<PAGE>   1


                          CHANGE IN CONTROL AGREEMENT              EXHIBIT 10.3 
                         Dated as of December 9, 1996


        The Board of Directors of Arbor Drugs, Inc. (the "Company") has
determined that, in light of the uncertainties affecting the industry in which
the Company operates, it would be in the best interests of the Company and its
shareholders to induce key employees, including the undersigned (the
"Employee"), to remain with the Company and to reinforce and encourage their
continued attention and dedication to the Company.  Accordingly, the Company
desires to enter into this agreement (the "Agreement") with the Employee
providing for the continuation of certain of the Employee's welfare benefits if
the Employee is terminated by the Company or a successor or, for Good Reason
(as hereinafter defined) the Employee terminates his or her employment with the
Company or a successor, within 180 days preceding, or within two years
following, a Change in Control (as hereinafter defined), subject to the terms
and conditions specified herein.  This Agreement is in addition to any other
entitlement the Employee might have under any other plan or individual
employment arrangement or agreement with the Company or any of its
subsidiaries.


CONTINUATION OF CERTAIN EMPLOYEE WELFARE BENEFITS

        If the Employee is terminated by the Company or a successor without
Cause (as hereinafter defined), or terminates his or her employment with the
Company or a successor for Good Reason (as hereinafter defined), within 180
days preceding, or within two years following, a Change in Control, the Company
or any of its subsidiaries or successor shall continue his participation, as if
he were still an employee, in the medical, dental, hospitalization, disability
and life insurance plans, programs and/or arrangements of the Company or any of
its subsidiaries in which he was participating on the date of the termination
of his employment on the same terms and conditions as other executives under
such plans, programs and/or arrangements until the earlier of (i) the end of
the 24-month period commencing with the month immediately following the month
in which the date of the termination of his employment occurred or (ii) the
date, or dates, he receives equivalent coverage and benefits under the plans,
programs and/or arrangements of a subsequent employer (such coverage and
benefits to be determined on a coverage-by-coverage or benefit-by-benefit
basis) (the "Continuation of Benefits"); provided, however, that the Employee
shall not be entitled to the Continuation of Benefits if any of the
Circumstances of Ineligibility (as hereinafter defined) apply to the Employee.

CIRCUMSTANCES OF INELIGIBILITY

        The Employee will not be eligible to receive the Continuation of
Benefits under this Agreement in any one or more of the following
circumstances:

        1.      VOLUNTARY TERMINATION:  If the Employee elects to voluntarily
terminate the Employee's employment, including termination due to retirement,
with the Company or a successor, the Employee will not be eligible to receive
the Payment; provided, however, that termination by the Employee for Good
Reason shall not constitute a Circumstance of Ineligibility.

        2.      TERMINATION FOR CAUSE:  If the Employee's employment with the
Company or a successor is terminated for Cause at any time preceding or
following a Change in Control, the Employee will not be eligible to receive the
Payment.

                                                                          27
<PAGE>   2
DEFINITIONS

        For purposes of this Agreement:

        1.      CHANGE IN CONTROL means that any of the following has
occurred:  (a) any person or other entity (other than any of the Company's
subsidiaries), including any person as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, becomes the beneficial owner, as defined in
Rule 13d-3 of the Exchange Act, directly or indirectly, of more than fifty
percent (50%) of the total combined voting power of all classes of capital
stock of the Company normally entitled to vote for the election of directors
(the "Voting Stock") of the Company, (b) the Board of Directors approves the
sale of all or substantially all of the assets of the Company (other than to
one or more wholly-owned direct or indirect subsidiaries of the Company) or a
plan of complete liquidation of the Company, (c) the Board of Directors
approves a consolidation or merger of the Company with another corporation
(other than with any of the Company's subsidiaries), the consummation of which
would result in the shareholders of the Company immediately before the
occurrence of the consolidation or merger owning, in the aggregate, less than
50% of the Voting Stock of the surviving entity, or (d) during any period of
not more than two consecutive years, a change in the Board of Directors occurs
with the result that the members of the Board of Directors on the date hereof
(the "Incumbent Directors") no longer constitute a majority of such Board of
Directors, provided that any person becoming a director (x) whose election or
nomination for election was supported by a majority of the then Incumbent
Directors and (y) whose initial assumption of his or her directorship did not
occur as a result of an actual or threatened solicitation of proxies or
consents or as a result of a designation by a person who has entered into an
agreement with the Company to effect a transaction described in clause (a), (b)
or (c) above shall be considered an Incumbent Director for purposes hereof.

        2.      CAUSE means (a) if the Employee is a party to a written
employment agreement with the Company or a subsidiary of the Company, which
agreement or plan contains a definition of "for cause" or "cause" (or words of
like import) for purposes of termination of employment or services thereunder
by the Company or such subsidiary, "for cause" or "cause" as defined therein;
or (b) if the Employee is not a party to such a written employment agreement,
(i) the commission by the Employee of an act of fraud in the performance of
such Employee's duties on behalf of the Company or a subsidiary of the Company;
(ii) conviction of the Employee for commission of a felony in connection with
the performance of his or her duties on behalf of the Company or a subsidiary
of the Company; or (iii) the continuing failure of the Employee to perform his
or her material duties to the Company or a subsidiary of the Company that has
not been cured within 15 days after written notice thereof has been given to
the Employee by the Board of Directors of the Company.

        3.      GOOD REASON means, without the written consent of the Employee,
(i) assignment of duties or responsibilities materially inconsistent with those
customarily associated with the highest position held by the Employee within
the 181 days prior to the Change in Control (alternatively, the "Measuring
Position"), or any other action by the Company or a successor that results in a
diminution of the Employee's position, authority, duties or responsibilities
compared to the Measuring Position, other than an isolated action that is not
taken in bad faith and is remedied by the Company or a successor promptly after
receipt of notice thereof from the Employee; (ii) reduction in (x) the
Employee's total compensation reportable on Form W-2 in any calendar year from
the average of the total compensation





                                                                        28
<PAGE>   3



     of the Employee reported on the Forms W-2 issued by the Company for the
     two most recent calendar years ended prior to the calendar year in which
     the Change in Control occurs or (y) in any welfare benefits from the
     highest levels in effect within the 181 days prior to the Change in
     Control; or (iii) relocation of the Employee's principal place of
     employment to a location more than 35 miles from the Executive's principal
     place of employment on the 181st day prior to the Change in Control.

CERTAIN TAX PROVISIONS

        1.      In the event that any payment or benefit received or to be
received by you pursuant to the terms of this Agreement (the "Contract
Payment") or of any other plan, arrangement or agreement of the Company (or any
subsidiary) ("Other Payments" and, together with the Contract Payments, the
"Payments") would, in the opinion of independent tax counsel selected by the
Company and reasonably acceptable to you ("Tax Counsel"), be subject to the
excise tax (the "Excise Tax") imposed by section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code") (in whole or in part), as determined as
provided below, the Company shall pay to you, at the time specified in
Paragraph 2 below, an additional amount (the "Gross-Up Payment") such that the
net amount retained by you, after deduction of the Excise Tax on Contract
Payments and Other Payments and any federal, state and local income or other
tax and Excise Tax upon the payment provided for by this Paragraph 1, and any
interest, penalties or additions to tax payable by you with respect thereto,
shall be equal to the total present value of the Contract Payments and Other
Payments at the time such Payments are to be made.  For purposes of determining
whether any of the Payments will be subject to the Excise Tax and the amounts
of such Excise Tax, (1) the total amount of the Payments shall be treated as
"parachute payments" within the meaning of section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of section 280G(b)(1) of the
Code shall be treated as subject to the Excise Tax, except to the extent that,
in the opinion of Tax Counsel, a Payment (in whole or in part) does not
constitute a "parachute payment" within the meaning of section 280G(b)(2) of
the Code, or such "excess parachute payments" (in whole or in part) are not
subject to the Excise Tax, (2) the amount of the Payments that shall be treated
as subject to the Excise Tax shall be equal to the lesser of (A) the total
amount of the Payments or (B) the amount of "excess parachute payments" within
the meaning of section 280G(b)(1) of the Code (after applying clause (1)
hereof), and (3) the value of any noncash benefits or any deferred payment or
benefit shall be determined by Tax Counsel in accordance with the principles of
sections 280G(d)(3) and (4) of the Code.  For purposes of determining the
amount of the Gross-Up Payment, you shall be deemed to pay federal income taxes
at the highest marginal rates of federal income taxation applicable to the
individuals in the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rates of taxation
applicable to individuals as are in effect in the state and locality of your
residence in the calendar year in which the Gross-Up Payment is to be made, net
of the maximum reduction in federal income taxes that can be obtained from
deduction of such state and local taxes, taking into account any limitations
applicable to individuals subject to federal income tax at the highest marginal
rates.

        2.      The Gross-Up Payments provided for in Paragraph 1 above hereof
shall be made upon the earlier of (i) the payment to you of any Contract
Payment or Other Payment or (ii) the imposition upon you or payment by you of
any Excise Tax.

        3.      If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the opinion of Tax Counsel
that the Excise Tax is less than the amount taken into account under Paragraph


                                                                           29


                                        
<PAGE>   4



1 above, you shall repay to the Company within five days of your receipt of
notice of such final determination or opinion the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income tax
imposed on the Gross-Up Payment being repaid by you if such repayment results
in a reduction in Excise Tax or a federal, state and local income tax
deduction) plus any interest received by you on the amount of such repayment.
If it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding or the opinion of Tax Counsel that the
Excise Tax exceeds the amount taken into account hereunder (including by reason
of any payment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess within five days of the Company's receipt of
notice of such final determination or opinion.

        4.      In the event of any change in, or further interpretation of,
sections 280G or 4999 of the Code and the regulations promulgated thereunder,
you shall be entitled, by written notice to the Company, to request an opinion
of Tax Counsel regarding the application of such change to any of the
foregoing, and the Company shall use its best efforts to cause such opinion to
be rendered as promptly as practicable.  All fees and expenses of Tax Counsel
incurred in connection with this agreement shall be borne by the Company.

MISCELLANEOUS

        Term.  This Agreement shall terminate and be of no further force or
effect if a Change in Control has not occurred on or before the fifth
anniversary of the date first written above.

        No Employment Agreement.  This Agreement does not constitute a contract
of employment or impose on the Company any obligation to retain the Employee as
an employee.

        Deductions and Withholding.  The Employee agrees that the Company
shall withhold from any and all compensation required to be paid to the
Employee pursuant to this Agreement all federal, state, local and/or other
taxes which the Company determines are required to be withheld in accordance
with applicable statutes and/or regulations from time to time in effect.

        Arbitration.  Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
conducted in the City of Detroit in the State of Michigan under the Commercial
Arbitration Rules then prevailing of the American Arbitration Association and
such submission shall request the American Arbitration Association to:  (i)
appoint an arbitrator experienced and knowledgeable concerning the matter then
in dispute; (ii) require the testimony to be transcribed; (iii) require the
award to be accompanied by findings of fact and a statement of reasons for the
decision; and (iv) request the matter to be handled by and in accordance with
the expedited procedures provided for in the Commercial Arbitration Rules.  The
determination of the arbitrators, which shall be based upon a de novo
interpretation of this Agreement, shall be final and binding and judgment may
be entered on the arbitrators' award in any court having jurisdiction.  All
costs of the American Arbitration Association and the arbitrator shall be borne
as determined by the arbitrator.

        Legal Fees.  In the event the Company or the successor does not make
the Change in Control Payment or Gross-Up Payment due hereunder on a timely
basis and the Employee collects any part or all of the Change in Control
Payment or Gross-Up Payment or otherwise successfully enforces the terms of
this Agreement




                                                                           30
                                        
<PAGE>   5
by or through a lawyer or lawyers, the Company or the successor shall pay all
costs of such collection or enforcement, including reasonable legal fees and
other reasonable fees and expenses which the Employee may incur.  The Company
or the successor shall pay to the Employee interest at the "prime" lending rate
as announced from time to time by Citibank, N.A. on all or any part of the
Payment that is not paid when due.  The applicable rate for each calendar
quarter shall be the "prime" rate in effect on the first day of the calendar
quarter.

        No Duty to Mitigate/Set-off.  The Company agrees that if the Employee's
employment with the Company or a successor is terminated within the six months
preceding or two years following a Change in Control covered by this Agreement,
the Employee shall not be required to seek other employment.  Further, the
amount of the Change in Control Payment shall not be reduced by any
compensation earned by the Employee or any benefit provided to the Employee as
the result of employment by another employer or otherwise.  The Company's
obligations to make the Change in Control Payment shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company or a successor may have
against the Employee.

        Entire Agreement.  This Agreement embodies the entire agreement of the
parties with respect to any payment due the Employee in the event of a Change
in Control and supersedes any other prior oral or written agreements between
the Employee and the Company with respect thereto.  No party may amend, modify
or terminate this Agreement without the express written consent of the other
party.

        Successors; Binding Agreement.  In addition to any obligations imposed
by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree in writing to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place and this Agreement shall inure
to the benefit of such successor. Any such assignment shall not relieve the
Company from liability hereunder. This Agreement shall inure to the benefit of
and be enforceable by the Employee's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devises and
legatees.

        Governing Law.  This Agreement shall be governed and construed in
accordance with the laws of the State of Michigan without regard to the
conflicts of law principles of such state.

        Counterparts.  This Agreement may be executed and delivered in
separate counterparts, each of which when so executed and delivered shall be
deemed an original and all of which taken together shall constitute one and the
same agreement.


                                                                           31


                                        
<PAGE>   6

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

                                                   ARBOR DRUGS, INC.

                                                   By:   /s/ Gilbert C. Gerhard 
                                                         -----------------------
                                                   Gilbert C. Gerhard
                                                   Senior Vice President-
                                                   Finance & Administration

ACCEPTED AND AGREED TO
BY THE UNDERSIGNED EMPLOYEE
as of the date first written above

By:            /s/ Eugene Applebaum
               ----------------------
        Name:  Eugene Applebaum




                                                                            32
                                        
<PAGE>   7



                          CHANGE IN CONTROL AGREEMENT
                          Dated as of December 9, 1996


        The Board of Directors of Arbor Drugs, Inc. (the "Company") has
determined that, in light of the uncertainties affecting the industry in which
the Company operates, it would be in the best interests of the Company and its
shareholders to induce key employees, including the undersigned (the
"Employee"), to remain with the Company and to reinforce and encourage their
continued attention and dedication to the Company.  Accordingly, the Company
desires to enter into this agreement (the "Agreement") with the Employee
providing for the continuation of certain of the Employee's welfare benefits if
the Employee is terminated by the Company or a successor or, for Good Reason
(as hereinafter defined) the Employee terminates his or her employment with the
Company or a successor, within 180 days preceding, or within two years
following, a Change in Control (as hereinafter defined), subject to the terms
and conditions specified herein.  This Agreement is in addition to any other
entitlement the Employee might have under any other plan or individual
employment arrangement or agreement with the Company or any of its
subsidiaries.


CONTINUATION OF CERTAIN EMPLOYEE WELFARE BENEFITS

        If the Employee is terminated by the Company or a successor without
Cause (as hereinafter defined), or terminates his or her employment with the
Company or a successor for Good Reason (as hereinafter defined), within 180
days preceding, or within two years following, a Change in Control, the Company
or any of its subsidiaries or successor shall continue his participation, as if
he were still an employee, in the medical, dental, hospitalization, disability
and life insurance plans, programs and/or arrangements of the Company or any of
its subsidiaries in which he was participating on the date of the termination
of his employment on the same terms and conditions as other executives under
such plans, programs and/or arrangements until the earlier of (i) the end of
the 24-month period commencing with the month immediately following the month
in which the date of the termination of his employment occurred or (ii) the
date, or dates, he receives equivalent coverage and benefits under the plans,
programs and/or arrangements of a subsequent employer (such coverage and
benefits to be determined on a coverage-by-coverage or benefit-by-benefit
basis) (the "Continuation of Benefits"); provided, however, that the Employee
shall not be entitled to the Continuation of Benefits if any of the
Circumstances of Ineligibility (as hereinafter defined) apply to the Employee.

CIRCUMSTANCES OF INELIGIBILITY

        The Employee will not be eligible to receive the Continuation of
Benefits under this Agreement in any one or more of the following
circumstances:

        1.      VOLUNTARY TERMINATION:  If the Employee elects to voluntarily
   terminate the Employee's employment, including termination due to
   retirement, with the Company or a successor, the Employee will not be
   eligible to receive the Payment; provided, however, that termination by
   the Employee for Good Reason shall not constitute a Circumstance of
   Ineligibility.

        2.      TERMINATION FOR CAUSE:  If the Employee's employment with the
   Company or a successor is terminated for Cause at any time preceding or
   following a Change in Control, the Employee will not be eligible to receive
   the Payment.



                                                                           33

                                        
<PAGE>   8

DEFINITIONS

        For purposes of this Agreement:

        1.      CHANGE IN CONTROL means that any of the following has occurred: 
(a) any person or other entity (other than any of the Company's subsidiaries),
including any person as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, becomes the beneficial owner, as defined in Rule 13d-3 of the
Exchange Act, directly or indirectly, of more than fifty percent (50%) of the
total combined voting power of all classes of capital stock of the Company
normally entitled to vote for the election of directors (the "Voting Stock") of
the Company, (b) the Board of Directors approves the sale of all or
substantially all of the assets of the Company (other than to one or more
wholly-owned direct or indirect subsidiaries of the Company) or a plan of
complete liquidation of the Company, (c) the Board of Directors approves a
consolidation or merger of the Company with another corporation (other than
with any of the Company's subsidiaries), the consummation of which would result
in the shareholders of the Company immediately before the occurrence of the
consolidation or merger owning, in the aggregate, less than 50% of the Voting
Stock of the surviving entity, or (d) during any period of not more than two
consecutive years, a change in the Board of Directors occurs with the result
that the members of the Board of Directors on the date hereof (the "Incumbent
Directors") no longer constitute a majority of such Board of Directors,
provided that any person becoming a director (x) whose election or nomination
for election was supported by a majority of the then Incumbent Directors and
(y) whose initial assumption of his or her directorship did not occur as a
result of an actual or threatened solicitation of proxies or consents or as a
result of a designation by a person who has entered into an agreement with the
Company to effect a transaction described in clause (a), (b) or (c) above shall
be considered an Incumbent Director for purposes hereof.

        2.      CAUSE means (a) if the Employee is a party to a written
employment agreement with the Company or a subsidiary of the Company, which
agreement or plan contains a definition of "for cause" or "cause" (or words of
like import) for purposes of termination of employment or services thereunder
by the Company or such subsidiary, "for cause" or "cause" as defined therein;
or (b) if the Employee is not a party to such a written employment agreement,
(i) the commission by the Employee of an act of fraud in the performance of
such Employee's duties on behalf of the Company or a subsidiary of the Company;
(ii) conviction of the Employee for commission of a felony in connection with
the performance of his or her duties on behalf of the Company or a subsidiary
of the Company; or (iii) the continuing failure of the Employee to perform his
or her material duties to the Company or a subsidiary of the Company that has
not been cured within 15 days after written notice thereof has been given to
the Employee by the Board of Directors of the Company.

        3.      GOOD REASON means, without the written consent of the Employee,
(i) assignment of duties or responsibilities materially inconsistent with those
customarily associated with the highest position held by the Employee within
the 181 days prior to the Change in Control (alternatively, the "Measuring
Position"), or any other action by the Company or a successor that results in a
diminution of the Employee's position, authority, duties or responsibilities
compared to the Measuring Position, other than an isolated action that is not
taken in bad faith and is remedied by the Company or a successor promptly after
receipt of notice thereof from the Employee; (ii) reduction in (x) the
Employee's total compensation reportable on Form W-2 in any calendar year from
the average of the total compensation


                                                                            34

                                        
<PAGE>   9
   of the Employee reported on the Forms W-2 issued by the Company for the
   two most recent calendar years ended prior to the calendar year in which the
   Change in Control occurs or (y) in any welfare benefits from the highest
   levels in effect within the 181 days prior to the Change in Control; or
   (iii) relocation of the Employee's principal place of employment to a
   location more than 35 miles from the Executive's principal place of
   employment on the 181st day prior to the Change in Control.

CERTAIN TAX PROVISIONS

        1.      In the event that any payment or benefit received or to be
received by you pursuant to the terms of this Agreement (the "Contract
Payment") or of any other plan, arrangement or agreement of the Company (or any
subsidiary) ("Other Payments" and, together with the Contract Payments, the
"Payments") would, in the opinion of independent tax counsel selected by the
Company and reasonably acceptable to you ("Tax Counsel"), be subject to the
excise tax (the "Excise Tax") imposed by section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code") (in whole or in part), as determined as
provided below, the Company shall pay to you, at the time specified in
Paragraph 2 below, an additional amount (the "Gross-Up Payment") such that the
net amount retained by you, after deduction of the Excise Tax on Contract
Payments and Other Payments and any federal, state and local income or other
tax and Excise Tax upon the payment provided for by this Paragraph 1, and any
interest, penalties or additions to tax payable by you with respect thereto,
shall be equal to the total present value of the Contract Payments and Other
Payments at the time such Payments are to be made.  For purposes of determining
whether any of the Payments will be subject to the Excise Tax and the amounts
of such Excise Tax, (1) the total amount of the Payments shall be treated as
"parachute payments" within the meaning of section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of section 280G(b)(1) of the
Code shall be treated as subject to the Excise Tax, except to the extent that,
in the opinion of Tax Counsel, a Payment (in whole or in part) does not
constitute a "parachute payment" within the meaning of section 280G(b)(2) of
the Code, or such "excess parachute payments" (in whole or in part) are not
subject to the Excise Tax, (2) the amount of the Payments that shall be treated
as subject to the Excise Tax shall be equal to the lesser of (A) the total
amount of the Payments or (B) the amount of "excess parachute payments" within
the meaning of section 280G(b)(1) of the Code (after applying clause (1)
hereof), and (3) the value of any noncash benefits or any deferred payment or
benefit shall be determined by Tax Counsel in accordance with the principles of
sections 280G(d)(3) and (4) of the Code.  For purposes of determining the
amount of the Gross-Up Payment, you shall be deemed to pay federal income taxes
at the highest marginal rates of federal income taxation applicable to the
individuals in the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rates of taxation
applicable to individuals as are in effect in the state and locality of your
residence in the calendar year in which the Gross-Up Payment is to be made, net
of the maximum reduction in federal income taxes that can be obtained from
deduction of such state and local taxes, taking into account any limitations
applicable to individuals subject to federal income tax at the highest marginal
rates.

        2.      The Gross-Up Payments provided for in Paragraph 1 above hereof
shall be made upon the earlier of (i) the payment to you of any Contract
Payment or Other Payment or (ii) the imposition upon you or payment by you of
any Excise Tax.

        3.      If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the opinion of Tax Counsel
that the Excise Tax is less than the amount taken into account under Paragraph




                                                                          35
                                        
<PAGE>   10
1 above, you shall repay to the Company within five days of your receipt of
notice of such final determination or opinion the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income tax
imposed on the Gross-Up Payment being repaid by you if such repayment results
in a reduction in Excise Tax or a federal, state and local income tax
deduction) plus any interest received by you on the amount of such repayment.
If it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding or the opinion of Tax Counsel that the
Excise Tax exceeds the amount taken into account hereunder (including by reason
of any payment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess within five days of the Company's receipt of
notice of such final determination or opinion.

        4.      In the event of any change in, or further interpretation of,
sections 280G or 4999 of the Code and the regulations promulgated thereunder,
you shall be entitled, by written notice to the Company, to request an opinion
of Tax Counsel regarding the application of such change to any of the
foregoing, and the Company shall use its best efforts to cause such opinion to
be rendered as promptly as practicable.  All fees and expenses of Tax Counsel
incurred in connection with this agreement shall be borne by the Company.

MISCELLANEOUS

        Term.  This Agreement shall terminate and be of no further force or
effect if a Change in Control has not occurred on or before the fifth
anniversary of the date first written above.

        No Employment Agreement. This Agreement does not constitute a contract
of employment or impose on the Company any obligation to retain the Employee as
an employee.

        Deductions and Withholding.  The Employee agrees that the Company shall
withhold from any and all compensation required to be paid to the Employee
pursuant to this Agreement all federal, state, local and/or other taxes which
the Company determines are required to be withheld in accordance with
applicable statutes and/or regulations from time to time in effect.

        Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration conducted in
the City of Detroit in the State of Michigan under the Commercial Arbitration
Rules then prevailing of the American Arbitration Association and such
submission shall request the American Arbitration Association to:  (i) appoint
an arbitrator experienced and knowledgeable concerning the matter then in
dispute; (ii) require the testimony to be transcribed; (iii) require the award
to be accompanied by findings of fact and a statement of reasons for the
decision; and (iv) request the matter to be handled by and in accordance with
the expedited procedures provided for in the Commercial Arbitration Rules.  The
determination of the arbitrators, which shall be based upon a de novo
interpretation of this Agreement, shall be final and binding and judgment may
be entered on the arbitrators' award in any court having jurisdiction.  All
costs of the American Arbitration Association and the arbitrator shall be borne
as determined by the arbitrator.

        Legal Fees.  In the event the Company or the successor does not make
the Change in Control Payment or Gross-Up Payment due hereunder on a timely
basis and the Employee collects any part or all of the Change in Control
Payment or Gross-Up Payment or otherwise successfully enforces the terms of
this Agreement




                                                                           36
                                        
<PAGE>   11
by or through a lawyer or lawyers, the Company or the successor shall pay all
costs of such collection or enforcement, including reasonable legal fees and
other reasonable fees and expenses which the Employee may incur.  The Company
or the successor shall pay to the Employee interest at the "prime" lending rate
as announced from time to time by Citibank, N.A. on all or any part of the
Payment that is not paid when due.  The applicable rate for each calendar
quarter shall be the "prime" rate in effect on the first day of the calendar
quarter.

        No Duty to Mitigate/Set-off.  The Company agrees that if the Employee's
employment with the Company or a successor is terminated within the six months
preceding or two years following a Change in Control covered by this Agreement,
the Employee shall not be required to seek other employment.  Further, the
amount of the Change in Control Payment shall not be reduced by any
compensation earned by the Employee or any benefit provided to the Employee as
the result of employment by another employer or otherwise.  The Company's
obligations to make the Change in Control Payment shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company or a successor may have
against the Employee.

        Entire Agreement.  This Agreement embodies the entire agreement of the
parties with respect to any payment due the Employee in the event of a Change
in Control and supersedes any other prior oral or written agreements between
the Employee and the Company with respect thereto.  No party may amend, modify
or terminate this Agreement without the express written consent of the other
party.

        Successors; Binding Agreement. In addition to any obligations imposed
by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree in writing to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place and this Agreement shall inure
to the benefit of such successor. Any such assignment shall not relieve the
Company from liability hereunder. This Agreement shall inure to the benefit of
and be enforceable by the Employee's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devises and
legatees.

        Governing Law.  This Agreement shall be governed and construed in
accordance with the laws of the State of Michigan without regard to the
conflicts of law principles of such state.

        Counterparts.  This Agreement may be executed and delivered in separate
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which taken together shall constitute one and the same
agreement.



                                                                           37

                                        
<PAGE>   12



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

                                                   ARBOR DRUGS, INC.


                                                   By:   /s/ Gilbert C. Gerhard 
                                                         -----------------------
                                                   Gilbert C. Gerhard
                                                   Senior Vice President-
                                                   Finance & Administration

ACCEPTED AND AGREED TO
BY THE UNDERSIGNED EMPLOYEE
as of the date first written above


By:            /s/ Markus M. Ernst
               ---------------------
        Name:  Markus M. Ernst




                                                                           38
<PAGE>   13



                          CHANGE IN CONTROL AGREEMENT
                          Dated as of December 9, 1996


        The Board of Directors of Arbor Drugs, Inc. (the "Company") has
determined that, in light of the uncertainties affecting the industry in which
the Company operates, it would be in the best interests of the Company and its
shareholders to induce key employees, including the undersigned (the
"Employee"), to remain with the Company and to reinforce and encourage their
continued attention and dedication to the Company.  Accordingly, the Company
desires to enter into this agreement (the "Agreement") with the Employee
providing for a payment to the Employee and the continuation of certain of the
Employee's welfare benefits if the Employee is terminated by the Company or a
successor or, for Good Reason (as hereinafter defined), the Employee terminates
his or her employment with the Company or a successor, within 180 days
preceding, or within two years following, a Change in Control (as hereinafter
defined), subject to the terms and conditions specified herein.  This Agreement
is in addition to any other entitlement the Employee might have under any other
plan or individual employment arrangement or agreement with the Company or any
of its subsidiaries.

CHANGE IN CONTROL PAYMENT

        If the Employee is terminated by the Company or a successor without
Cause (as hereinafter defined), or terminates his or her employment with the
Company or a successor for Good Reason (as hereinafter defined), within 180
days preceding, or within two years following, a Change in Control, the
Employee will be entitled to receive a payment in an amount equal to two times
the Employee's annual base salary on the date of termination of the Employee's
employment (or in the case of a termination of employment for Good Reason based
on a reduction in the Employee's annual base salary, the annual base salary in
effect immediately prior to such reduction) (the "Change in Control Payment");
provided, however, that the Employee shall not be entitled to receive the
Change in Control Payment if any of the Circumstances of Ineligibility (as
hereinafter defined) apply to the Employee. The Change in Control Payment will
be paid to the Employee in cash in a lump sum within five (5) days following
the termination of the Employee's employment with the Company or the successor
corporation.

CIRCUMSTANCES OF INELIGIBILITY

        The Employee will not be eligible to receive the Change in Control
Payment under this Agreement in any one or more of the following circumstances:

         1.      VOLUNTARY TERMINATION:  If the Employee elects to voluntarily
terminate the Employee's employment, including termination due to retirement,
with the Company or a successor, the Employee will not be eligible to receive
the Payment; provided, however, that termination by the Employee for Good
Reason shall not constitute a Circumstance of Ineligibility.

         2.      TERMINATION FOR CAUSE:  If the Employee's employment with the
Company or a successor is terminated for Cause at any time preceding or
following a Change in Control, the Employee will not be eligible to receive the
Payment.




                                                                        39
<PAGE>   14



DEFINITIONS

         For purposes of this Agreement:

         1.      CHANGE IN CONTROL means that any of the following has
   occurred:  (a) any person or other entity (other than any of the
   Company's subsidiaries), including any person as defined in Section 13(d)(3)
   of the Securities Exchange Act of 1934, becomes the beneficial owner, as
   defined in Rule 13d-3 of the Exchange Act, directly or indirectly, of more
   than fifty percent (50%) of the total combined voting power of all classes
   of capital stock of the Company normally entitled to vote for the election
   of directors (the "Voting Stock") of the Company, (b) the Board of Directors
   approves the sale of all or substantially all of the assets of the Company
   (other than to one or more wholly-owned direct or indirect subsidiaries of
   the Company) or a plan of complete liquidation of the Company, (c) the Board
   of Directors approves a consolidation or merger of the Company with another
   corporation (other than with any of the Company's subsidiaries), the
   consummation of which would result in the shareholders of the Company
   immediately before the occurrence of the consolidation or merger owning, in
   the aggregate, less than 50% of the Voting Stock of the surviving entity, or
   (d) during any period of not more than two consecutive years, a change in
   the Board of Directors occurs with the result that the members of the Board
   of Directors on the date hereof (the "Incumbent Directors") no longer
   constitute a majority of such Board of Directors, provided that any person
   becoming a director (x) whose election or nomination for election was
   supported by a majority of the then Incumbent Directors and (y) whose
   initial assumption of his or her directorship did not occur as a result of
   an actual or threatened solicitation of proxies or consents or as a result
   of a designation by a person who has entered into an agreement with the
   Company to effect a transaction described in clause (a), (b) or (c) above
   shall be considered an Incumbent Director for purposes hereof.

         2.      CAUSE means (a) if the Employee is a party to a written
   employment agreement with the Company or a subsidiary of the Company,
   which agreement or plan contains a definition of "for cause" or "cause" (or
   words of like import) for purposes of termination of employment or services
   thereunder by the Company or such subsidiary, "for cause" or "cause" as
   defined therein; or (b) if the Employee is not a party to such a written
   employment agreement, (i) the commission by the Employee of an act of fraud
   in the performance of such Employee's duties on behalf of the Company or a
   subsidiary of the Company; (ii) conviction of the Employee for commission of
   a felony in connection with the performance of his or her duties on behalf
   of the Company or a subsidiary of the Company; or (iii) the continuing
   failure of the Employee to perform his or her material duties to the Company
   or a subsidiary of the Company that has not been cured within 15 days after
   written notice thereof has been given to the Employee by the Board of
   Directors of the Company.

         3.      GOOD REASON means, without the written consent of the
   Employee, (i) assignment of duties or responsibilities materially
   inconsistent with those customarily associated with the highest position
   held by the Employee within the 181 days prior to the Change in Control
   (alternatively, the "Measuring Position"), or any other action by the
   Company or a successor that results in a diminution of the Employee's
   position, authority, duties or responsibilities compared to the Measuring
   Position, other than an isolated action that is not taken in bad faith and
   is remedied by the



                                                                          40

<PAGE>   15



    Company or a successor promptly after receipt of notice thereof from
    the Employee; (ii) reduction in (x) the Employee's total compensation
    reportable on Form W-2 in any calendar year from the average of the total
    compensation of the Employee reported on the Forms W-2 issued by the
    Company for the two most recent calendar years ended prior to the calendar
    year in which the Change in Control occurs or (y) in any welfare benefits
    from the highest levels in effect within the 181 days prior to the Change
    in Control; or (iii) relocation of the Employee's principal place of
    employment to a location more than 35 miles from the Executive's principal
    place of employment on the 181st day prior to the Change in Control.

CONTINUATION OF CERTAIN EMPLOYEE WELFARE BENEFITS

        Notwithstanding anything contained herein to the contrary, if the
Employee is entitled to receive the Change in Control Payment, the Company or
any of its subsidiaries or successor shall continue his participation, as if he
were still an employee, in the medical, dental, hospitalization, disability and
life insurance plans, programs and/or arrangements of the Company or any of its
subsidiaries in which he was participating on the date of the termination of
his employment on the same terms and conditions as other executives under such
plans, programs and/or arrangements until the earlier of (i) the end of the
24-month period commencing with the month immediately following the month in
which the date of the termination of his employment occurred or (ii) the date,
or dates, he receives equivalent coverage and benefits under the plans,
programs and/or arrangements of a subsequent employer (such coverage and
benefits to be determined on a coverage-by-coverage or benefit-by-benefit
basis).

CERTAIN TAX PROVISIONS

        1.      In the event that the Change in Control Payment or any other
payment or benefit received or to be received by you pursuant to the terms of
this Agreement (the "Contract Payment") or of any other plan, arrangement or
agreement of the Company (or any subsidiary) ("Other Payments" and, together
with the Contract Payments, the "Payments") would, in the opinion of
independent tax counsel selected by the Company and reasonably acceptable to
you ("Tax Counsel"), be subject to the excise tax (the "Excise Tax") imposed by
section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (in
whole or in part), as determined as provided below, the Company shall pay to
you, at the time specified in Paragraph 2 below, an additional amount (the
"Gross-Up Payment") such that the net amount retained by you, after deduction
of the Excise Tax on Contract Payments and Other Payments and any federal,
state and local income or other tax and Excise Tax upon the payment provided
for by this Paragraph 1, and any interest, penalties or additions to tax
payable by you with respect thereto, shall be equal to the total present value
of the Contract Payments and Other Payments at the time such Payments are to be
made.  For purposes of determining whether any of the Payments will be subject
to the Excise Tax and the amounts of such Excise Tax, (1) the total amount of
the Payments shall be treated as "parachute payments" within the meaning of
section 280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, except to the extent that, in the opinion of Tax Counsel, a Payment
(in whole or in part) does not constitute a "parachute payment" within the
meaning of section 280G(b)(2) of the Code, or such "excess parachute payments"
(in whole or in part) are not subject to the Excise Tax, (2) the amount of the
Payments that shall be treated as subject to the Excise Tax shall be equal to
the lesser of (A) the total amount of the Payments or (B) the amount of "excess
parachute payments" within the


                                                                        41



<PAGE>   16



meaning of section 280G(b)(1) of the Code (after applying clause (1) hereof),
and (3) the value of any noncash benefits or any deferred payment or benefit
shall be determined by Tax Counsel in accordance with the principles of
sections 280G(d)(3) and (4) of the Code.  For purposes of determining the
amount of the Gross-Up Payment, you shall be deemed to pay federal income taxes
at the highest marginal rates of federal income taxation applicable to the
individuals in the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rates of taxation
applicable to individuals as are in effect in the state and locality of your
residence in the calendar year in which the Gross-Up Payment is to be made, net
of the maximum reduction in federal income taxes that can be obtained from
deduction of such state and local taxes, taking into account any limitations
applicable to individuals subject to federal income tax at the highest marginal
rates.

        2.      The Gross-Up Payments provided for in Paragraph 1 above hereof
shall be made upon the earlier of (i) the payment to you of any Contract
Payment or Other Payment or (ii) the imposition upon you or payment by you of
any Excise Tax.

        3.      If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the opinion of Tax Counsel
that the Excise Tax is less than the amount taken into account under Paragraph
1 above, you shall repay to the Company within five days of your receipt of
notice of such final determination or opinion the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income tax
imposed on the Gross-Up Payment being repaid by you if such repayment results
in a reduction in Excise Tax or a federal, state and local income tax
deduction) plus any interest received by you on the amount of such repayment. 
If it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding or the opinion of Tax Counsel that the
Excise Tax exceeds the amount taken into account hereunder (including by reason
of any payment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess within five days of the Company's receipt of
notice of such final determination or opinion.

        4.      In the event of any change in, or further interpretation of,
sections 280G or 4999 of the Code and the regulations promulgated thereunder,
you shall be entitled, by written notice to the Company, to request an opinion
of Tax Counsel regarding the application of such change to any of the
foregoing, and the Company shall use its best efforts to cause such opinion to
be rendered as promptly as practicable.  All fees and expenses of Tax Counsel
incurred in connection with this agreement shall be borne by the Company.

MISCELLANEOUS

        Term.  This Agreement shall terminate and be of no further force or
effect if a Change in Control has not occurred on or before the fifth
anniversary of the date first written above.

        No Employment Agreement.    This Agreement does not constitute a
contract of employment or impose on the Company any obligation to retain the
Employee as an employee.

        Deductions and Withholding.  The Employee agrees that the Company shall
withhold from any and all compensation required to be paid to the Employee
pursuant to this Agreement all federal, state, local and/or other taxes which
the


                                                                        42


<PAGE>   17



Company determines are required to be withheld in accordance with applicable
statutes and/or regulations from time to time in effect.

        Arbitration.    Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
conducted in the City of Detroit in the State of Michigan under the Commercial
Arbitration Rules then prevailing of the American Arbitration Association and
such submission shall request the American Arbitration Association to:  (i)
appoint an arbitrator experienced and knowledgeable concerning the matter then
in dispute; (ii) require the testimony to be transcribed; (iii) require the
award to be accompanied by findings of fact and a statement of reasons for the
decision; and (iv) request the matter to be handled by and in accordance with
the expedited procedures provided for in the Commercial Arbitration Rules.  The
determination of the arbitrators, which shall be based upon a de novo
interpretation of this Agreement, shall be final and binding and judgment may
be entered on the arbitrators' award in any court having jurisdiction.  All
costs of the American Arbitration Association and the arbitrator shall be borne
as determined by the arbitrator.

        Legal Fees.  In the event the Company or the successor does not make
the Change in Control Payment or Gross-Up Payment due hereunder on a timely
basis and the Employee collects any part or all of the Change in Control
Payment or Gross-Up Payment or otherwise successfully enforces the terms of
this Agreement by or through a lawyer or lawyers, the Company or the successor
shall pay all costs of such collection or enforcement, including reasonable
legal fees and other reasonable fees and expenses which the Employee may incur. 
The Company or the successor shall pay to the Employee interest at the "prime"
lending rate as announced from time to time by Citibank, N.A. on all or any
part of the Payment that is not paid when due.  The applicable rate for each
calendar quarter shall be the "prime" rate in effect on the first day of the
calendar quarter.

        No Duty to Mitigate/Set-off.  The Company agrees that if the Employee's
employment with the Company or a successor is terminated within the six months
preceding or two years following a Change in Control covered by this Agreement,
the Employee shall not be required to seek other employment.  Further, the
amount of the Change in Control Payment shall not be reduced by any
compensation earned by the Employee or any benefit provided to the Employee as
the result of employment by another employer or otherwise.  The Company's
obligations to make the Change in Control Payment shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company or a successor may have
against the Employee.

        Entire Agreement.  This Agreement embodies the entire agreement of the
parties with respect to any payment due the Employee in the event of a Change
in Control and supersedes any other prior oral or written agreements between
the Employee and the Company with respect thereto.  No party may amend, modify
or terminate this Agreement without the express written consent of the other
party.

        Successors; Binding Agreement.    In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree in writing to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place and this Agreement shall inure
to the benefit of such successor. Any such assignment shall not relieve the
Company


                                                                        43



<PAGE>   18



from liability hereunder.  This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and legatees.

        Governing Law.  This Agreement shall be governed and construed in
accordance with the laws of the State of Michigan without regard to the
conflicts of law principles of such state.

        Counterparts.  This Agreement may be executed and delivered in separate
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which taken together shall constitute one and the same
agreement.

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

                                 ARBOR DRUGS, INC.

                                 By:   /s/ Eugene Applebaum
                                       ------------------------------------
                                       Eugene Applebaum
                                       Chairman of the Board
                                       & President



ACCEPTED AND AGREED TO
BY THE UNDERSIGNED EMPLOYEE
as of the date first written above


By:           /s/ Gilbert C. Gerhard
              -------------------------
       Name:  Gilbert C. Gerhard


                                                                        44

<PAGE>   19



                          CHANGE IN CONTROL AGREEMENT
                          Dated as of December 9, 1996


The Board of Directors of Arbor Drugs,  Inc. (the "Company") has determined
that, in light of the uncertainties affecting the industry in which the Company
operates, it would be in the best interests of the Company and its shareholders
to induce key employees, including the undersigned (the "Employee"), to remain
with the Company and to reinforce and encourage their continued attention and
dedication to the Company.  Accordingly, the Company desires to enter into this
agreement (the "Agreement") with the Employee providing for a payment to the
Employee and the continuation of certain of the Employee's welfare benefits if
the Employee is terminated by the Company or a successor or, for Good Reason
(as hereinafter defined), the Employee terminates his or her employment with
the Company or a successor, within 180 days preceding, or within two years
following, a Change in Control (as hereinafter defined), subject to the terms
and conditions specified herein.  This Agreement is in addition to any other
entitlement the Employee might have under any other plan or individual
employment arrangement or agreement with the Company or any of its
subsidiaries.

CHANGE IN CONTROL PAYMENT

        If the Employee is terminated by the Company or a successor without
Cause (as hereinafter defined), or terminates his or her employment with the
Company or a successor for Good Reason (as hereinafter defined), within 180
days preceding, or within two years following, a Change in Control, the
Employee will be entitled to receive a payment in an amount equal to two times
the Employee's annual base salary on the date of termination of the Employee's
employment (or in the case of a termination of employment for Good Reason based
on a reduction in the Employee's annual base salary, the annual base salary in
effect immediately prior to such reduction) (the "Change in Control Payment");
provided, however, that the Employee shall not be entitled to receive the
Change in Control Payment if any of the Circumstances of Ineligibility (as
hereinafter defined) apply to the Employee. The Change in Control Payment will
be paid to the Employee in cash in a lump sum within five (5) days following
the termination of the Employee's employment with the Company or the successor
corporation.

CIRCUMSTANCES OF INELIGIBILITY

        The Employee will not be eligible to receive the Change in Control
Payment under this Agreement in any one or more of the following circumstances:

         1.      VOLUNTARY TERMINATION:  If the Employee elects to voluntarily
terminate the Employee's employment, including termination due to retirement,
with the Company or a successor, the Employee will not be eligible to receive
the Payment; provided, however, that termination by the Employee for Good
Reason shall not constitute a Circumstance of Ineligibility.

         2.      TERMINATION FOR CAUSE:  If the Employee's employment with the
Company or a successor is terminated for Cause at any time preceding or
following a Change in Control, the Employee will not be eligible to receive the
Payment.


                                                                        45


<PAGE>   20



DEFINITIONS

         For purposes of this Agreement:
        
         1.      CHANGE IN CONTROL means that any of the following has
occurred:  (a) any person or other entity (other than any of the Company's
subsidiaries), including any person as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, becomes the beneficial owner, as defined in
Rule 13d-3 of the Exchange Act, directly or indirectly, of more than fifty
percent (50%) of the total combined voting power of all classes of capital
stock of the Company normally entitled to vote for the election of directors
(the "Voting Stock") of the Company, (b) the Board of Directors approves the
sale of all or substantially all of the assets of the Company (other than to
one or more wholly-owned direct or indirect subsidiaries of the Company) or a
plan of complete liquidation of the Company, (c) the Board of Directors
approves a consolidation or merger of the Company with another corporation
(other than with any of the Company's subsidiaries), the consummation of which
would result in the shareholders of the Company immediately before the
occurrence of the consolidation or merger owning, in the aggregate, less than
50% of the Voting Stock of the surviving entity, or (d) during any period of
not more than two consecutive years, a change in the Board of Directors occurs
with the result that the members of the Board of Directors on the date hereof
(the "Incumbent Directors") no longer constitute a majority of such Board of
Directors, provided that any person becoming a director (x) whose election or
nomination for election was supported by a majority of the then Incumbent
Directors and (y) whose initial assumption of his or her directorship did not
occur as a result of an actual or threatened solicitation of proxies or
consents or as a result of a designation by a person who has entered into an
agreement with the Company to effect a transaction described in clause (a), (b)
or (c) above shall be considered an Incumbent Director for purposes hereof.

         2.      CAUSE means (a) if the Employee is a party to a written
employment agreement with the Company or a subsidiary of the Company, which
agreement or plan contains a definition of "for cause" or "cause" (or words of
like import) for purposes of termination of employment or services thereunder
by the Company or such subsidiary, "for cause" or "cause" as defined therein;
or (b) if the Employee is not a party to such a written employment agreement,
(i) the commission by the Employee of an act of fraud in the performance of
such Employee's duties on behalf of the Company or a subsidiary of the Company;
(ii) conviction of the Employee for commission of a felony in connection with
the performance of his or her duties on behalf of the Company or a subsidiary
of the Company; or (iii) the continuing failure of the Employee to perform his
or her material duties to the Company or a subsidiary of the Company that has
not been cured within 15 days after written notice thereof has been given to
the Employee by the Board of Directors of the Company.

         3.      GOOD REASON means, without the written consent of the
Employee, (i) assignment of duties or responsibilities materially inconsistent
with those customarily associated with the highest position held by the
Employee within the 181 days prior to the Change in Control (alternatively, the
"Measuring Position"), or any other action by the Company or a successor that
results in a diminution of the Employee's position, authority, duties or
responsibilities compared to the Measuring Position, other than an isolated
action that is not taken in bad faith and is remedied by the Company or a
successor promptly after receipt of notice thereof from the




                                                                         46
<PAGE>   21



Employee; (ii) reduction in (x) the Employee's total compensation reportable on
Form W-2 in any calendar year from the average of the total compensation of the
Employee reported on the Forms W-2 issued by the Company for the two most
recent calendar years ended prior to the calendar year in which the Change in
Control occurs or (y) in any welfare benefits from the highest levels in effect
within the 181 days prior to the Change in Control; or (iii) relocation of the
Employee's principal place of employment to a location more than 35 miles from
the Executive's principal place of employment on the 181st day prior to the
Change in Control.

CONTINUATION OF CERTAIN EMPLOYEE WELFARE BENEFITS

        Notwithstanding anything contained herein to the contrary, if the
Employee is entitled to receive the Change in Control Payment, the Company or
any of its subsidiaries or successor shall continue his participation, as if he
were still an employee, in the medical, dental, hospitalization, disability and
life insurance plans, programs and/or arrangements of the Company or any of its
subsidiaries in which he was participating on the date of the termination of
his employment on the same terms and conditions as other executives under such
plans, programs and/or arrangements until the earlier of (i) the end of the
24-month period commencing with the month immediately following the month in
which the date of the termination of his employment occurred or (ii) the date,
or dates, he receives equivalent coverage and benefits under the plans,
programs and/or arrangements of a subsequent employer (such coverage and
benefits to be determined on a coverage-by-coverage or benefit-by-benefit
basis).

CERTAIN TAX PROVISIONS

        1.      In the event that the Change in Control Payment or any other
payment or benefit received or to be received by you pursuant to the terms of
this Agreement (the "Contract Payment") or of any other plan, arrangement or
agreement of the Company (or any subsidiary) ("Other Payments" and, together
with the Contract Payments, the "Payments") would, in the opinion of
independent tax counsel selected by the Company and reasonably acceptable to
you ("Tax Counsel"), be subject to the excise tax (the "Excise Tax") imposed by
section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (in
whole or in part), as determined as provided below, the Company shall pay to
you, at the time specified in Paragraph 2 below, an additional amount (the
"Gross-Up Payment") such that the net amount retained by you, after deduction
of the Excise Tax on Contract Payments and Other Payments and any federal,
state and local income or other tax and Excise Tax upon the payment provided
for by this Paragraph 1, and any interest, penalties or additions to tax
payable by you with respect thereto, shall be equal to the total present value
of the Contract Payments and Other Payments at the time such Payments are to be
made.  For purposes of determining whether any of the Payments will be subject
to the Excise Tax and the amounts of such Excise Tax, (1) the total amount of
the Payments shall be treated as "parachute payments" within the meaning of
section 280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, except to the extent that, in the opinion of Tax Counsel, a Payment
(in whole or in part) does not constitute a "parachute payment" within the
meaning of section 280G(b)(2) of the Code, or such "excess parachute payments"
(in whole or in part) are not subject to the Excise Tax, (2) the amount of the
Payments that shall be treated as subject to the Excise Tax shall be equal to
the lesser of (A) the total amount of the Payments or (B) the amount of "excess
parachute payments" within the meaning of section 280G(b)(1) of the Code (after
applying clause (1) hereof), and (3) the value of any noncash benefits or any
deferred payment or benefit shall




                                                                            47
<PAGE>   22



be determined by Tax Counsel in accordance with the principles of sections
280G(d)(3) and (4) of the Code.  For purposes of determining the amount of the
Gross-Up Payment, you shall be deemed to pay federal income taxes at the
highest marginal rates of federal income taxation applicable to the individuals
in the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of taxation applicable to
individuals as are in effect in the state and locality of your residence in the
calendar year in which the Gross-Up Payment is to be made, net of the maximum
reduction in federal income taxes that can be obtained from deduction of such
state and local taxes, taking into account any limitations applicable
to individuals subject to federal income tax at the highest marginal rates.

        2.      The Gross-Up Payments provided for in Paragraph 1 above hereof
shall be made upon the earlier of (i) the payment to you of any Contract
Payment or Other Payment or (ii) the imposition upon you or payment by you of
any Excise Tax.

        3.      If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the opinion of Tax Counsel
that the Excise Tax is less than the amount taken into account under Paragraph
1 above, you shall repay to the Company within five days of your receipt of
notice of such final determination or opinion the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income tax
imposed on the Gross-Up Payment being repaid by you if such repayment results
in a reduction in Excise Tax or a federal, state and local income tax
deduction) plus any interest received by you on the amount of such repayment. 
If it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding or the opinion of Tax Counsel that the
Excise Tax exceeds the amount taken into account hereunder (including by reason
of any payment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess within five days of the Company's receipt of
notice of such final determination or opinion.

        4.      In the event of any change in, or further interpretation of,
sections 280G or 4999 of the Code and the regulations promulgated thereunder,
you shall be entitled, by written notice to the Company, to request an opinion
of Tax Counsel regarding the application of such change to any of the
foregoing, and the Company shall use its best efforts to cause such opinion to
be rendered as promptly as practicable.  All fees and expenses of Tax Counsel
incurred in connection with this agreement shall be borne by the Company.

MISCELLANEOUS

        Term.  This Agreement shall terminate and be of no further force or
effect if a Change in Control has not occurred on or before the fifth
anniversary of the date first written above.

        No Employment Agreement.    This Agreement does not constitute a
contract of employment or impose on the Company any obligation to retain the
Employee as an employee.

        Deductions and Withholding.  The Employee agrees that the Company shall
withhold from any and all compensation required to be paid to the Employee
pursuant to this Agreement all federal, state, local and/or other taxes which
the Company determines are required to be withheld in accordance with
applicable statutes and/or regulations from time to time in effect.




                                                                        48
<PAGE>   23




        Arbitration.    Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
conducted in the City of Detroit in the State of Michigan under the Commercial
Arbitration Rules then prevailing of the American Arbitration Association and
such submission shall request the American Arbitration Association to:  (i)
appoint an arbitrator experienced and knowledgeable concerning the matter then
in dispute; (ii) require the testimony to be transcribed; (iii) require the
award to be accompanied by findings of fact and a statement of reasons for the
decision; and (iv) request the matter to be handled by and in accordance with
the expedited procedures provided for in the Commercial Arbitration Rules.  The
determination of the arbitrators, which shall be based upon a de novo
interpretation of this Agreement, shall be final and binding and judgment may
be entered on the arbitrators' award in any court having jurisdiction.  All
costs of the American Arbitration Association and the arbitrator shall be borne
as determined by the arbitrator.

        Legal Fees.  In the event the Company or the successor does not make
the Change in Control Payment or Gross-Up Payment due hereunder on a timely
basis and the Employee collects any part or all of the Change in Control
Payment or Gross-Up Payment or otherwise successfully enforces the terms of
this Agreement by or through a lawyer or lawyers, the Company or the successor
shall pay all costs of such collection or enforcement, including reasonable
legal fees and other reasonable fees and expenses which the Employee may incur. 
The Company or the successor shall pay to the Employee interest at the "prime"
lending rate as announced from time to time by Citibank, N.A. on all or any
part of the Payment that is not paid when due.  The applicable rate for each
calendar quarter shall be the "prime" rate in effect on the first day of the
calendar quarter.

        No Duty to Mitigate/Set-off.  The Company agrees that if the Employee's
employment with the Company or a successor is terminated within the six months
preceding or two years following a Change in Control covered by this Agreement,
the Employee shall not be required to seek other employment.  Further, the
amount of the Change in Control Payment shall not be reduced by any
compensation earned by the Employee or any benefit provided to the Employee as
the result of employment by another employer or otherwise.  The Company's
obligations to make the Change in Control Payment shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company or a successor may have
against the Employee.

        Entire Agreement.  This Agreement embodies the entire agreement of the
parties with respect to any payment due the Employee in the event of a Change
in Control and supersedes any other prior oral or written agreements between
the Employee and the Company with respect thereto.  No party may amend, modify
or terminate this Agreement without the express written consent of the other
party.

        Successors; Binding Agreement.    In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree in writing to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place and this Agreement shall inure
to the benefit of such successor. Any such assignment shall not relieve the
Company from liability hereunder. This Agreement shall inure to the benefit of
and be enforceable by the Employee's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devises and
legatees.




                                                                        49
<PAGE>   24



        Governing Law.  This Agreement shall be governed and construed in
accordance with the laws of the State of Michigan without regard to the
conflicts of law principles of such state.

        Counterparts.  This Agreement may be executed and delivered in separate
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which taken together shall constitute one and the same
agreement.

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

                                   ARBOR DRUGS, INC.


                                   By:   /s/ Gilbert C. Gerhard
                                         ----------------------------
                                         Gilbert C. Gerhard
                                         Senior Vice President-
                                         Finance & Administration



ACCEPTED AND AGREED TO
BY THE UNDERSIGNED EMPLOYEE
as of the date first written above


By:    /s/ Donald M. Stutrud
       ---------------------    
Name:  Donald M. Stutrud




                                                                        50
<PAGE>   25




                          CHANGE IN CONTROL AGREEMENT
                          Dated as of December 9, 1996


        The Board of Directors of Arbor Drugs, Inc. (the "Company") has
determined that, in light of the uncertainties affecting the industry in which
the Company operates, it would be in the best interests of the Company and its
shareholders to induce key employees, including the undersigned (the
"Employee"), to remain with the Company and to reinforce and encourage their
continued attention and dedication to the Company.  Accordingly, the Company
desires to enter into this agreement (the "Agreement") with the Employee
providing for a payment to the Employee and the continuation of certain of the
Employee's welfare benefits if the Employee is terminated by the Company or a
successor or, for Good Reason (as hereinafter defined), the Employee terminates
his or her employment with the Company or a successor, within 180 days
preceding, or within two years following, a Change in Control (as hereinafter
defined), subject to the terms and conditions specified herein.  This Agreement
is in addition to any other entitlement the Employee might have under any other
plan or individual employment arrangement or agreement with the Company or any
of its subsidiaries.

CHANGE IN CONTROL PAYMENT

        If the Employee is terminated by the Company or a successor without
Cause (as hereinafter defined), or terminates his or her employment with the
Company or a successor for Good Reason (as hereinafter defined), within 180
days preceding, or within two years following, a Change in Control, the
Employee will be entitled to receive a payment in an amount equal to two times
the Employee's annual base salary on the date of termination of the Employee's
employment (or in the case of a termination of employment for Good Reason based
on a reduction in the Employee's annual base salary, the annual base salary in
effect immediately prior to such reduction) (the "Change in Control Payment");
provided, however, that the Employee shall not be entitled to receive the
Change in Control Payment if any of the Circumstances of Ineligibility (as
hereinafter defined) apply to the Employee. The Change in Control Payment will
be paid to the Employee in cash in a lump sum within five (5) days following
the termination of the Employee's employment with the Company or the successor
corporation.

CIRCUMSTANCES OF INELIGIBILITY

        The Employee will not be eligible to receive the Change in Control
Payment under this Agreement in any one or more of the following circumstances:

        1.      VOLUNTARY TERMINATION:  If the Employee elects to voluntarily
terminate the Employee's employment, including termination due to retirement,
with the Company or a successor, the Employee will not be eligible to receive
the Payment; provided, however, that termination by the Employee for Good
Reason shall not constitute a Circumstance of Ineligibility.

        2.      TERMINATION FOR CAUSE:  If the Employee's employment with the
Company or a successor is terminated for Cause at any time preceding or
following a Change in Control, the Employee will not be eligible to receive the
Payment.



                                                                        51

<PAGE>   26





DEFINITIONS

         For purposes of this Agreement:

        1.      CHANGE IN CONTROL means that any of the following has occurred: 
(a) any person or other entity (other than any of the Company's subsidiaries),
including any person as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, becomes the beneficial owner, as defined in Rule 13d-3 of the
Exchange Act, directly or indirectly, of more than fifty percent (50%) of the
total combined voting power of all classes of capital stock of the Company
normally entitled to vote for the election of directors (the "Voting Stock") of
the Company, (b) the Board of Directors approves the sale of all or
substantially all of the assets of the Company (other than to one or more
wholly-owned direct or indirect subsidiaries of the Company) or a plan of
complete liquidation of the Company, (c) the Board of Directors approves a
consolidation or merger of the Company with another corporation (other than
with any of the Company's subsidiaries), the consummation of which would result
in the shareholders of the Company immediately before the occurrence of the
consolidation or merger owning, in the aggregate, less than 50% of the Voting
Stock of the surviving entity, or (d) during any period of not more than two
consecutive years, a change in the Board of Directors occurs with the result
that the members of the Board of Directors on the date hereof (the "Incumbent
Directors") no longer constitute a majority of such Board of Directors,
provided that any person becoming a director (x) whose election or nomination
for election was supported by a majority of the then Incumbent Directors and
(y) whose initial assumption of his or her directorship did not occur as a
result of an actual or threatened solicitation of proxies or consents or as a
result of a designation by a person who has entered into an agreement with the
Company to effect a transaction described in clause (a), (b) or (c) above shall
be considered an Incumbent Director for purposes hereof.

        2.      CAUSE means (a) if the Employee is a party to a written
employment agreement with the Company or a subsidiary of the Company, which
agreement or plan contains a definition of "for cause" or "cause" (or words of
like import) for purposes of termination of employment or services thereunder
by the Company or such subsidiary, "for cause" or "cause" as defined therein;
or (b) if the Employee is not a party to such a written employment agreement,
(i) the commission by the Employee of an act of fraud in the performance of
such Employee's duties on behalf of the Company or a subsidiary of the Company;
(ii) conviction of the Employee for commission of a felony in connection with
the performance of his or her duties on behalf of the Company or a subsidiary
of the Company; or (iii) the continuing failure of the Employee to perform his
or her material duties to the Company or a subsidiary of the Company that has
not been cured within 15 days after written notice thereof has been given to
the Employee by the Board of Directors of the Company.

        3.      GOOD REASON means, without the written consent of the Employee,
(i) assignment of duties or responsibilities materially inconsistent with those
customarily associated with the highest position held by the Employee within
the 181 days prior to the Change in Control (alternatively, the "Measuring
Position"), or any other action by the Company or a successor that results in a
diminution of the Employee's position, authority, duties or responsibilities
compared to the Measuring Position, other than an isolated action that is not
taken in bad faith and is remedied by the Company or a successor promptly after
receipt of notice thereof from the



                                                                        52

<PAGE>   27



        Employee; (ii) reduction in (x) the Employee's total compensation
reportable on Form W-2 in any calendar year from the average of the total
compensation of the Employee reported on the Forms W-2 issued by the Company
for the two most recent calendar years ended prior to the calendar year in
which the Change in Control occurs or (y) in any welfare benefits from the
highest levels in effect within the 181 days prior to the Change in Control; or
(iii) relocation of the Employee's principal place of employment to a location
more than 35 miles from the Executive's principal place of employment on the
181st day prior to the Change in Control.5

                                      
CONTINUATION OF CERTAIN EMPLOYEE WELFARE BENEFITS

        Notwithstanding anything contained herein to the contrary, if the
Employee is entitled to receive the Change in Control Payment, the Company or
any of its subsidiaries or successor shall continue his participation, as if he
were still an employee, in the medical, dental, hospitalization, disability and
life insurance plans, programs and/or arrangements of the Company or any of its
subsidiaries in which he was participating on the date of the termination of
his employment on the same terms and conditions as other executives under such
plans, programs and/or arrangements until the earlier of (i) the end of the
24-month period commencing with the month immediately following the month in
which the date of the termination of his employment occurred or (ii) the date,
or dates, he receives equivalent coverage and benefits under the plans,
programs and/or arrangements of a subsequent employer (such coverage and
benefits to be determined on a coverage-by-coverage or benefit-by-benefit
basis).

CERTAIN TAX PROVISIONS

        1.      In the event that the Change in Control Payment or any other
payment or benefit received or to be received by you pursuant to the terms of
this Agreement (the "Contract Payment") or of any other plan, arrangement or
agreement of the Company (or any subsidiary) ("Other Payments" and, together
with the Contract Payments, the "Payments") would, in the opinion of
independent tax counsel selected by the Company and reasonably acceptable to
you ("Tax Counsel"), be subject to the excise tax (the "Excise Tax") imposed by
section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (in
whole or in part), as determined as provided below, the Company shall pay to
you, at the time specified in Paragraph 2 below, an additional amount (the
"Gross-Up Payment") such that the net amount retained by you, after deduction
of the Excise Tax on Contract Payments and Other Payments and any federal,
state and local income or other tax and Excise Tax upon the payment provided
for by this Paragraph 1, and any interest, penalties or additions to tax
payable by you with respect thereto, shall be equal to the total present value
of the Contract Payments and Other Payments at the time such Payments are to be
made.  For purposes of determining whether any of the Payments will be subject
to the Excise Tax and the amounts of such Excise Tax, (1) the total amount of
the Payments shall be treated as "parachute payments" within the meaning of
section 280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, except to the extent that, in the opinion of Tax Counsel, a Payment
(in whole or in part) does not constitute a "parachute payment" within the
meaning of section 280G(b)(2) of the Code, or such "excess parachute payments"
(in whole or in part) are not subject to the Excise Tax, (2) the amount of the
Payments that shall be treated as subject to the Excise Tax shall be equal to
the lesser of (A) the total amount of the Payments or (B) the amount of "excess
parachute payments" within the meaning of section 280G(b)(1) of the Code (after
applying clause (1) hereof), and (3) the value of any noncash benefits or any
deferred payment or benefit shall




                                                                        53

<PAGE>   28



be determined by Tax Counsel in accordance with the principles of sections
280G(d)(3) and (4) of the Code.  For purposes of determining the amount of the
Gross-Up Payment, you shall be deemed to pay federal income taxes at the
highest marginal rates of federal income taxation applicable to the individuals
in the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of taxation applicable to
individuals as are in effect in the state and locality of your residence in the
calendar year in which the Gross-Up Payment is to be made, net of the maximum
reduction in federal income taxes that can be obtained from deduction of such
state and local taxes, taking into account any limitations applicable to
individuals subject to federal income tax at the highest marginal rates.

        2.      The Gross-Up Payments provided for in Paragraph 1 above hereof
shall be made upon the earlier of (i) the payment to you of any Contract
Payment or Other Payment or (ii) the imposition upon you or payment by you of
any Excise Tax.

        3.      If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding or the opinion of Tax Counsel
that the Excise Tax is less than the amount taken into account under Paragraph
1 above, you shall repay to the Company within five days of your receipt of
notice of such final determination or opinion the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income tax
imposed on the Gross-Up Payment being repaid by you if such repayment results
in a reduction in Excise Tax or a federal, state and local income tax
deduction) plus any interest received by you on the amount of such repayment. 
If it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding or the opinion of Tax Counsel that the
Excise Tax exceeds the amount taken into account hereunder (including by reason
of any payment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess within five days of the Company's receipt of
notice of such final determination or opinion.

        4.      In the event of any change in, or further interpretation of,
sections 280G or 4999 of the Code and the regulations promulgated thereunder,
you shall be entitled, by written notice to the Company, to request an opinion
of Tax Counsel regarding the application of such change to any of the
foregoing, and the Company shall use its best efforts to cause such opinion to
be rendered as promptly as practicable.  All fees and expenses of Tax Counsel
incurred in connection with this agreement shall be borne by the Company.

MISCELLANEOUS

        Term.  This Agreement shall terminate and be of no further force or
effect if a Change in Control has not occurred on or before the fifth
anniversary of the date first written above.

        No Employment Agreement.    This Agreement does not constitute a
contract of employment or impose on the Company any obligation to retain the
Employee as an employee.

        Deductions and Withholding.  The Employee agrees that the Company shall
withhold from any and all compensation required to be paid to the Employee
pursuant to this Agreement all federal, state, local and/or other taxes which
the Company determines are required to be withheld in accordance with
applicable statutes and/or regulations from time to time in effect.




                                                                        54
<PAGE>   29


        Arbitration.    Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
conducted in the City of Detroit in the State of Michigan under the Commercial
Arbitration Rules then prevailing of the American Arbitration Association and
such submission shall request the American Arbitration Association to:  (i)
appoint an arbitrator experienced and knowledgeable concerning the matter then
in dispute; (ii) require the testimony to be transcribed; (iii) require the
award to be accompanied by findings of fact and a statement of reasons for the
decision; and (iv) request the matter to be handled by and in accordance with
the expedited procedures provided for in the Commercial Arbitration Rules.  The
determination of the arbitrators, which shall be based upon a de novo
interpretation of this Agreement, shall be final and binding and judgment may
be entered on the arbitrators' award in any court having jurisdiction.  All
costs of the American Arbitration Association and the arbitrator shall be borne
as determined by the arbitrator. 

        Legal Fees.  In the event the Company or the successor does not make
the Change in Control Payment or Gross-Up Payment due hereunder on a timely
basis and the Employee collects any part or all of the Change in Control
Payment or Gross-Up Payment or otherwise successfully enforces the terms of
this Agreement by or through a lawyer or lawyers, the Company or the successor
shall pay all costs of such collection or enforcement, including reasonable
legal fees and other reasonable fees and expenses which the Employee may incur. 
The Company or the successor shall pay to the Employee interest at the "prime"
lending rate as announced from time to time by Citibank, N.A. on all or any
part of the Payment that is not paid when due.  The applicable rate for each
calendar quarter shall be the "prime" rate in effect on the first day of the
calendar quarter.

        No Duty to Mitigate/Set-off.  The Company agrees that if the Employee's
employment with the Company or a successor is terminated within the six months
preceding or two years following a Change in Control covered by this Agreement,
the Employee shall not be required to seek other employment.  Further, the
amount of the Change in Control Payment shall not be reduced by any
compensation earned by the Employee or any benefit provided to the Employee as
the result of employment by another employer or otherwise.  The Company's
obligations to make the Change in Control Payment shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company or a successor may have
against the Employee.

        Entire Agreement.  This Agreement embodies the entire agreement of the
parties with respect to any payment due the Employee in the event of a Change
in Control and supersedes any other prior oral or written agreements between
the Employee and the Company with respect thereto.  No party may amend, modify
or terminate this Agreement without the express written consent of the other
party.

        Successors; Binding Agreement.    In addition to any obligations
imposed by law upon any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree in writing to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place and this Agreement shall inure
to the benefit of such successor. Any such assignment shall not relieve the
Company from liability hereunder. This Agreement shall inure to the benefit of
and be enforceable by the Employee's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devises and
legatees.



                                                                        55

<PAGE>   30


        Governing Law.  This Agreement shall be governed and construed in
accordance with the laws of the State of Michigan without regard to the
conflicts of law principles of such state.

        Counterparts.  This Agreement may be executed and delivered in separate
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which taken together shall constitute one and the same
agreement.

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

                                  ARBOR DRUGS, INC.


                                  By:   /s/ Gilbert C. Gerhard
                                        Gilbert C. Gerhard
                                        Senior Vice President-
                                        Finance & Administration



ACCEPTED AND AGREED TO
BY THE UNDERSIGNED EMPLOYEE
as of the date first written above


By:        /s/ Eric Bolokofsky
           ----------------------
    Name:  Eric Bolokofsky




                                                                        56