925		1,469		26,394
Operating income		199,604		18,503		218,107
Interest income						1,589
Interest expense						(24,742	)
Undistributed loss from joint venture						(3,084	)
Income before income taxes						191,870
Capital expenditures		21,562		--		21,562
As of June 30, 2004
Total assets	$	3,413,479	$	131,176	$	3,544,655
Investment in equity method investees		895		--		895
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 $6.1 million and $10.2 million for the three months ended June 30, 2004 and 2003, respectively, and $13.0 million and $5.3 million for the six months ended June 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 $32.4 million and $33.9 million as of June 30, 2004 and December 31, 2003, respectively. All other long-lived assets are domiciled in the United States.

Note 10 – Subsequent Events

         On July 12, 2004, the Company received a Notice of Proposed Litigation from the Office of the Attorney General of the State of New York. On July 21, 2004, we received a Civil Investigative Demand from the Attorney General of the State of Vermont, and we have been advised that we will receive identical subpoenas or civil investigative demands from the Attorneys General of 18 other states (see “–Legal Proceedings”). In light of these recent developments, we will evaluate the adequacy of legal reserves previously established and may increase such reserves in the third quarter in an amount presently estimated to range from $15.0 million to $20.0 million.

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:

• 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, contracts with 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, such as privacy regulations under the Health Insurance Portability and Accountability Act (“HIPAA”)), more aggressive enforcement of existing legislation or regulations, or a change in the interpretation of existing legislation or regulations

• adverse results in litigation, including a number of pending class action 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, other regulatory agencies including the Department of Labor, and various state attorneys general

• 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

• uncertainties regarding the implementation and the ultimate terms of proposed government initiatives, including the Medicareprescription drug benefit

• 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 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 98.7% of revenues for the three and six months ended June 30, 2004 as compared to 98.6% for the three and six months ended June 30, 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.

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 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 the costs of uninsured claims which are primarily legal claims, including the cost to defend. The reserves are estimated using certain actuarial assumptions followed in the insurance industry and our historical experience.

FACTORS AFFECTING ESTIMATE
Self-insurance reserves are based on management’s estimates of the aggregate liability of the costs of legal claims including 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 through 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 samples 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 June 30,							Six Months Ended June 30,
(in thousands)	2004		Increase/ (Decrease)			2003		2004		Increase/ (Decrease)			2003
Product revenues
Network revenues	$	2,365,476		2	.7%	$	2,303,311	$	4,702,729		4	.7%	$	4,491,519
Mail revenues		1,337,237		38	.7%		964,119		2,550,317		31	.7%		1,936,374
Service revenues		19,022		6	.9%		17,787		40,986		12	.0%		36,598
Total PBM revenues		3,721,735		13	.3%		3,285,217		7,294,032		12	.8%		6,464,491
Cost of PBM revenues		3,511,510		14	.0%		3,081,185		6,873,013		13	.4%		6,062,463
PBM Gross Profit		210,225		3	.0%		204,032		421,019		4	.7%		402,028
PBM SG&A expenses		94,082		(9	.3)%		103,704		187,306		(7	.5)%		202,424
PBM operating income	$	116,143		15	.8%	$	100,328	$	233,713		17	.1%	$	199,604

        Network pharmacy revenues increased $62.2 million, or 2.7%, and $211.2 million, or 4.7%, during the three and six months ended June 30, 2004 as compared to the same periods of 2003. Network pharmacy revenues increased partially as a result of the following factors:

• For the three months ended June 30, 2004, a 2.9% increase in the average revenue per network pharmacy claim over the same period last year resulted in a $66.3 million increase in overall network pharmacy revenues. Increases in average revenue per network pharmacy claims due to inflation 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 50.6% of total network claims (excluding claims for the DoD TRICARE Retail Pharmacy program for which revenues are included in service revenues rather than network pharmacy revenues) for the three months ended June 30, 2004 as compared to 47.6% of total network claims for the same period of 2003. The average co-payment per retail pharmacy claim increased by 9.1% in the second 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.

• Excluding CuraScript, network pharmacy claims decreased 0.4 million to 95.6 million in the second quarter of 2004 from 96.0 million in the second quarter of 2003, resulting in a $10.2 million decrease in network pharmacy revenues in the second quarter of 2004 as compared to the same quarter of 2003. The decreases 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 second quarter.

• For the six months ended June 30, 2004, the average revenue per network pharmacy claim increased 6.5% over the same period of 2003 resulting in a $286.6 million increase in overall network pharmacy revenues. Increases in average revenue per network pharmacy claims due to inflation 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 50.0% of total network claims (excluding claims for the DoD TRICARE Retail Pharmacy program for which revenues are included in service revenues rather than network pharmacy revenues) for the six months ended June 30, 2004 as compared to 47.7% of total network claims for the same period of 2003. The average co-payment per retail pharmacy claim increased by 9.4% in the second quarter of 2004 as compared to the same quarter of 2003.

• Excluding CuraScript, network pharmacy claims for the six months ended June 30, 2004 decreased 3.7 million, to 189.0 million, over the same period in 2004 resulting in an $85.3 million decrease in network pharmacy revenues. The decreases in network pharmacy claims volume is mainly due to client specific reductions from the third quarter of 2003 as described above. These decreases were partially offset by new business which started during the second quarter.

• The acquisition of CuraScript resulted in an increase of network pharmacy revenues of $6.0 million and $9.9 million for the three and six months ended June 30, 2004, respectively. The acquisition also increased claims counts for the three and six months ended June 30, 2004 by 0.1 million and 0.2 million, respectively.

        The $373.1 million, or 38.7%, increase in mail pharmacy revenues for the second quarter of 2004 as compared to the second quarter of 2003 is attributable to the following factors:

• Excluding CuraScript, we processed an additional 1.4 million claims in the second quarter of 2004 as compared to the second 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 a $161.0 million increase in mail order revenues.

• The acquisition of CuraScript resulted in additional mail order claims of 0.3 million and a $158.3 million increase in mail order revenues in the second quarter of 2004 as compared to the second quarter of 2003.

• Excluding CuraScript, average revenue per mail order claim increased by approximately 4.8% in the six months ended June 30, 2004 as compared to the same period of 2003, representing additional mail pharmacy revenue of $53.8 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 37.2% in the second quarter of 2003 to 38.8% 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 (i.e. therapies for diabetes, high cholesterol, etc.) commonly dispensed from mail order pharmacies compared to acute medications that are dispensed primarily by pharmacies in our retail networks.

        The $613.9 million, or 31.7%, increase in mail pharmacy revenues for the first six months of 2004 as compared to the ssame period of 2003 is attributable to the following factors:

• Excluding CuraScript, we processed an additional 3.0 million claims in the six months ended June 30, 2004 as compared to the same period in 2003, resulting in a $378.0 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 0.4 million and a $231.8 million increase in mail order revenues in the six months ended June 30, 2004 as compared to the same period of 2003.

• Average revenue per mail order claim for the six months ended June 30, 2004 (excluding CuraScript) changed little from the same period of 2003. 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 from 37.1% for the six months ended June 30, 2003 to 39.0% for the same period of 2004. 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 $1.2 million increase in PBM service revenues in the second quarter of 2004 as compared to the second 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 $4.4 million, or 12.0%, increase in PBM service revenues in the six months ended June 30, 2004 as compared to the six months ended June 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 $430.3 million, or 14.0%, and $810.6 million, or 13.4%, in the three and six months ended June 30, 2004 as compared to the same periods in 2003 as a result of the following:

• Net increases in the average cost per claim, mainly due to inflation, increased cost of revenues by approximately $253.1million and $606.4 million in the three and six months ended June 30, 2004, respectively, as compared to the same periods of 2003. Average cost per claim in the second quarter was also impacted by $1.6 million of start-up costs incurred in June 2004 as a result of the implementation of the TRICARE program.

• The addition of CuraScript’s specialty mail pharmacy in January 2004 resulted in increases of $149.6 million and $222.3 million for the three and six months ended June 30, 2004, respectively, as compared to the same periods of 2003.

• Excluding CuraScript, integrated claims (on an unadjusted basis) increased 0.9 million in the second quarter of 2004 as compared to the same quarter of 2003 resulting in a $27.6 million increase in PBM cost of revenues.

• For the six months ended June 30, 2004, integrated claims (on an unadjusted basis), excluding CuraScript, decreased 0.6 million as compared to the six months ended June 30, 2003, resulting in a $18.1 million decrease in PBM cost of revenues.

        Our PBM gross profit increased $6.2 million, or 3.0%, and $19.0 million, or 4.7%, respectively, for the three and six months ended June 30, 2004. Increases in revenues from network inflation and higher mail order volumes were partially offset by inflationary increases in cost of revenues. Gross profit for the six months ended June 30, 2003 was negatively impacted by a non-recurring reduction in gross profit 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”) decreased $9.6 million, or 9.3%, and $15.1 million, or 7.5%, respectively, in the three and six months ended June 30, 2004 over the same periods of 2003. During 2003 and 2004, we implemented cost saving measures which reduced SG&A by approximately $11.2 million and $19.1 million for the three and six months ended June 30, 2004 as compared to the same periods of 2003. For both the three and six months ended June 30, 2004, SG&A was positively impacted by an approximate $5.0 million decrease in overall compensation expense. In addition, the six months ended June 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. These decreases were partially offset by the acquisition of CuraScript in January 2004 which increased in SG&A by $7.0 million and $11.2 million in the three and six months ended June 30, 2004, respectively, as compared to the same periods of 2003.

        PBM operating income increased $15.8 million, or 15.8%, and $34.1 million, or 17.1%, respectively, in the three and six months ended June 30, 2004 over the same period of 2003.

NON-PBM OPERATING INCOME

	Three Months Ended June 30,							Six Months Ended June 30,
(in thousands)	2004		Increase/ (Decrease)			2003		2004		Increase/ (Decrease)			2003
Product revenues	$	27,130		33	.4%	$	20,343	$	55,093		47	.9%	$	37,257
Service revenues		30,640		7	.0%		28,637		58,195		3	.1%		56,430
Total Non-PBM revenues		57,770		17	.9%		48,980		113,288		20	.9%		93,687
Non-PBM cost of revenues		44,473		24	.3%		35,777		88,998		29	.2%		68,867
Non-PBM Gross Profit		13,297		0	.7%		13,203		24,290		(2	.1)%		24,820
Non-PBM SG&A expense		2,641		(18	.8)%		3,251		4,661		(26	.2)%		6,317
Non-PBM operating income	$	10,656		7	.1%	$	9,952	$	19,629		6	.1%	$	18,503

        Non-PBM product revenues increased $6.8 million, or 33.4%, and $17.8 million, or 47.9%, respectively, for the three and six months ended June 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 $2.0 million, or 7.0%, and $1.8 million, or 3.1%, respectively, for the three and six months ended June 30, 2004. The increase reflects new eligibility and service programs initiated during the first quarter of 2004. This increase 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 $8.7 million, or 24.3%, and $20.1 million, or 29.2%, respectively, in the three and six months ended June 30, 2004 as compared to the same periods of 2003, mainly due to the additional volume in 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 six months ended June 30, 2004 changed only slightly as compared to the same periods of 2003.

        Non-PBM SG&A decreased $0.6 million, or 18.8%, and $1.7 million, or 26.2%, respectively, for the three and six months ended June 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 $0.7 million, or 7.1%, and $1.1 million, or 6.1%, respectively, during the three and six months ended June 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 $15.8 million invested through June 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 six months ended June 30, 2004 was $1.5 million ($0.9 million, net of tax) and $2.8 million ($1.7 million, net of tax), respectively, compared to $1.5 million ($0.9 million, net of tax) and $3.1 million ($1.9 million, net of tax) for the same periods of 2003.

        For the three and six months ended June 30, 2004, net interest expense increased $6.0, or 45.3%, and $8.1, or 35.0%, respectively, as compared to the same periods in 2003. The increase in interest expense in the second quarter of 2004 as compared to the second quarter of 2003 is primarily due to the redemption of our Senior Notes in June, for which 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”). These increases were partially offset by the favorable effects of a lower interest rate on outstanding principal balances.

        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 increased slightly to 38.3% for the three and six months ended June 30, 2004 as compared to 38.2% for the three and six months ended June 30, 2003.

NET INCOME AND EARNINGS PER SHARE

        Net income for the three months ended June 30, 2004 increased $6.4, or 10.9%, over the same period of 2003. Net income increased $17.8 million, or 15.1%, for the six months ended June 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 increased 13.3% and 12.2%, respectively, for the second quarter of 2004 over the second quarter of 2003. For the six months ended June 30, 2004, basic and diluted earnings per share increased 15.9% and 16.2%, respectively, over the six months ended June 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 six months ended June 30, 2004 would have been $65.1 million, or $0.83 per diluted share, and $134.0, or $1.71 per diluted share, respectively, and would have been $56.8 million, or $0.71 per diluted share, and $112.3 million, or $1.41 per diluted share, respectively, for the three and six months ended June 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 $0.9 million and $3.2 million for the three and six months ended June 30, 2004.

LIQUIDITY AND CAPITAL RESOURCES

OPERATING CASH FLOW AND CAPITAL EXPENDITURES

        For the six months ended June 30, 2004, net cash provided by operations increased $32.7 million to $153.3 million from $120.6 million during the six months ended June 30, 2003. This increase reflects increased earnings of $17.7 million, a $13.6 million increase from net changes in our working capital components, and a $6.4 million increase in depreciation and amortization, partially due to the acquisition of CuraScript in January 2004. The increase from changes in our working capital components primarily consists of a $52.4 million increase resulting from the timing of payments to vendors partially offset by decreases of $23.7 million and $16.1 million from higher accounts receivable and inventory balances, respectively. Net cash provided by operations was also negatively impacted by a $5.0 million decrease in non-cash adjustments to net income mainly due to lower tax benefits from the exercise of employee stock options during the six months ended June 30, 2004 as compared to the six months ended June 30, 2003.

        Our capital expenditures for the six months ended June 30, 2004 decreased $4.2 million, or 19.5%, as compared to the same period of 2003. During the first quarter of 2003, we completed a new mail order facility in Tempe to provide 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 are developing a new Patient Care Contact Center in St. Marys, Georgia. The project was initiated in June, with approximately $4.2 milion capitalized in the second quarter, and will be completed during the third quarter of 2004. Third quarter expenditures for the project are expected to range from $6.0 million to $8.0 million, of which approximately $4.0 million will be capitalized. 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 one 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, Board of Directors authorized a new 4.0 million share repurchase program in addition to the 1.2 million shares remaining under the current program. There is no limit on the duration of the program. During the three and six months ended June 30, 2004, we used internally generated cash to repurchase 0.6 and 0.7 million shares respectively for $42.3 million and $52.1 million. Approximately 8.8 million shares have been repurchased through June30,2004. 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 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 $284.7 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 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 June 30, 2004, we have loaned PCA $11.3 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 June 30, 2004, enrollment has fallen short of expectations, with approximately 156,000 membership applications received and 110,000 approved members 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 2004, we made scheduled payments on our Term A and Term B loans of $5.0 million and $0.5 million, respectively. We had net borrowings of $25.0 million under our revolving credit facility during the three months ended June 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 ($375 million at June 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 June 30, 2004, the weighted average interest rate on the new facility was 2.73%. 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 June 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 $0.2 million, and future minimum lease payments due under noncancellable operating leases as of June 30, 2004 (in thousands):

	Payments Due by Period as of June 30,
Contractual obligations	Total		2004		2005 - 2006		2007 - 2008		After 2008
Long-term debt	$	419,500	$	11,000	$	51,500	$	119,000	$	238,000
Future minimum lease
payments		103,658		11,455		42,154		32,971		17,078
Total contractual cash
obligations	$	523,158	$	22,455	$	93,654	$	151,971	$	255,078

OTHER MATTERS

        As previously communicated, we received a comment letter from the SEC with respect to our Annual Report on Form 10-K for 2001 and 2002 and subsequent reports on Form 10-Q. The issues raised by the SEC in regard to both segment reporting and the treatment of co-payments in retail pharmacy prescriptions have been resolved. The SEC has requested, and we have provided, information regarding the useful lives of customer contract intangible assets. The majority of our customer contract intangible assets have useful lives of 20 years and we amortize such assets on a straight-line basis. We believe that the useful lives assigned to our customer contract intangible assets and the amortization method selected are appropriate and are in compliance with FAS 142, “Goodwill and Other Intangible Assets.” To date, the SEC has not requested any change to our accounting.

        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, we do not expect the adoption of these standards to 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. 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 will be 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 June 30, 2004, our swap agreement fixes the variable interest rate payments on approximately $20 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 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, $0.9 million at June 30, 2004, is reported on the balance sheet in other liabilities. The related deferred loss on our swap agreements, $0.6 million at June 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 six months ended June 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 June 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 June 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 a new matter, Scheuerman et al. v. Express Scripts , each of these lawsuits which was described in our Annual Report on Form 10-K for the year ended December 31, 2003, and, if necessary, updated in our Quarterly Report on Form 10-Q for the quarter ended 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. Because these cases all are in their early stages and 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:

• City of Paterson, et al. v. Benecard et. al..   (Cause No. L-005908-02, Superior Court of New Jersey, Law Division, Camden County). On or about September 13, 2002, plaintiffs filed this action against Benecard Prescription Services and our subsidiary, NPA, alleging violations of the New Jersey Consumer Protection Act. The allegations by the plaintiffs assert that various business practices of the defendants violated the statute. Neither we nor NPA owns any interest in Benecard, which is an independent entity. Subsequently, plaintiff added ESI as a defendant and added claims for common law fraud, negligent misrepresentation, and breach of contract. Plaintiffs purport to represent a class of similarly situated plaintiffs and seek unspecified monetary damages. Both NPA and ESI have filed answers denying liability. On March 7, 2004, our motion for summary judgment on the consumer protection counts was granted.

• International Association of Firefighters, Local No. 22, et al. v. National Prescription Administrators and Express Scripts, Inc. (Cause No. L03216-02, Superior Court of New Jersey, Law Division, Camden County). On or about August 16, 2002, we were served with this lawsuit alleging that our subsidiary, NPA, had breached agreements with two benefit plans to whom NPA had provided services under an umbrella agreement with a labor coalition client. ESI was also named as a defendant under a theory of de facto merger. The plaintiffs purport to bring the action on behalf of a class of similarly situated plans. The lawsuit alleges that NPA had not paid the plans the rebates to which they were entitled under the agreement. Claims for unspecified money damages are asserted under the New Jersey Consumer Protection Act, and for breach of contract and unjust enrichment. We have filed answers denying liability. On July 23, 2004, summary judgment was granted in favor of NPA and ESI on the customer fraud counts.

• Jerry Beeman, et al. v. Caremark, et al. (Cause No. 021327 VAP, 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 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. On July 12, 2004, the case was dismissed with prejudice on the grounds that the plaintiffs lacked standing to bring the action.

• Scheuerman et al. v. Express Scripts. (Cause No. 2372-04 Supreme Court of the State of New York, Country of Albany). This action was filed on April 26, 2004. This case purports to be a class action filed on behalf of all individuals who receive health benefits through the New York Health Insurance Program. Another previously disclosed case purporting to seek relief for the same class on the same claims was previously filed by the same counsel in another New York State court, Wagner et al. v. Express Scripts. The complaint alleges that certain business practices constitute a breach of fiduciary duty and violate the New York State statute on deceptive trade practices. The complaint seeks injunctive relief and unspecified monetary damages. We have removed this case to federal district court.

         On July 12, 2004, we received a Notice of Proposed Litigation from the Office of the Attorney General of the State of New York. The Notice 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 notice also alleges certain violations of civil law in connection with the Company’s therapeutic interchange programs. We are engaged in discussions with the Office of the Attorney General regarding the Notice. We believe that we have administered the state’s plan in accordance with contractual and legal requirements, and that our therapeutic interchange programs comply in all material respects with applicable legal requirements.

         On July 21, 2004, we received a Civil Investigative Demand from the Attorney General of the State of Vermont. We have been advised that we will receive, or have already received, substantially identical civil investigative demands from the Attorneys General of Arizona, Connecticut, Delaware, District of Columbia, Illinois, Maine, Maryland, Massachusetts, Mississippi, Montana, Nevada, North Carolina, Oregon, Pennsylvania, South Carolina, Tennessee, Vermont, Virginia and Washington. 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. We believe that our business practices comply in all material respects with applicable legal requirements.

Item 2.      Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

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

Period	Shares purchased		Average price per share		Shares purchased as part of a publicly announced program		Maximum shares that may yet be purchased under the program
4/1/2004 - 4/30/2004		--	$	--		--		1,705
5/1/2004 - 5/31/2004		554		76.27		554		1,151
6/1/2004 - 6/30/2004		--		--		--		1,151
Second quarter 2004 total		554	$	76.27		554

                   We have one stock repurchase program, announced on October 25, 1996, under which our Board of Directors approved the repurchase of a total of 10.0 million shares. In July 2004, the Board of Directors authorized an increase in our stock repurchase program from10.0 million shares to 14.0 million shares, increasing the number of shares remaining under the current program to 5.2 million. There is no limit on the duration of the program. Approximately 8.8 million shares have been repurchased through June 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 4.     Submission of Matters to a Vote of Security Holders

(a) The Company’s annual meeting of stockholders was held on May 26, 2004.

(b) The following persons were elected directors of the Company to serve until the next Annual Meeting of Stockholders and until their respective successors are elected and qualified: Gary G. Benanav, Frank J. Borelli, Nicholas LaHowchic, Thomas P. Mac Mahon, John O. Parker, Jr., George Paz, Samuel K. Skinner, Seymour Sternberg, Barrett A. Toan, and Howard L. Waltman.

(c) The stockholder vote for each director was as follows:

	Votes Cast for	Votes Withheld
Gary G. Benanav	59,440,727	5,770,320
Frank J. Borelli	60,308,764	4,902,283
Nicholas LaHowchic	60,327,314	4,883,733
Thomas P. Mac Mahon	45,222,933	19,988,114
John O. Parker, Jr.	60,308,764	4,902,283
George Paz	59,654,360	5,556,687
Samuel K. Skinner	60,116,114	5,094,933
Seymour Sternberg	58,783,859	6,427,188
Barrett A. Toan	59,695,010	5,516,037
Howard L. Waltman	59,473,534	5,737,513

                     The stockholders also voted to:

(1) Approve and ratify the proposed amendment to the Company’s Amended and Restated Certificate of Incorporation (61,698,393 affirmative votes; 3,108,704 negative votes; 403,948 abstention votes); and

(2) Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s Independent Accountants for 2004 (62,528,380 affirmative votes; 2,334,761 negative votes; 347,905 abstention votes).

Item 6.      Exhibits and Reports on Form 8-K

                  (a)        Exhibits. See Index to Exhibits below.

                  (b)        Reports on Form 8-K.

(i)     On April 20, 2004, we filed and/or furnished a Current Report on Form 8-K, dated April 20, 2004, under Item 9 regarding the issuance of a Notice of Redemption of the Company's 9 5/8% Series B Senior Notes.

(ii)     On April 29, 2004, we filed and/or furnished a Current Report on Form 8-K, dated April 28, 2004, under Items 5, 7 and 12, regarding a press release we issued concerning our financial performance for the quarter ending March 31, 2004.

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: July 28, 2004	By: /s/ Barrett A. Toan
	Barrett A. Toan, Chairman of the Board,
	and Chief Executive Officer
Date: July 28, 2004	By:/s/ Edward Stiften
	Edward Stiften, Sr. 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.
3.22	Certificate of Amendment to the Certificate of Incorporation of the Company dated June 2, 2004.
3.32	Third Amended and Restated Bylaws, incorporated by reference to Exhibit No. 3.2 to the Company's Annual Report on Form 10-K for the year ending December 31, 2000.
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	Indenture, dated as of June 16, 1999, among the Company, Bankers Trust Company, as trustee, and Guarantors named therein, incorporated by reference to Exhibit No. 4.4 to the Company's Registration Statement on Form S-4 filed August 4, 1999 (No. 333-83133) (the "S-4 Registration Statement").
4.3	Supplemental Indenture, dated as of October 6, 1999, to Indenture dated as of June 16, 1999, among the Company, Bankers Trust Company, as trustee, and Guarantors named therein, incorporated by reference to Exhibit No. 4.3 to the Company's Annual Report on Form 10-K for the year ending December 31, 1999.
4.4	Second Supplemental Indenture, dated as of July 19, 2000, to Indenture dated as of June 16, 1999, among the Company, Bankers Trust Company, as trustee, and Guarantors named therein, incorporated by reference to Exhibit No. 4.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
4.5	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).
4.6	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).
4.7	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.
4.8	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 April 1, 2004 between the Company and Edward J. Stiften.
10.22,3	Executive Employment Agreement dated as of April 15, 2004 between the Company and George Paz.
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.

EX-3

Exhibit 3.2

STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION

EXPRESS SCRIPTS, INC.

a corporation organized and existing under a by virtue of the General Corporation Law of the State of Delaware.

DOES HEREBY CERTIFY:

FIRST: That at a meeting of the Board of Directors of Express Scripts, Inc., held on February 11, 2004, resolutions were duly adopted setting forth a proposed amendment of the Amended and Restated Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:

RESOLVED, that the first paragraph of Section 4 of the Express Scripts, Inc. Amended and Restated Certificate of Incorporation is amended to be and read as follows:

“The total number of shares of stock which the Corporation has authority to issue is 280,000,000 shares, of which (i) 5,000,000 shares are preferred stock, par value $0.01 per share (the “Preferred Stock”), and (ii) 275,000,000 shares are common stock, par value $0.01 per share.”

SECOND: That thereafter, pursuant to resolution of its Board of Directors, an annual meeting of the stockholders of said corporation was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.

THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

FOURTH: That the capital of said corporation shall not be reduced under or by reason of said amendment.

IN WITNESS WHEREOF, said Express Scripts, Inc. has caused this certificate to be signed by Barrett A. Toan, Chairman and Chief Executive Officer, an Authorized Officer, this 2nd day of June, 2004.

By: /s/ Barrett A. Toan                                        

            Authorized Officer

Title:   Chairman and Chief Executive Officer

Name: Barrett A. Toan

EX-3

Exhibit 3.3

THIRD AMENDED AND RESTATED

BYLAWS

of

EXPRESS SCRIPTS, INC.

Adopted November 21, 2000
(as amended February 6, 2001)
(as further amended May 26, 2004)

1.     MEETINGS OF STOCKHOLDERS.

        1.1       Annual Meeting. The annual meeting of stockholders shall be held on the date and at the time fixed from time to time by the board of directors (the “Board”), provided, that each successive annual meeting shall be held on the fourth Wednesday in May of each year if not a legal holiday, and if a legal holiday then on the next succeeding day not a legal holiday, or on such other date or time and at such place as may be determined from time to time by resolutions adopted by the Board.

        1.2       Special Meetings. Subject to the rights of the holders of any series of preferred stock under the Certificate of Incorporation, as amended, of the corporation (the “Certificate of Incorporation”), special meetings of the stockholders may be called by the chairman of the Board or the chief executive officer or by resolution of the Board. Only business related to the purposes set forth in the notice of the meeting may be transacted at a special meeting.

        1.3       Place and Time of Meetings. Meetings of the stockholders may be held in or outside Delaware at the place and time specified by the Board; provided that the Board may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the General Corporation Law of the State of Delaware (the “General Corporation Law of Delaware”).

        1.4       Notice of Meeting; Waiver of Notice. (a) Written or printed notice of each meeting of stockholders shall be given by or at the direction of the secretary or the chief executive officer of the corporation to each stockholder entitled to vote at the meeting, except that (a) it shall not be necessary to give notice to any stockholder who properly waives notice before or after the meeting, whether in writing or by electronic transmission or otherwise, and (b) no notice of an adjourned meeting need be given except when required under Section 1.6 of these Bylaws or by law. Each notice of a meeting shall be given, personally or by mail or, as provided below, by means of electronic transmission, not less than ten (10) nor more than sixty (60) days before the meeting and shall state the time and place of the meeting, or if held by remote communications, the means of remote communication by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and unless it is the annual meeting, shall state at whose direction or request the meeting is called and the purposes for which it is called. The attendance of any stockholder at a meeting, without protesting at the beginning of the meeting that the meeting is not lawfully called or convened, shall constitute a waiver of notice by him or her. Any previously scheduled meeting of stockholders may be postponed, and (unless the Certificate of Incorporation otherwise provides) any special meeting of stockholders may be canceled, by resolution of the Board upon public disclosure (as defined in Section 1.13(a)) given on or prior to the date previously scheduled for such meeting of stockholders.

                    (b)        Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to a stockholder may be given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the corporation. Any such consent shall be deemed revoked (1) if the corporation is unable to deliver by electronic transmission two consecutive notices given by the corporation in accordance with such consent and (2) such inability becomes known to the secretary or an assistant secretary of the corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. For purposes of these Bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

                    (c)        Notice shall be deemed given, if mailed, when deposited in the United States mail with postage prepaid, if addressed to a stockholder at his or her address on the corporation’s records. Notice given by electronic transmission shall be deemed given: (1) if by facsimile, when directed to a number at which the stockholder has consented to receive notice; (2) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (3) if by posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (4) by any other form of electronic transmission, when directed to the stockholder.

                    (d)        An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the corporation that the notice has been given, whether by a form of electronic transmission or otherwise, shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

        1.5       Quorum; Voting; Validation of Meeting. (a) The holders of a majority in voting power of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the person presiding over the meeting or (ii) the stockholders by the vote of the holders of a majority of the stock, present in person or represented by proxy shall have power to adjourn the meeting in accordance with Section 1.6 of these Bylaws.

                    (b)        When a quorum is present at any meeting, a plurality of the votes present in person or represented by proxy and entitled to vote on the election of a director shall be sufficient to elect directors, subject to the rights of the holders of preferred stock to elect directors under specified circumstances pursuant to the Certificate of Incorporation. On all other matters, the vote of the holders of a majority of the stock having voting power on such matter present in person or represented by proxy shall decide any question brought before such meetings, unless the question is one upon which, by express provision of the laws of the State of Delaware or of the Certificate of Incorporation or these Bylaws, a vote of a greater number or voting by classes is required, in which case such express provision shall govern and control the decision of the question.

                    (c)        If a quorum is initially present, the stockholders may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum, if any action taken is approved by a majority of the stockholders initially constituting the quorum.

                    (d)        The transactions of any meeting of stockholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though they had been taken at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy.

        1.6       Adjourned Meeting; Notice. (a) Any stockholders’ meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the voting power of the shares represented at that meeting, either in person or by proxy. In the absence of a quorum, no other business may be transacted at that meeting except as provided in Section 1.5 of these Bylaws.

                    (b)        When any meeting of stockholders, either annual or special, is adjourned to another time or place or means of remote communication, notice need not be given of the adjourned meeting if the time and place, if any, thereof, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, are announced at the meeting at which the adjournment is taken. However, if a new record date for the adjourned meeting is fixed or if the adjournment is for more than thirty (30) days from the date set for the original meeting, then notice of the adjourned meeting shall be given. Notice of any such adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Section 1.4 of these Bylaws. At any adjourned meeting the corporation may transact any business that might have been transacted at the original meeting.

        1.7       Voting. (a) The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 1.8 of these Bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners, and to voting trusts and other voting agreements).

                    (b)        Except as may be otherwise provided in the Certificate of Incorporation, by these Bylaws or as required by law, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder which has voting power upon the matter in question.

                    (c)        Any stockholder entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or, except when the matter is the election of directors, may vote the remaining shares against the proposal; but if the stockholder fails to specify the number of shares which the stockholder is voting affirmatively or otherwise indicates how the number of shares to be voted affirmatively is to be determined, it will be conclusively presumed that the stockholder’s approving vote is with respect to all shares which the stockholder is entitled to vote.

                    (d)        Voting need not be by ballot unless requested by a stockholder at the meeting or ordered by the chairman of the meeting; however, all elections of directors shall be by written ballot, unless otherwise provided in the Certificate of Incorporation; provided, that if authorized by the Board, a written ballot may be submitted by electronic transmission, provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder or proxyholder.

        1.8       Record Date for Stockholder Notice. (a) For purposes of determining the stockholders entitled to notice of any meeting or to vote thereat, the Board may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting, and in such event only stockholders of record on the date so fixed are entitled to notice and to vote, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the Certificate of Incorporation, by these Bylaws, by agreement or by applicable law.

                    (b)        If the Board does not so fix a record date, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

                    (c)        A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting unless the Board fixes a new record date for the adjourned meeting, but the Board shall fix a new record date if the meeting is adjourned for more than thirty (30) days from the date set for the original meeting.

                    (d)        The record date for any other lawful purpose shall be as provided in Section 5.8 of these Bylaws.

        1.9       Proxies. Every person entitled to vote for directors, or on any other matter, shall have the right to do so either in person or by one or more agents authorized by a written proxy filed with the secretary of the corporation. A written proxy may be in the form of a telegram, cablegram, or other means of electronic transmission which sets forth or is submitted with information from which it can be determined that the telegram, cablegram, or other means of electronic transmission was authorized by the person. No such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the General Corporation Law of Delaware. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by filing another duly executed proxy bearing a later date with the secretary of the corporation.

        A proxy is not revoked by the death or incapacity of the maker unless, before the vote is counted, written notice of such death or incapacity is received by the secretary of the corporation.

        1.10       List of Stockholders. Not less than 10 days prior to the date of any meeting of stockholders, the secretary of the corporation shall prepare a complete list of stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of such stockholder; provided, that the corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. For a period of not less than 10 days prior to the meeting, the list shall be available during ordinary business hours for inspection by any stockholder for any purpose germane to the meeting. During this period, the list shall be kept either (1) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting or (2) during ordinary business hours, at the principal place of business of the corporation. If the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

        1.11       Notice of Stockholder Nominee. Only persons who are nominated in accordance with the procedures set forth in this paragraph shall be eligible for election by the stockholders as directors of the corporation. Nominations of persons for election to the Board may be made at a meeting of stockholders (a) by or at the direction of the Board, or (b) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the corporation entitled to vote for the election of directors at such meeting who complies with the procedures set forth in this paragraph. Such nominations by any stockholder shall be made pursuant to timely notice in proper written form to the secretary of the corporation in accordance with this paragraph. To be timely, a stockholder’s notice must be delivered to or mailed to and received by the secretary at the principal executive offices of the corporation not less than 90 days nor more than 120 days in advance of the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that (i) no annual meeting was held in the previous year or (ii) the date of the annual meeting has been changed by more than 30 days from the date of the previous year’s meeting, or in the event of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth day following the day on which notice of the date of the meeting was mailed or public disclosure of the date of the meeting was made, whichever occurs first. In no event shall the public disclosure of an adjournment or postponement of a stockholders meeting commence a new time period for the giving of a stockholders notice as described above. To be in proper written form, such stockholders’ notice to the secretary shall set forth in writing (a) as to each person whom such stockholder proposes to nominate for election or re-election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (or any successor thereto) (the “Exchange Act”), including, without limitation, such person’s written consent to being named in the proxy statement as a nominee and to serving as director if elected as well as (i) such person’s name, age, business address and residence address, (ii) his or her principal occupation or employment, (iii) the class and number of shares of the corporation that are beneficially owned by such person, and (iv) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder; and (b) as to such stockholder (i) the name and address, as they appear on the corporation’s books, of such stockholder and the beneficial owner, if any, on whose behalf the nomination is made, and (ii) the class and number of shares of the corporation which are beneficially owned by such stockholder and the beneficial owner, if any, on whose behalf the nomination is made, and any material interest of such stockholder and owner. At the request of the Board, any person nominated by the Board for election as a director shall furnish to the secretary of the corporation that information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee. No person shall be eligible for election by the stockholders as a director unless nominated in accordance with the procedures set forth in the Bylaws of the corporation. The chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by the Bylaws of the corporation, and if he or she shall so determine, he or she shall so declare at the meeting that the defective nomination shall be disregarded.

        1.12       Stockholder Proposals. At any special meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting by or at the direction of the Board. At any annual meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board, (b) otherwise properly brought before the meeting by or at the direction of the Board, or (c) by any stockholder who complies with the procedures set forth in this paragraph. For business properly to be brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in proper written form to the secretary of the corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder’s notice must be delivered to or mailed to and received by the secretary at the principal executive offices of the corporation not less than 90 days nor more than 120 days in advance of the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that (i) no annual meeting was held in the previous year or (ii) the date of the annual meeting has been changed by more than 30 days from the date of the previous year’s meeting, not later than the close of business on the tenth day following the day on which notice of the date of the meeting was mailed or public disclosure of the date of the meeting was made, whichever occurs first. In no event shall the public disclosure of an adjournment or postponement of a stockholders meeting commence a new time period for the giving of a stockholders notice as described above. To be in proper written form, such stockholder’s notice to the secretary shall set forth in writing as to each matter such stockholder proposed to bring before the annual meeting (a) a brief description of the business desired to be brought before the meeting, (b) the name and address, as they appear on the corporation’s books, of the stockholder proposing such business, and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (c) the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws of the corporation, the language of the proposed amendment) and the reasons for conducting such business at the meeting, (d) the class and number of shares of the corporation which are owned beneficially by such stockholder and the beneficial owner, if any, on whose behalf the proposal is made, (e) any material interest in such business of the stockholder or the beneficial owner, if any, on whose behalf the proposal is made, (f) any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Exchange Act in such stockholder’s capacity as a proponent of a stockholder proposal, (g) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business, and (h) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (i) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation’s outstanding capital stock required to approve or adopt the proposal or (ii) otherwise to solicit proxies from stockholders in support of such proposal. The foregoing notice requirements shall be deemed satisfied by a stockholder if the stockholder has notified the corporation of his or her intention to present a proposal at an annual meeting in compliance with Rule 14a-8 (or any successor thereof) promulgated under the Exchange Act and such stockholder’s proposal has been included in a proxy statement that has been prepared by the corporation to solicit proxies for such annual meeting. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this paragraph. The chairman of an annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting in accordance with the provisions of this paragraph, and, if he or she should so determine, he or she shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted.

        1.13       Public Disclosure; Conduct of Nominations and Proposals by Stockholders. (a) For purposes of Sections 1.4(a), 1.11 and 1.12 hereof, “public disclosure” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press, Reuters or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

                    (b)        Notwithstanding the foregoing provisions of these Sections 1.11 and 1.12, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual meeting of stockholders of the corporation to present a nomination or business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the corporation.

                    (c)        Notwithstanding the foregoing provisions of Sections 1.11 and 1.12, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in Sections 1.11 and 1.12. Nothing in these Sections 1.11 and 1.12 shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of preferred stock to elect directors under specified circumstances pursuant to the Certificate of Incorporation.

        1.14       Meeting Required. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, such vote may only be taken at an annual or special meeting with prior notice, except as provided in the Certificate of Incorporation.

        1.15       Organization. (a) Meetings of stockholders shall be presided over by the chairman of the Board, if any, or in his or her absence by the vice chairman of the Board, if any, or in his or her absence, by the chief executive officer, if any, or in his or her absence by a chairman of the meeting, which chairman must be an officer or director of the corporation and must be designated as chairman of the meeting by the Board. The secretary, or in his or her absence an assistant secretary, or in his or her absence a person whom the person presiding over the meeting shall appoint, shall act as secretary of the meeting and keep a record of the proceedings thereof.

                    (b)        The Board shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem appropriate. Subject to such rules and regulations of the Board, if any, the person presiding over the meeting shall have the right and authority to convene and adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of the person presiding over the meeting, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies and such other persons as the person presiding over the meeting shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting and matters which are to be voted on by ballot. The person presiding over the meeting, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if the person presiding over the meeting should so determine and declare, any such matter or business shall not be transacted or considered. Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

        1.16       Inspectors of Election. Before any meeting of stockholders, the Board may, and shall if required by law, appoint one or more inspectors of election, who may be employees of the corporation, to act at the meeting or its adjournment and to make a written report thereof. If any person appointed as inspector fails to appear or fails or refuses to act, then the person presiding over the meeting may, and upon the request of any stockholder or a stockholder’s proxy, shall appoint a person to fill that vacancy.

         Such inspectors shall:

(a) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies and ballots;

(b) receive votes and ballots, including, if applicable, votes and ballots submitted by means of electronic transmission;

(c) hear and determine all challenges and questions in any way arising in connection with the right to vote;

(d) determine when the polls shall close;

(e) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspector or inspectors;

(f) certify their determination of the number of shares of the corporation represented at the meeting and such inspectors’ count of all votes and ballots, which certification and report shall specify such other information as may be required by law; and

(g) do any other acts that may be proper to conduct the election or vote with fairness to all stockholders.

        Each inspector of election shall perform his or her duties impartially, in good faith, to the best of his or her ability and as expeditiously as is practical, and before entering upon the discharge of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector of election with strict impartiality and according to the best of his or her ability. In determining the validity and counting of proxies and ballots cast at any meeting of stockholders of the corporation, the inspectors may consider such information as is permitted by applicable law. If there are three (3) or more inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein.

        1.17       Election Out of Section 203. Pursuant to the corporation’s original Certificate of Incorporation, the corporation has expressly elected not to be governed by Section 203 of the General Corporation Law of Delaware.

2.     BOARD OF DIRECTORS.

        2.1       Number, Qualification, Election and Term of Directors. Subject to the provisions of the General Corporation Law of Delaware and to any limitations in the Certificate of Incorporation, the business and affairs of the corporation shall be managed by or under the direction of the Board. Subject to the rights of the holders of any series of preferred stock, the number of directors may be fixed or changed from time to time by resolution of a majority of the entire Board; provided the number shall be no less than seven (7) and no more than fifteen (15), or, if the number is not fixed, the number shall be ten (10), but no decrease may shorten the term of any incumbent director. Directors shall be elected at each annual meeting of stockholders, as provided in Section 1.5(b), and shall hold office until the next annual meeting of stockholders and until the election and qualification of their respective successors, subject to the provisions of Section 2.9. As used in these Bylaws, the term “entire Board” means the total number of directors which the corporation would have if there were no vacancies on the Board.

        2.2       Quorum and Manner of Acting. (a) A majority of the entire Board shall constitute a quorum for the transaction of business at any meeting, except as provided in Section 2.10 of these Bylaws. In the absence of a quorum a majority of the directors present may adjourn any meeting from time to time until a quorum is present. Every act or decision done or made by a majority of the directors present at a duly held meeting at which a quorum is present shall be regarded as the act of the Board, subject to the provisions of the Certificate of Incorporation and applicable law.

                    (b)        A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

        2.3       Place of Meetings. Meetings of the Board may be held in or outside Delaware.

        2.4       Annual and Regular Meetings. Annual meetings of the Board for the election of officers and consideration of other matters shall be held either (a) without notice immediately after the annual meeting of stockholders and at the same place, or (b) as soon as practicable after the annual meeting of stockholders, on notice as provided in Section 2.6 of these Bylaws. Regular meetings of the Board may be held without notice and, unless otherwise specified by the Board, shall be held in accordance with a schedule and at such locations as determined from time to time by the Board, provided no less than five (5) such meetings shall beheld each year. If the day fixed for a regular meeting is a legal holiday, the meeting shall be held on the next business day.

        2.5       Special Meetings. . Special meetings of the Board may be called by the chairman of the board, the chief executive officer or by a majority of the directors in office.

        2.6       Notice of Meetings; Waiver of Notice. Notice of the time and place of each special meeting of the Board, and of each annual meeting not held immediately after the annual meeting of stockholders and at the same place, shall be given to each director in advance of the time set for such meeting as provided herein; provided, that if the meeting is to be held at the principal executive offices of the corporation, the notice need not specify the place of the meeting. Except for amendments to the Bylaws, as provided under Section 6.9, notice of a special meeting need not state the purpose or purposes for which the meeting is called and, unless indicated in the notice thereof, any and all business may be transacted at a special meeting. Notice need not be given to any director who submits a signed waiver of notice before or after the meeting or who attends the meeting without protesting at the beginning of the meeting the transaction of any business because the meeting was not lawfully called or convened. Notice of any adjourned meeting need not be given, other than by announcement at the meeting at which the adjournment is taken unless the meeting is adjourned for more than twenty-four (24) hours. If the meeting is adjourned for more than twenty-four (24) hours, then notice of the time and place of the adjourned meeting shall be given before the adjourned meeting takes place, in the manner specified herein to the directors who were not present at the time of adjournment. Notice of a special meeting may be given by any one or more of the following methods and the method used need not be the same for each director being notified:

(a) Written notice sent by mail at least three (3) days prior to the meeting;

(b) Personal service at least twenty-four (24) hours prior to the time of the meeting;

(c) Telegraphic notice at least twenty-four (24) hours prior to the time of the meeting, said notice to be sent as a straight full-rate telegram;

(d) Telephonic notice at least twenty-four (24) hours prior to the time of the meeting; or

(e) Facsimile or other means of electronic transmission at least twenty-four (24) hours prior to the time of the meeting.

        Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director.

        2.7       Board or Committee Action Without a Meeting. Any action required or permitted to be taken by the Board or by any committee of the Board may be taken without a meeting if all of the members of the Board or of the committee individually or collectively consent in writing or by electronic transmission to the adoption of a resolution authorizing the action. Such action by written consent shall have the same force and affect as a unanimous vote of the Board. The resolution and the written consents or electronic transmission or transmissions by the members of the Board or the committee shall be filed with the minutes of the proceeding of the Board or of the committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

        2.8       Participation in Board or Committee Meetings by Conference Telephone. Any or all members of the Board or of any committee of the Board may participate in a meeting of the Board or of the committee by means of a conference telephone or other communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at the meeting.

        2.9       Resignation and Removal of Directors. Any director may resign at any time by delivering his or her resignation in writing, including by means of electronic transmission, to the president or secretary of the corporation, to take effect at the time specified in the resignation; the acceptance of a resignation, unless required by its terms, shall not be necessary to make it effective. Subject to applicable law and the rights of the holders of any series of preferred stock with respect to such series of preferred stock, any or all of the directors may be removed at any time, either with or without cause, by vote of the holders of a majority of the stock having voting power and entitled to vote thereon.

        2.10       Vacancies. Subject to applicable law and the rights of the holders of any series of preferred stock with respect to such series of preferred stock, any vacancy in the Board, including one created by an increase in the authorized number of directors, may be filled for the unexpired term by a majority vote of the remaining directors, although less than a quorum.

        2.11       Compensation. Directors and members of committees shall receive such compensation as the Board determines, together with reimbursement of their reasonable expenses in connection with the performance of their duties. A director may also be paid for serving the corporation, its affiliates or subsidiaries in other capacities.

        2.12       Notice to Members of the Board of Directors. Each member of the Board shall file with the secretary of the corporation an address to which mail or telegraphic notices shall be sent, a telephone number to which a telephonic or facsimile notice may be transmitted and, at the sole discretion of a director, such electronic address to which other electronic transmissions may be sent. A notice mailed, telegraphed, telephoned or transmitted by facsimile or other means of electronic transmission in accordance with the instructions provided by the director shall be deemed sufficient notice. Such address or telephone number may be changed at any time and from time to time by a director by giving written notice of such change to the secretary. Failure on the part of any director to keep an address and telephone number on file with the secretary (but not including an address for other electronic transmissions) shall automatically constitute a waiver of notice of any regular or special meeting of the Board which might be held during the period of time that such address and telephone number are not on file with the Secretary. A notice shall be deemed to be mailed when deposited in the United States mail, postage prepaid. A notice shall be deemed to be telegraphed when the notice is delivered to the transmitter of the telegram and either payment or provision for payment is made by the corporation. Notice shall be deemed to be given by telephone if the notice is transmitted over the telephone to some person (whether or not such person is the director) or message recording device answering the telephone at the number which the director has placed on file with the Secretary. Notice shall be deemed to be given by facsimile or other means of electronic transmission when sent to the telephone number or other address which the director has placed on file with the secretary.

        2.13       Organization. Meetings of the Board shall be presided over by the chairman of the Board, if any, or in his or her absence by the vice chairman of the Board, if any, or in his or her absence by the chief executive officer, if any, or in his or her absence by the president, if any. In the absence of all such directors, a president pro tem chosen by a majority of the directors present shall preside at the meeting. The secretary shall act as secretary of the meeting, but in his or her absence the chairman of the meeting may appoint any person to act as secretary of the meeting.

        2.14       Director Emeritus.¹  The Board may from time to time elect one or more directors emeritus (each a “Director Emeritus”), each of whom shall serve, at the pleasure of the Board, until the first meeting of the Board next following the annual meeting of stockholders, subject to an annual review, or until his or her earlier resignation or removal by the Board. A Director Emeritus shall serve as an advisor and consultant to the Board, subject to such terms and conditions as may be approved by the Board, and may be appointed by the Board to serve as an advisor and consultant to one or more committees of the Board. Such Director Emeritus shall also be available for consultation with management of the corporation. A Director Emeritus shall have the privilege of attending meetings of the Board, and meetings of any committee of the Board for which he or she has been appointed to serve as an advisor and consultant. A Director Emeritus may participate in the discussions that occur during the portions of such meetings which he or she attends. Notice of such meetings to a Director Emeritus shall not be required under any applicable law, the Certificate of Incorporation, or these Bylaws. Each Director Emeritus shall be entitled to receive such compensation as may be fixed from time to time by the Board. No Director Emeritus shall be entitled to vote on any business coming before the Board or any committee of the Board, nor shall he or she be counted as a member of the Board or any such committee for the purpose of determining the number of Directors necessary to constitute a quorum, for the purpose of determining whether a quorum is present, or for any other purpose whatsoever. In the case of a Director Emeritus, the occurrence of any event which in the case of a director would create a vacancy on the Board, shall be deemed to create a vacancy in such position; but the Board may declare the position terminated until such time as the Board shall again deem it proper to create and to fill the position. A Director Emeritus shall be entitled to indemnification under these Bylaws to the same extent, and subject to the same conditions and limitations, as a member of the Board.

3.     COMMITTEES.

        3.1       Audit Committee. The Board by resolution shall designate an Audit Committee consisting of three directors or such other number as may be specified by the Board, which shall review the internal financial controls of the corporation, and the integrity of its financial reporting, and have such other powers and duties as the Board determines. The Board shall adopt a charter, which may be amended from time to time, setting for the powers and duties of the Audit Committee. The members of the Audit Committee shall serve at the pleasure of the Board. All action of the Audit Committee shall be reported to the Board at its next meeting.

        3.2       Compensation Committee. The Board by resolution shall designate a Compensation Committee consisting of three directors or such other number as may be specified by the Board, which shall administer the corporation’s compensation plans and have such other powers and duties as the Board determines. The members of the Compensation Committee shall serve at the pleasure of the Board. All action of the Compensation Committee shall be reported to the Board at its next meeting. The Board shall adopt a charter, which may be amended from time to time, setting forth the powers and duties of the Compensation Committee.

        3.3       Corporate Governance Committee. The Board by resolution shall designate a Corporate Governance Committee consisting of three directors or such other number as may be specified by the Board, which shall nominate candidates for election to the Board and have such other powers and duties as the Board determines. The members of the Corporate Governance Committee shall serve at the pleasure of the Board. All action of the Corporate Governance Committee shall be reported to the Board at its next meeting. The Board shall adopt a Charter, which may be amended from time to time, setting forth the powers and duties of the Corporate Governance Committee.

        3.4       Other Committees. The Board, by resolution adopted by a majority of the entire Board, may designate other committees of directors of one or more directors, which shall serve at the Board’s pleasure and have such powers and duties as the Board determines.

        3.5       Meetings and Action of Committees. (a) The Board may designate one or more directors as alternate members of any committee (other than the Audit Committee), who may replace any absent or disqualified member at any meeting of the committee. Each committee shall keep regular minutes of its meetings and report the same to the Board at its next meeting. Each committee may adopt rules of procedure and shall meet as provided by those rules or by resolutions of the Board.

                    (b)        Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article 2 of these Bylaws, including Section 2.2 (quorum and manner of acting), Section 2.3 (place of meetings), Section 2.4 (annual and regular meetings), Section 2.5 (special meetings), 2.6 (notice of meetings and waiver of notice), Section 2.7 (board or committee action without a meeting), Section 2.8 (participation in board or committee meetings by conference telephone), Section 2.12 (notice to members of the board of directors), and Section 2.13 (organization), with such changes in the context of those Bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, (i) that the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee, (ii) that special meetings of committees may also be called by resolution of the Board, (iii) that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee; (iv) that a majority of the members of a committee shall constitute a quorum for the transaction of business at any meeting; and (v) that the affirmative vote of a majority of the members of a committee shall be required to take action in respect of any matter presented to or requiring the approval of the committee.

        3.6       Election Pursuant to Section 141(c)(2). By resolution of the Board, the corporation has elected pursuant to Section 141(c) of the General Corporation Law of Delaware to be governed by paragraph (2) of Section 141(c) in respect of committees of the Board.

4.     OFFICERS.

        4.1       Number; Security. The executive officers of the corporation shall consist of a chief executive officer, a president, one or more vice presidents (including executive vice president(s) and senior vice president(s) if the Board so determines), a secretary and a treasurer and a chief financial officer who shall be chosen by the Board and such other officers, including but not limited to a chairman of the Board, a vice chairman of the Board, as the Board shall deem expedient, who shall be chosen in such manner and hold their offices for such terms as the Board may prescribe. Any two or more offices may be held by the same person. Either the chairman of the Board or the president, as the Board may designate from time to time, shall be the chief executive officer of the corporation. The Board may from time to time designate the president or any executive vice president as the chief operating officer of the corporation. Any vice president, treasurer or assistant treasurer, or assistant secretary, respectively, may exercise any of the powers of the president, the chief financial officer, or the secretary, respectively, as directed by the Board and shall perform such other duties as are imposed upon such officer by the Bylaws or the Board. The Board may require any officer, agent or employee to give security for the faithful performance of his duties.

        4.2       Election; Term of Office; Salaries. The term of office and salary of each of the officers of the corporation and the manner and time of the payment of such salaries shall be fixed and determined by the Board and may be altered by said Board from time to time at its pleasure, subject to the rights, if any, of said officers under any contract of employment; provided, that the Board may designate such responsibilities to the Compensation Committee and may also authorize the chief executive officer or the president to establish the salaries of officers appointed pursuant to Section 4.3.

        4.3       Subordinate Officers. The Board may appoint subordinate officers (including assistant secretaries and assistant treasurers), agents or employees, each of whom shall hold office for such period and have such powers and duties as the Board determines. The Board may delegate to any executive officer or to any committee the power to appoint and define the powers and duties of any subordinate officers, agents or employees.

        4.4       Resignation and Removal of Officers. Any officer may resign at any time by delivering his resignation in writing to the chief executive officer, president or secretary of the corporation, to take effect at the time specified in the resignation; the acceptance of a resignation, unless required by its terms, shall not be necessary to make it effective. Any officer elected or appointed by the Board or appointed by an executive officer or by a committee may be removed by the Board either with or without cause, and in the case of an officer appointed by an executive officer or by a committee, by the officer or committee who appointed him or her or by the president.

        4.5       Vacancies. A vacancy in any office may be filled for the unexpired term in the manner prescribed in Sections 4.2 and 4.3 of these Bylaws for election or appointment to the office.

        4.6       Chairman of the Board. The chairman of the Board, if such an officer shall be chosen, shall have general supervision, direction and control of the corporation’s business and its officers, and, if present, preside at meetings of the stockholders and the Board and exercise and perform such other powers and duties as may from time to time be assigned to him by the Board or as may be prescribed by these Bylaws. The chairman of the Board shall report to the Board.

        4.7       Vice Chairman of the Board. The vice chairman of the Board, if there shall be one, shall, in the case of the absence, disability or death of the chairman of the Board, exercise all the powers and perform all the duties of the chairman of the Board. The vice chairman shall have such other powers and perform such other duties as may be granted or prescribed by the Board.

        4.8       Chief Executive Officer. Subject to the control of the Board, the chief executive officer of the corporation shall have general supervision over the business of the corporation; the powers and duties of the chief executive officer shall be:

                    (a)        To affix the signature of the corporation to all deeds, conveyances, mortgages, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board or which, in the judgment of the chief executive officer, should be executed on behalf of the corporation, and to sign certificates for shares of capital stock of the corporation.

                    (b)        To have such other powers and be subject to such other duties as the Board may from time to time prescribe.

        4.9       President. The powers and duties of the president are:

                    (a)        To affix the signature of the corporation to all deeds, conveyances, mortgages, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board or which, in the judgment of the president, should be executed on behalf of the corporation, and to sign certificates for shares of capital stock of the corporation.

                    (b)        To have such other powers and be subject to such other duties as the Board may from time to time prescribe.

        4.10       Vice President. In case of the absence, disability or death of the president, the elected vice president, or one of the elected vice presidents, shall exercise all the powers and perform all the duties of the president. If there is more than one elected vice president, the order in which the elected vice presidents shall succeed to the powers and duties of the president shall be as fixed by the Board. The elected vice president or elected vice presidents shall have such other powers and perform such other duties as may be granted or prescribed by the Board.

                      Vice presidents appointed pursuant to Section 4.3 shall have such powers and duties as may be fixed by the chairman of the Board or president, except that such appointed vice presidents may not exercise the powers and duties of the president. Each vice president shall have such powers and duties as the Board or the president assigns to him or her.

        4.11       Secretary. The powers and duties of the secretary are:

                    (a)        To keep a book of minutes at the principal office of the corporation, or such other place as the Board may order, of all meetings of its directors and stockholders with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at directors’ meetings, the number of shares present or represented at stockholders’ meetings and the proceedings thereof.

                    (b)        To keep the seal of the corporation, if any, and affix the same, if any, to all instruments which may require it.

                    (c)        To keep or cause to be kept at the principal office of the corporation, or at the office of the transfer agent or agents, a share register, or duplicate share registers, showing the names of the stockholders and their addresses, the number of and classes of shares, and the number and date of cancellation of every certificate surrendered for cancellation.

                    (d)        To keep a supply of certificates for shares of the corporation, to fill in all certificates issued, and to make a proper record of each such issuance; provided, that so long as the corporation shall have one or more duly appointed and acting transfer agents of the shares, or any class or series of shares, of the corporation, such duties with respect to such shares shall be performed by such transfer agent or transfer agents.

                    (e)        To transfer upon the share books of the corporation any and all shares of the corporation; provided, that so long as the corporation shall have one or more duly appointed and acting transfer agents of the shares, or any class or series of shares, of the corporation, such duties with respect to such shares shall be performed by such transfer agent or transfer agents, and the method of transfer of each certificate shall be subject to the reasonable regulations of the transfer agent to which the certificate is presented for transfer, and also, if the corporation then has one or more duly appointed and acting registrars, to the reasonable regulations of the registrar to which the new certificate is presented for registration; and provided, further that no certificate for shares of stock shall be issued or delivered or, if issued or delivered, shall have any validity whatsoever until and unless it has been signed or authenticated in the manner provided in Section 5.1 hereof.

                    (f)        To make service and publication of all notices that may be necessary or proper, and without command or direction from anyone. In case of the absence, disability, refusal, or neglect of the secretary to make service or publication of any notices, then such notices may be served and/or published by the president or a vice president, or by any person thereunto authorized by either of them or by the board of directors or by the holders of a majority of the outstanding shares of the corporation.

                    (g)        To sign certificates for shares of capital stock of the corporation.

                    (h)        Generally to do and perform all such duties as pertain to the office of secretary and as may be required by the Board.

        4.12       Treasurer. The treasurer shall be or shall be under the direction of the chief financial officer of the corporation, and shall be in charge of the corporation’s books and accounts. Subject to the control of the Board, he or she shall have such other powers and duties as the Board or the president assigns to him or her.

        4.13       Chief Financial Officer. The powers and duties of the chief financial officer are:

                    (a)        To supervise the corporate-wide treasury functions and financial reporting to external bodies.

                    (b)        To have the custody of all funds, securities, evidence of indebtedness and other valuable documents of the corporation and, at the chief financial officer’s discretion, to cause any or all thereof to be deposited for account of the corporation at such depositary as may be designated from time to time by the Board.

                    (c)        To receive or cause to be received, and to give or cause to be given, receipts and acquittances for monies paid in for the account of the corporation.

                    (d)        To disburse, or cause to be disbursed, all funds of the corporation as may be directed by the Board, taking proper vouchers for such disbursements.

                    (e)        To render to the chief executive officer and president, and to the Board, whenever they may require, accounts of all transactions and of the financial condition of the corporation.

                    (f)        Generally to do and perform all such duties as pertain to the office of chief financial officer and as may be required by the Board.

5.     SHARES.

        5.1       Shares of the Corporation. The shares of the corporation shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the chairman or vice chairman of the board of directors or by the president or a vice-president, and by the secretary or an assistant secretary, or the treasurer or an assistant treasurer, representing the number of shares registered in certificate form. The signatures of any such officers thereon may be facsimiles. The seal of the corporation shall be impressed, by original or by facsimile, printed or engraved, on all such certificates. The certificate shall also be signed by the transfer agent and a registrar and the signature of either the transfer agent or the registrar may also be facsimile, engraved or printed. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon any such certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may nevertheless be issued by the corporation with the same effect as if such officer, transfer agent, or registrar had not ceased to be such officer, transfer agent, or registrar at the date of its issue.

        5.2       Special Designation on Certificates. If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights or each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

        5.3       Lost, Stolen, Destroyed and Mutilated Certificates. The owner of any stock of the corporation shall immediately notify the corporation of any loss, theft, destruction or mutilation of any certificate therefor, and the corporation may issue uncertificated shares or a new certificate for stock in the place of any certificate theretofore issued by it and alleged to have been lost, stolen or destroyed, and the Board may, in its discretion, require the owner of the lost, stolen or destroyed certificate or his or her legal representatives to give the corporation a bond in such sum, limited or unlimited, and in such form and with such surety or sureties, as the Board shall in its uncontrolled discretion determine, to indemnify the corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate, or the issuance of any such new certificate or uncertificated shares. The Board may, however, in its discretion refuse to issue any such new certificate or uncertificated shares except pursuant to legal proceedings under the laws of the State of Delaware in such case made and provided.

        5.4       Stock Records. The corporation or a transfer agent shall keep stock books in which shall be recorded the number of shares issued, the names of the owners of the shares, the number owned by them respectively, whether such shares are represented by certificates or are uncertificated, and the transfer of such shares with the date of transfer.

        5.5       Transfers. Transfers of stock shall be made only on the stock transfer record of the corporation upon surrender of the certificate or certificates being transferred which certificate shall be properly endorsed for transfer or accompanied by a duly executed stock power, except in the case of uncertificated shares, for which the transfer shall be made only upon receipt of transfer documentation reasonably acceptable to the corporation. Whenever a certificate is endorsed by or accompanied by a stock power executed by someone other than the person or persons named in the certificate, or the transfer documentation for the uncertificated shares is executed by someone other than the holder of record thereof, evidence of authority to transfer same shall also be submitted with the certificate or transfer documentation. All certificates surrendered to the corporation for transfer shall be canceled.

        5.6       Regulations Governing Issuance and Transfers of Shares. The Board shall have the power and authority to make all such rules and regulations as it shall deem expedient concerning the issue, transfer and registration of shares of stock of the corporation.

        5.7       Transfer Agents and Registrars. The Board may appoint, or authorize one or more officers to appoint, one or more transfer agents and one or more registrars.

        5.8       Record Date for Purposes Other than Notice and Voting. For purposes of determining the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted and which shall not be more than sixty (60) days before any such action. In that case, only stockholders of record at the close of business on the date so fixed are entitled to receive the dividend, distribution or allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided in the Certificate of Incorporation, by these Bylaws, by agreement or by law. If the Board does not so fix a record date, then the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the applicable resolution.

6.     MISCELLANEOUS.

        6.1       Seal. The Board shall adopt a corporate seal, which shall be in the form of a circle and shall bear the corporation’s name and the year and state in which is was incorporated.

        6.2       Fiscal Year. The Board may determine the corporation’s fiscal year. Until changed by the Board, the corporation’s fiscal year shall be the calendar year.

        6.3       Voting of Shares in Other Corporations. Shares in other corporations which are held by the corporation may be represented and voted by the president or a vice president of this corporation or by proxy or proxies appointed by one of them. The Board may, however, appoint some other person to vote the shares.

        6.4       Checks; Drafts; Evidences of Indebtedness. From time to time, the Board shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.

        6.5       Corporate Contracts and Instruments; How Executed. The Board, except as otherwise provided in these Bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

        6.6       Construction; Definitions. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the General Corporation Law of Delaware shall govern the construction of these Bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, the term “person” includes both a corporation and a natural person, and the masculine gender includes the feminine gender and vice versa.

        6.7       Provisions Additional to Provisions of Law. All restrictions, limitations, requirements and other provisions of these Bylaws shall be construed, insofar as possible, as supplemental and additional to all provisions of law applicable to the subject matter thereof and shall be fully complied with in addition to the said provisions of law unless such compliance shall be illegal.

        6.8       Provisions Contrary to Provisions of Law. Any article, section, subsection, subdivision, sentence, clause or phrase of these Bylaws which upon being construed in the manner provided in Section 6.7 hereof, shall be contrary to or inconsistent with any applicable provisions of law, shall not apply so long as said provisions of law shall remain in effect, but such result shall not affect the validity or applicability of any other portions of these Bylaws, it being hereby declared that these Bylaws would have been adopted and each article, section, subsection, subdivision, sentence, clause or phrase thereof, irrespective of the fact that any one or more articles, sections, subsections, subdivisions, sentences, clauses or phrases is or are illegal.

        6.9       Amendments.² Bylaws may be amended, repealed or adopted by a majority of the entire Board, provided that written notice of any such proposed action shall have been given to each director prior to such meeting, or that notice of such addition, amendment, alteration or report shall have been given at the preceding meeting of the Board. The Bylaws may also be amended, repealed or adopted by the affirmative vote of the holders of a majority of the voting power of the stock issued and outstanding and entitled to vote thereon; provided, however, that any proposed alteration or repeal of, or the adoption of any Bylaw inconsistent with, Section 1.2, 1.3, 1.4, 1.5, 1.11, 1.12, 1.13 or 1.17 of Article 1 of the Bylaws or Section 2.1, 2.2, 2.9 or 2.10 of Article 2 of the Bylaws or Section 6.10 of the Bylaws or this sentence, by the stockholders shall require the affirmative vote of the holders of at least 66 2/3% of the voting power of all stock then issued and outstanding and entitled to vote thereon, voting together as a single class; and, provided, further, however, that in the case of any such stockholder action at a special meeting of stockholders, notice of the proposed alteration, repeal or adoption of the new Bylaw or Bylaws must be contained in the notice of such special meeting. The fact that the power to amend these Bylaws has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to amend, adopt or repeal bylaws.

        Whenever an amendment or new bylaw is adopted, it shall be copied in the book of bylaws with the original bylaws, in the appropriate place. If any bylaw is repealed, the fact of repeal with the date of the meeting at which the repeal was enacted or the filing of the operative written consent(s) shall be stated in said book.

      6.10       Indemnification and Insurance. ²

                    (a)        Generally.

                                (1)        The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was or has agreed to serve at the request of the corporation as a director or officer of the corporation, or is or was serving or has agreed to serve at the request of the corporation as a director or officer (which, for purposes hereof, shall include a trustee or similar capacity)of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity.

                                (2)        The corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was or has agreed to serve at the request of the corporation as an employee or agent of the corporation, or is or was serving or has agreed to serve at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity.

                                (3)        The indemnification provided by this subsection (a) shall be from and against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the indemnitee or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom, but shall only be provided if the indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action, suit or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

                                (4)        Notwithstanding the foregoing provisions of this subsection (a), in the case of an action or suit by or in the right of the corporation to procure a judgment in its favor (i) the indemnification provided by this subsection (a) shall be limited to expenses (including attorneys’ fees) actually and reasonably incurred by such person in the defense or settlement of such action or suit, and (ii) no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless, and only to the extent that, the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper.

                                (5)        The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

                    (b)        Successful Defense. To the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsection (a) hereof or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection therewith. If a director or officer is not wholly successful, on the merits or otherwise, in any action, suit or proceeding but is successful, on the merits or otherwise, as to any claim, issue or matter in such action, suit or proceeding, the corporation shall indemnify such person against all expenses (including attorneys’ fees) actually and reasonably incurred by such person or on his or her behalf relating to each successfully resolved claim, issue or matter. For purposes of this Section 6.10 and without limitation, the termination of a claim, issue or matter in an action, suit or proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

                    (c)        Determination That Indemnification Is Proper. Any indemnification of a person entitled to indemnity under subsection (a)(1) hereof shall (unless otherwise ordered by a court) be made by the corporation unless a determination is made that indemnification of such person is not proper in the circumstances because he or she has not met the applicable standard of conduct set forth in subsection (a)(3) hereof. Any indemnification of a person entitled to indemnity under subsection (a)(2) hereof may (unless otherwise ordered by a court) be made by the corporation upon a determination that indemnification of such person is proper in the circumstances because he or she has met the applicable standard of conduct set forth in subsection (a)(3) hereof. Any such determination shall be made (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even if less than a quorum, or (ii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (iii) by the stockholders.

                    (d)        Advance Payment of Expenses; Notification and Defense of Claim.

                                (i)        Expenses (including attorneys’ fees) incurred by a director or officer in defending a threatened or pending civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation as authorized in this Section. Such expenses (including attorneys’ fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate.

                                (ii)        Promptly after receipt by a director, officer, employee or agent of notice of the commencement of any action, suit or proceeding, such person shall, if a claim thereof is to be made against the corporation hereunder, notify the corporation of the commencement thereof. The failure to promptly notify the corporation will not relieve the corporation from any liability that it may have to such person hereunder, except to the extent the corporation is prejudiced in its defense of such action, suit or proceeding as a result of such failure.

                                (iii)        The Board of Directors may authorize the corporation’s counsel to represent a director, officer, employee or agent in any action, suit or proceeding, whether or not the corporation is a party to such action, suit or proceeding. In the event the corporation shall be obligated to pay the expenses of any person with respect to an action, suit or proceeding, as provided in this Section 6.10, the corporation, if appropriate, shall be entitled to assume the defense of such action, suit or proceeding, with counsel reasonably acceptable to such person, upon the delivery to such person of written notice of its election to do so. After delivery of such notice, approval of such counsel by such person and the retention of such counsel by the corporation, the corporation will not be liable to such person under this Section 6.10 for any fees of counsel subsequently incurred by such person with respect to the same action, suit or proceeding, provided that (i) the director, officer, employee or agent shall have the right to employ his or her counsel in such action, suit or proceeding at such person’s expense and (b) if (i) the employment of counsel by such person has been previously authorized in writing by the corporation, (ii) counsel to the director, officer, employee or agent shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the corporation and such person in the conduct of any such defense or (iii) the corporation shall not, in fact, have employed counsel to assume the defense of such action, suit or proceeding, then the fees and expenses of such person’s counsel shall be at the expense of the corporation.

                                (iv)        Notwithstanding any other provision of this Section 6.10 to the contrary, to the extent that any director or officer is, by reason of his or her corporate status, a witness or otherwise participates in any action, suit or proceeding at a time when such person is not a party in the action, suit or proceeding, the corporation shall indemnify such person against all expenses (including attorneys’ fees) actually and reasonably incurred by such person or on his or her behalf in connection therewith.

                    (e)        Procedure for Indemnification of Required Indemnitees. Any indem-nification of a person the corporation is required to indemnify under subsection (a) hereof, or advance of costs, charges and expenses of a person the corporation is required to pay under subsection (d) hereof, shall be made promptly, and in any event within 60 days, upon the written request of such person. If the corporation fails to respond within 60 days, then the request for indemnification shall be deemed to be approved. The right to indemnification or advances as granted by this Section 6.10 shall be enforceable by the person the corporation is required to indemnify under subsection (a) hereof in any court of competent jurisdiction if the corporation denies such request, in whole or in part. Such person’s costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under subsection (d) hereof where the required undertaking, if any, has been received by the corporation) that the claimant has not met the standard of conduct set forth in subsection (a) hereof, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in subsection (a) hereof, nor the fact that there has been an actual determination by the corporation (including its Board of Directors, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

        A director or officer shall be presumed to be entitled to indemnification under this Section 6.10 upon submission of a request for indemnification pursuant to this subsection (e), and the corporation shall have the burden of proof in overcoming that presumption in reaching a determination contrary to that presumption. Such presumption shall be used as a basis for a determination of entitlement to indemnification unless the corporation provides information sufficient to overcome such presumption by clear and convincing evidence.

                    (f)        Survival; Preservation of Other Rights. The provisions of this Section 6.10 shall be deemed to be a contract between the corporation and each director, officer, employee and agent who serves in such capacity at any time while these provisions as well as the relevant provisions of the General Corporation Law of the State of Delaware are in effect and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action, suit, or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such a “contract right” may not be modified retroactively without the consent of such director, officer, employee or agent. The indemnification provided by this Section 6.10 shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

                    (g)        Indemnification Agreements. Without limiting the provisions of this Section 6.10, the corporation is authorized from time to time, without further action by the stockholders of the corporation, to enter into agreements with any director, officer, employee or agent of the corporation providing such rights of indemnification as the corporation may deem appropriate, up to the maximum extent permitted by law. Any agreement entered into by the corporation with a director may be authorized by the other directors, and such authorization shall not be invalid on the basis that similar agreements may have been or may thereafter be entered into with other directors.

                    (h)        Insurance and Subrogation

                                (i)        The corporation may purchase and maintain insurance on behalf of any person who is or was or has agreed to serve at the request of the corporation as a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against, and incurred by, him or her or on his or her behalf in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of this Section 6.10.

                                (ii)        In the event of any payment by the corporation under this Section 6.10, the corporation shall be subrogated to the extent of such payment to all of the rights of recovery of such person, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the corporation to bring suit to enforce such rights in accordance with the terms of such insurance policy.

                                (iii)        The corporation shall not be liable under this Section 6.10 to make any payment of amounts otherwise indemnifiable hereunder (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) if and to the extent that such person has otherwise actually received such payment under the Certificate of Incorporation or these Bylaws or any insurance policy, contract, agreement or otherwise.

                    (i)        Certain Definitions. For purposes of this Section 6.10, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents so that any person who is or was a director, officer employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Section 6.10 with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Section 6.10, references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this Section 6.10.

                    (j)        Limitation on Indemnification. Notwithstanding any other provision herein to the contrary, the corporation shall not be obligated pursuant to these Bylaws:

                    (a)        To indemnify or advance expenses to a director, officer, employee or agent with respect to proceedings (or part thereof) initiated by such person, except with respect to proceedings brought to establish or enforce a right to indemnification (which shall be governed by the provisions of this Section 6.10), unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the corporation.

                    (b)        To indemnify a director, officer, employee or agent for any expenses incurred by such person with respect to any proceeding instituted by such person to enforce or interpret these Bylaws, if a court of competent jurisdiction determines that each of the material assertions made by such person in such proceedings was not made in good faith or was frivolous;

                    (c)        To indemnify a director, officer, employee or agent for expenses or the payment of profits arising from the purchase and sale by such person of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

                    (k)        Certain Settlement Provisions. The corporation shall have no obligation to indemnify any director, officer, employee or agent under this Section 6.10 for amounts paid in settlement of any action, suit or proceeding without the corporation’s prior written consent, which shall not be unreasonably withheld. The corporation shall not settle any action, suit or proceeding in any manner that would impose any fine or other obligation on any director or officer or employee or agent without such person’s prior written consent.

                    (l)        Savings Clause. If this Section 6.10 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director or officer and may indemnify each employee or agent of the corporation as to costs, charges and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the corporation, to the full extent permitted by any applicable portion of this Section 6.10 that shall not have been invalidated and to the full extent permitted by applicable law.

                    (m)        Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnification provided for herein is held by a court of competent jurisdiction to be unavailable to a director or officer in whole or in part, it is agreed that, in such event, the corporation shall contribute to the payment of such director’s or officer’s costs, charges and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, but not including an action by or in the right of the corporation, in an amount that is just and equitable in the circumstances, taking into account, among other things, contributions by other directors and officers of the corporation or others pursuant to indemnification agreements or otherwise; provided, that, without limiting the generality of the foregoing, such contribution shall not be required where such holding by the court is due to (i) the failure of such director or officer to meet the standard of conduct set forth in subsection (a) hereof, or (ii) any limitation on indemnification set forth in subsection (h)(iii), (j) or (k) hereof.

                    (n)        Form and Delivery of Communications. Any notice, request or other communication required or permitted to be given to the corporation under this Section 6.10 shall be in writing and either delivered in person or sent by telecopy, telex, telegram, overnight mail or courier service, or certified or registered mail, postage prepaid, return receipt requested, to the General Counsel or Secretary of the corporation at its principal executive offices.

                    (o)        Subsequent Legislation. If the General Corporation Law of Delaware is amended after adoption of this Section 6.10 to expand further the indemnification permitted to directors or officers, then the corporation shall indemnify such persons to the fullest extent permitted by the General Corporation Law of Delaware, as so amended.

_________________

¹ As Amended May 26, 2004

² As Amended February 6, 2001

EX-10

Exhibit 10.1

EXECUTIVE EMPLOYMENT AGREEMENT

        This Executive Employment Agreement (the “Agreement”) dated as of April 1, 2004 (the “Effective Date”), by and between Express Scripts, Inc., a Delaware corporation (the “Company”), and Ed Stiften (“Executive”).

        WHEREAS, effective as of the date hereof, Executive is being employed by the Company as its Senior Vice President and Chief Financial Officer; and

        WHEREAS, the Company and Executive mutually desire to provide for the 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 67% of Executive’s Annual Base Salary as in effect on January 1 of such year, or in the case of 2004, as of the date hereof, 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 6.13(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 1.28 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 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 material adverse change in Executive’s position 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 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 adjustments in the Company’s long-term incentive compensation programs, or awards made thereunder, resulting from changes in market conditions or adjustments to Company-wide 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 Section 3.4 and 3.5 below, within ninety (90) days of the Effective Date.

Provided that the events described in Section 1.21 (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; 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 April 1, 2004.

        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 either:

        (a)   One Million Eighty-Five Thousand Dollars ($1,085,000) if the Termination Date occurs during the Initial Employment Period, or

        (b)   eighteen (18) months of Executive’s Annual Base Salary as in effect immediately prior to the Termination Date if the Termination Date occurs during a Renewal Period, plus an amount equal to the product of (i) Eighty-five percent (85%) of 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, 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 prior to such Anniversary Date of his 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 Chief Financial Officer and shall report to, and at all times be subject to the lawful direction of, the Chief Executive Officer of the Company, or, in the Chief Executive Officer’s absence, the Company’s then senior executive officer serving in the role of chief executive officer. 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 best efforts and his 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 duties and responsibilities to the best of his 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 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 Twenty-Five Thousand Dollars ($325,000), 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, Medicare taxes and state disability insurance. 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 in Sections 3.10 and 6.13 hereof. The Executive’s Bonus Potential for the year 2004 shall be equal to Two Hundred Seventeen Thousand Seven Hundred Fifty Dollars ($217,750). 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, Medicare taxes and state disability insurance. 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 his Bonus Potential, 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)     Initial Option Grant. Executive will receive a non-qualified option to purchase Twenty Thousand Two Hundred Fifteen (20,215) shares of the Company’s common stock (the “Initial 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. The Initial Option shall vest on March 31, 2007, 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 Initial 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)     Performance-Based Option Grant.

                              (i)     Executive will receive an option to purchase Sixteen Thousand One Hundred Seventy-Two (16,172) 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. The Performance-Based Option shall vest on September 30, 2010 (subject to acceleration as set forth in Section 3.4(b)(ii) 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.

                              (ii)     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.

        3.5     Restricted Stock.

                    (a)     Executive will receive Twelve Thousand Eight Hundred Fifty-Seven (12,857) 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.

                    (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 pro rata portion of the unvested Restricted Stock awarded pursuant to Section 3.5(a) hereof equal to the product of (x) the number of shares of Restricted Stock set forth in Section 3.5(a) hereof which have not vested, multiplied by (y) a fraction, the numerator of which is the number of days which have elapsed from the Effective Date through the Termination Date and the denominator of which is the total number of days from the Effective Date to the Restricted Stock Vesting Date. Shares of Restricted Stock awarded pursuant to Section 3.5(a) hereof in excess of the pro-rated amount which have not otherwise vested pursuant to Section 3.5(b)(ii) hereof 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 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 Initial Option, 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 agreements and 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 pay Executive’s cost of continuing medical insurance on the same or equivalent basis, if any, provided to active employees of the Company (the “Welfare Benefit”) for either (i) twenty-four (24) months if the Termination Date occurs during the Initial Employment Period, or (ii) eighteen (18) months if the Termination Date occurs during a Renewal Period.

                    (b)     The Company shall pay the Severance Benefit, without interest thereon, in either (i) twenty-four (24) substantially equal monthly installments if the Termination Date occurs during the Initial Employment Period, or (ii) eighteen (18) substantially equal monthly installments if the Termination Date occurs during a Renewal Period, which installments shall, in either case, 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, Medicare taxes and state disability insurance. Executive shall not be under any duty to mitigate damages in order to be eligible to receive the Severance Benefit.

                    (c)     Notwithstanding the foregoing, Executive agrees that payment of the Severance Benefit 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 amounts previously paid, allocated, accrued or provided by the Company to Executive pursuant to Section 4.2 hereof and the Company shall be entitled to discontinue the future payment, allocation, accrual or provision of the Severance Benefit and the Welfare Benefit.

                                (ii)     No later than thirty (30) days after the Termination Date, Executive must execute and deliver the General Release 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 is terminated due to Executive’s death prior to the scheduled expiration of the Employment Period, Executive will receive the Accrued Rights.

        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.

        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.

        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, 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. 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. 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.

        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 eighteen (18) months 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 twenty-four (24) 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 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:

Ed Stiften

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 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. 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. Executive shall provide Executive’s 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.

EXPRESS SCRIPTS, INC.

By: /s/ Barrett Toan                                        

Name: Barrett Toan

Title: Chairman and Chief Executive Officer

EXECUTIVE

/s/ Ed Stiften                                                       

Name: Ed Stiften

EXHIBIT A

GENERAL RELEASE AND ACKNOWLEDGMENT

        THIS GENERAL RELEASE AND ACKNOWLEDGMENT (the “General Release”) is made this ___ day of ________, ___________, by _______________ (the “Executive”) in favor of Express Scripts, Inc. (the “Company”) pursuant to Section 4.2(c)(ii) of the Executive’s Employment Agreement dated April 1, 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 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 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 4.2 or 4.5 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 4.2 or 4.5 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 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 execution of this General Release. The Executive acknowledges that the Company has given the Executive enough time to consult with his 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

Exhibit 10.2

EXECUTIVE EMPLOYMENT AGREEMENT

        This Executive Employment Agreement (the “Agreement”) dated as of April 15, 2004 and effective as of January 1, 2004 (the “Effective Date”), by and between Express Scripts, Inc., a Delaware corporation (the “Company”), and George Paz (“Executive”).

        WHEREAS, Executive has been employed by the Company 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 undertakings contained 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 82% 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 6.13(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 1.28 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 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 material adverse change in Executive’s position 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 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 January 29, 1998.

        1.25     “Option” 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 if the Termination Date occurs during a Renewal Period, 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 December 31, 2006 (the “Initial Employment Period”). This Agreement may be extended by the Company and Executive beyond the Initial Employment Period (any such additional period, a “Renewal Period”) upon mutual written agreement of the Company and Executive. 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 President and shall report to, and at all times be subject to the lawful direction of, 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 best efforts and his 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 duties and responsibilities to the best of his 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 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 Five Hundred Fifty Thousand Dollars ($550,000), 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, Medicare taxes and state disability insurance. 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 threin and in Section 6.13 hereof. 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, Medicare taxes and state disability insurance. 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 his Bonus Potential, 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. Executive will receive a non-qualified option to purchase Eighteen Thousand Two (18,002) shares of the Company’s common stock (the “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. The Option shall vest ratably as follows: 1/3 on December 31 2004, 1/3 on December 31, 2005 and 1/3 on December 31, 2006, provided Executive is still employed by the Company on such dates and subject to such other vesting terms as may be provided in the Incentive Plan and the applicable option agreement or notice. The 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.

        3.5     Restricted Stock.

                    (a)     Executive will receive Nineteen Thousand Three Hundred Fifty-Five (19,355) 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.

                    (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 end of the Initial Employment Period (the “Restricted Stock Vesting Date”), or if Executive should die prior to the Restricted Stock Vesting Date, Executive shall become fully vested in the Restricted Stock subject to this Agreement. Unless Section 3.5(b)(ii) shall apply, if Executive’s employment is terminated prior to the Restricted Stock Vesting Date for any reason other than death, all shares of Restricted Stock awarded pursuant to Section 3.5(a) hereof shall be forfeited without payment of consideration by the Company.

                                (ii)     If, prior to the Restricted Stock Vesting Date, either Executive terminates employment on account of Retirement, 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 pro rata portion of the unvested Restricted Stock awarded pursuant to Section 3.5(a) hereof equal to the product of (x) the number of shares of Restricted Stock set forth in Section 3.5(a) hereof which have not vested, multiplied by (y) a fraction, the numerator of which is the number of days which have elapsed from the Effective Date through the Termination Date and the denominator of which is the total number of days from the Effective Date to the Restricted Stock Vesting Date. Shares of Restricted Stock awarded pursuant to Section 3.5(a) hereof in excess of the pro-rated amount 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 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 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 agreements and 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, Medicare taxes and state disability insurance. Executive shall not be under any duty to mitigate damages in order to be eligible to receive the Severance Benefit.

                    (c)     Notwithstanding the foregoing, Executive agrees that payment of the Severance Benefit 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 amounts previously paid, allocated, accrued or provided by the Company to Executive pursuant to Section 4.2 hereof and the Company shall be entitled to discontinue the future payment, allocation, accrual or provision of the Severance Benefit and the Welfare Benefit.

                                (ii)     No later than thirty (30) days after the Termination Date, Executive must execute and deliver the General Release 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 is terminated due to Executive’s death prior to the scheduled expiration of the Employment Period, Executive will receive the Accrued Rights.

        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.

        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.

        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, 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. 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. 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.

        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:

George Paz

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 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. 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. Executive shall provide Executive’s 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.

EXPRESS SCRIPTS, INC.

By: /s/ Barrett Toan                                        

Name: Barrett Toan

Title: Chairman and Chief Executive Officer

EXECUTIVE

/s/ George Paz                                                  

Name: George Paz

EXHIBIT A

GENERAL RELEASE AND ACKNOWLEDGMENT

        THIS GENERAL RELEASE AND ACKNOWLEDGMENT (the “General Release”) is made this ___ day of ________, ___________, by _______________ (the “Executive”) in favor of Express Scripts, Inc. (the “Company”) pursuant to Section 4.2(c)(ii) of the Executive’s Employment Agreement dated April 15, 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 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 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 4.2 or 4.5 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 4.2 or 4.5 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 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 execution of this General Release. The Executive acknowledges that the Company has given the Executive enough time to consult with his 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-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: July 28, 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: July 28, 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 June 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:        July 28, 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 June 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:        July 28, 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.