<PAGE>   1
                                                                   EXHIBIT 10.18




                            PRIME VENDOR AGREEMENT*



                                     BETWEEN



                          TENNESSEE PHARMACY PURCHASING
                                    ALLIANCE


                                       AND



                        D & K HEALTHCARE RESOURCES, INC.


    *Confidential portion omitted and filed separately with the Commission.


<PAGE>   2
* indicates deleted material



                                  PRIME VENDOR
                                    AGREEMENT




         This Agreement ("Agreement") is made as of the 25th day of August,
1999, is by and between Tennessee Pharmacy Purchasing Alliance, ("TPPA") on its
own behalf and on behalf of its member pharmacies ("Members"), and D & K
Healthcare Resources, Inc., ("D & K").

         1.       Prime Vendor. Subject to the terms and conditions hereof, TPPA
                  and each of the Members hereby designate D & K as its Prime
                  Vendor for pharmaceutical and OTC products for the Members.
                  TPPA shall update changes to the list of Members at least
                  quarterly. As used herein, Prime Vendor means the preferred
                  supplier to fulfill at least ninety percent (90%) of the
                  branded pharmaceutical (i.e. non-generic) requirements of the
                  Members. D & K shall endeavor to supply all branded
                  pharmaceutical products ordered by Members hereunder.

         2.       Stocking Requests. D & K agrees to stock all routinely ordered
                  source contract items for the Members. D & K will respond to
                  all stocking requests on a timely basis. Upon receipt of a
                  written request from Members that includes NDC number, monthly
                  usage, and an order to cover the first shipment, D & K will
                  immediately initiate the stocking and ordering process.
                  Products are usually in stock and available for shipment
                  within one (1) to three (3) weeks of the original request
                  date.

         3.       Contract Administration. To accelerate the contract loading
                  and manufacturer confirmation process, Members shall provide D
                  & K with the following contract information: NDC number,
                  product description, negotiated price, effective dates, and
                  vendor contract or reference number.

         4.       Chargeback Denials by Manufacturers. D & K will make
                  reasonable efforts to accurately maintain contract pricing
                  agreements in its system including confirming both pricing and
                  eligibility. If manufacturers deny chargeback claims to D & K,
                  Members shall upon receipt of invoice from D & K, pay to D & K
                  the amount of the denied chargeback. Prior to such invoicing,
                  D & K will make reasonable efforts to recover the denied
                  chargeback from the manufacturer.

         5.       Orders. Telxon and Resource orders may be placed weekdays
                  until 6:00 P.M. local time for next business day delivery.
                  Telephone and fax orders may be placed with the Customer
                  Service Department weekdays until 5:30 P.M. local time for
                  next business day delivery.

         6.       Deliveries. Orders will be delivered in a sealed, returnable
                  plastic tote. A signature may be required by the individual
                  accepting the shipment to verify the number of cartons


                                       1
<PAGE>   3



         received. D & K makes every effort to deliver all customer orders
         before 12:00 P.M., but in the event of an unreasonable delay in such
         delivery, D & K shall endeavor to provide notice.

7.       Freight Terms. Freight will be F.O.B. destination (prepaid and absorbed
         by D & K) on all regularly scheduled deliveries to Members. D & K
         agrees to waive all daily minimum order requirements to qualify for
         prepaid freight. For special requests such as airfreight, express
         courier service, or bus shipments, D & K will ship prepaid and bill the
         freight charges on a separate invoice.

8.       Information Services and Systems. D & K maintains a decentralized
         Information Services Department to ensure technical assistance is
         readily available to its customers. Experienced personnel are staffed
         locally at each Division to provide the day-to-day and developmental
         support needed to keep both D & K and its customers on the leading edge
         of technological change. A partial list of D & K's technology offerings
         follows:

         A.       RESOURCE: D & K'S Resource order management software has many
                  advanced features designed to automate the order creation,
                  transmission, and confirmation process. The system provides
                  product availability information and reduces acquisition cost
                  by ensuring contract compliance. For example, prior to
                  transmission, the system will scan the order to identify items
                  for which there is either a lower cost, or a contract
                  alternative. The D & K Resource order management system is
                  feature rich and considered to be one of the easiest to use
                  among all ordering systems on the market today. Resource
                  operated on any IBM compatible 486 or better computer using
                  MS-DOS with 4M of RAM. Key system features include:

                  -   Order by item number, NDC number or description
                  -   Stock status
                  -   AB ratings
                  -   Generic equivalent search
                  -   Order confirmation within 20 minutes
                  -   Contract compliance and best price scanning
                  -   Purchase history
                  -   Report package
                  -   Import from Telxon or pharmacy system
                  -   Inventory capability
                  -   Daily price updates

         B.       Customized Management Reports: D & K has a variety of
                  customized management reports available to its customers. Such
                  reports include, but are not limited to: DEA reports, history
                  reports, price changes, contract compliance, etc. D & K will
                  work with TPPA to develop customized reports as may reasonably
                  be requested by TPPA.


                                       2
<PAGE>   4



         C.       Physical Inventory Assistance: D & K will make two physical
                  inventory options available to Members. Resource and mainframe
                  programs. Additional Telxons will be provided, as well as
                  inventory preparation training. System features include:

                  i.       Whole or partial units may be entered
                  ii.      Inventory printed in transmission or department
                           sequence
                  iii.     Inventory report includes: item number, average
                           wholesale price (AWP), customer cost, customer retail
                           price gross margin dollars, and percent by
                           department.
                  iv.      Multiple transmissions combined into single inventory
                           report

         D.       Business Reviews: D & K recommends semi-annual meetings as an
                  opportunity to formally review the performance of the
                  Agreement to ensure maximum economic benefit is being realized
                  by the trading partners, to explore mutually beneficial
                  programs, and to establish specific action items for the next
                  period.

9.       Prime Vendor Services. D & K shall provide the following services to
         Members.

         A.       Customer Service Department: D & K's customer service
                  department is professionally staffed from 8:00 A.M. to 6:00
                  P.M. local time excluding weekends and holidays.

         B.       Emergency Orders: D & K provides twenty-four (24) hour, seven
                  (7) day-a-week emergency delivery service in life-threatening
                  situations. Members will be provided with emergency telephone
                  and pager numbers.

         C.       Drop-Ship Service: D & K shall provide drop-ship service to
                  Members upon request. Manufacturers will typically call for
                  authorization to bill through D & K and approval will be
                  promptly given. Manufacturer drop-ship invoices will be
                  promptly processed by D & K within two business days of
                  receipt.

         D.       Price Stickers: D & K offers multiple encoded price sticker
                  formats for both Rx and OTC products. Information provided on
                  the sticker is AWP, net landed price, quantity purchased, date
                  purchased and the D & K item number.

         E.       Shelf Labels. D & K will provide scannable shelf labels upon
                  request.

         F.       Material Safety Data Sheets: D & K will provide Material
                  Safety Data Sheets (MSDS) upon request.

10.      Pricing. The prices for products supplied hereunder are set forth in
         the attached Schedule B. All prices quoted in this Agreement and all
         other obligations of D & K described herein are based on the agreement
         that TPPA has designated, and the Members will utilize, D & K as its
         and their Primary Vendor.




                                       3
<PAGE>   5





11.      Definitions of Cost. For this Agreement, the following definitions of
         costs will apply:

         Individual Contracts: TPPA contract items purchased by D & K through
         API will be priced at*.

         Net-Priced Items: D & K offers a selected group of net-priced products,
         including non-contract generic vendor items, special promotional and
         drop-ship merchandise. Net priced generic items will not effect
         contract generic pricing. A listing of net-priced items is available
         separately and is included in the D & K catalog.

         Other Items: For the purpose of this Agreement, items not covered under
         buying group, individual contracts, or net-priced, cost is defined to
         be the manufacturer's scheduled price, including promotions, special
         contract pricing, volume discounts and free goods, but excluding cash
         discounts. Off invoice allowances and free goods are subject to
         manufacturers' promotional calendars and may be subject to minimum
         order quantities.

12.      Credits. Credit for returned goods will be processed within five days
         of receipt of the merchandise. Credit for billing errors or mispicks is
         processed immediately. A copy of the credit memo will be sent with the
         Member's next order. Returns authorization requests may be transmitted
         electronically via Telxon at the Member's convenience.

13.      Return Goods Policy. D & K's Return Goods Policy is attached hereto as
         Schedule C. D & K reserves the right to change such policy upon thirty
         (30) days prior written notice to TPPA.

14.      Medicare/Medicaid. TPPA and Members acknowledge that any discounts or
         rebates to it hereunder on items reimbursable by Medicare or a state
         healthcare program such as Medicaid, may be reportable under applicable
         law by TPPA and Members to federal or state healthcare authorities
         respectively.

15.      No Warranty. D & K makes no representation or warranty of
         merchantability, fitness for a particular purpose, or otherwise,
         expressed or implied, with respect to any products; and TPPA and the
         Members acknowledge and agree that any representations or warranties
         that relate to any products are made only by the manufacturer of such
         products. TPPA and the Members acknowledge and agree that its sole
         recourse for the breach of any such manufacturer's representation and
         warranty is against the manufacturer.

16.      No Liability. Notwithstanding anything in this Agreement to the
         contrary, D & K shall have no liability for any special incidental,
         indirect or consequential damages, including, without limitation, loss
         of opportunity, revenue or profit, in connection with or arising out of
         this Agreement or D & K's performance hereunder, even if such damages
         were foreseeable.




    *Confidential portion omitted and filed separately with the Commission.


                                       4
<PAGE>   6
17.      Extension of Credit. D & K shall extend credit subject to Members
         furnishing evidence of financial responsibility, posting of security,
         and execution of a security agreement and other documents as D & K may
         require from time to time. Notwithstanding the foregoing, if at
         anytime, or from time to time, D & K believes that a Member's ability
         to make payments hereunder is impaired or a Member's financial
         condition has materially deteriorated, D & K may require additional
         security and may withhold deliveries until such security is received
         and may amend the payment terms hereunder. Members shall abide by D &
         K's standard credit terms and conditions.

18.      Term. The term of this Agreement will be for a period of
         three (3) years, commencing as of the date first set forth above,
         and, unless sooner terminated as provided below, shall renew
         automatically thereafter for successive one (1) year periods, unless
         written cancellation notice is provided by either party at least
         thirty (30) days prior to the end of the initial term.*  Either
         party may terminate this Agreement if the other party is in breach of
         any of its obligations hereunder and fails to cure such breach within
         ninety (90) days (fifteen (15) days for failure to make payments when
         due) after receipt of notice of such breach; and D & K may terminate
         this Agreement at any time if TPPA or its assets (whether voluntarily
         or involuntarily) become the subject of any bankruptcy or insolvency
         proceeding or if TPPA makes an assignment for the benefit of its
         creditors.

19.      Delays. Notwithstanding any provision of this Agreement to the
         contrary, each party's obligations under this Agreement (other then
         Member's payment obligations) will be excused if and to the extent that
         any delay or failure to perform such obligation is due to acts of
         nature, governmental actions, strikes or labor disputes or other causes
         or situations beyond the reasonable control of that party.

20.      Confidentiality. Each party agrees to maintain in confidence the terms
         and conditions herein, and disclose the contents of this Agreement only
         to those within its organization who have a reasonable need to know of
         such information, except as otherwise agreed by the other party or as
         required by law.

21.      Taxes. Members will pay, when due, any sales, use, excise, gross
         receipts or other federal, state local taxes or other assessments
         (other than any tax based solely on the net





    *Confidential portion omitted and filed separately with the Commission.

                                       5
<PAGE>   7


         income of D & K) and related interest and penalties that D & K is at
         any time obligated to pay or collect in connection with or arising out
         of the transactions, contemplated by this Agreement. If D & K pays any
         such amounts which a Member is obligated to pay under this section,
         then such Member will promptly reimburse D & K in an amount equal to
         the amount so paid by D & K.

22.      Insurance. D & K will at all times during the term of this Agreement
         maintain product liability insurance at levels not less than two
         million dollars ($2,000,000.00), and will provide TPPA with a
         certificate confirming such insurance coverage promptly following
         request for same. Such policies will include TPPA as an additional
         named insured.

23.      Severability. The unenforceability or invalidity of any term or
         provision herein, or of any portion thereof, will not affect the
         validity of enforceability of any other term or provision, or portion
         thereof, herein contained.

24.      Assignment. This Agreement may not be assigned by either party without
         the express written consent of the other party, except that either
         party may assign this Agreement to another party that wholly owns it,
         which it wholly owns or which is under common ownership with such
         party.

25.      Governing Law. This Agreement shall be construed and enforced under the
         law of the State of Missouri without regard to its conflict of laws
         principles.

26.      Notices. All notices under this Agreement shall be in writing and shall
         be deemed duly given on the date received, if personally delivered,
         sent by facsimile transmission, or by overnight courier, and addresses
         to the parties at the following addresses:


         If to TPPA to:

         Tennessee Pharmacy Purchasing Alliance
         107 Music City Circle, Suite 202
         Nashville, TN 37214
         Attention: Glynn Williams, CEO
         Fax:       (615) 872-9095
         Phone:     (615) 872-8880

         If to D & K to:

         D & K Healthcare Resources, Inc.
         8000 Maryland Avenue, Suite 920
         St. Louis, MO  63105
         Attention: Martin Wilson, President
         Fax:       (314) 727-5759
         Phone:     (314) 722-3485

                                       6
<PAGE>   8
     28.      Headings. The headings of this Agreement are used only as a matter
              of convenience, and in no way define limit, construe or describe
              the scope or intent of any section of this Agreement.

     29.      Representation. TPPA represents and warrants that it is authorized
              to act on behalf of its members.

     30.      Incorporation of Request for Proposals (RFP). All terms, covenants
              and representations contained in D & K's response to TPPA's
              request for proposals (see Schedule A) and information provided to
              TPPA during site visits and presentation prior to the award of
              this Agreement (collectively the "RFP Information") are expressly
              included in this Agreement. In the event that the terms of this
              Agreement and the RFP Information conflict, the terms of this
              Agreement shall control. Other than the RFP Information, this
              Agreement and its Exhibits supersede any and all agreements,
              either oral or written, between the parties to this Agreement with
              respect to the subject matter contained in the Agreement, and
              contains all of the covenants and agreements with respect to the
              purchase and sale of Products within the scope of this Agreement.

     31.      Change of Control. In the event that a third party acquires all or
              substantially all of the outstanding voting stock of D & K, then
              TPPA shall have the right to terminate this Agreement upon thirty
              (30) days advance written notice to D & K or such third party
              acquirer as applicable, at any time following the effective date
              following the closing of such acquisition.


     In Witness Whereof, the parties have caused this Agreement to be executed
by authorized representatives.




D & K HEALTHCARE RESOURCES, INC.          TENNESSEE PHARMACY
                                          PURCHASING ALLIANCE


BY:  J. Hord Armstrong, III               BY:      Glenn Williams
     ------------------------------           -------------------------------
ITS: Chairman and CEO                     ITS:     Board Chairman
     ------------------------------           -------------------------------
DATE:   8/25/99                           DATE:    8/25/99
     ------------------------------           -------------------------------



                                       7
<PAGE>   9
                                   SCHEDULE A




                   "TENNESSEE PHARMACIST PURCHASING ALLIANCE"



                          TENNESSEE PHARMACY COALITION



                                 JUNE 11, 1999




                           ***REQUEST FOR PROPOSAL***

<PAGE>   10
                          TENNESSEE PHARMACY COALITION
                    TENNESSEE PHARMACIST PURCHASING ALLIANCE

                              REQUEST FOR PROPOSAL

GENERAL INFORMATION

I.  WHOLESALER INFORMATION

a)     Provide the name and address of your corporation.


         D&K HEALTHCARE RESOURCES, INC.



         CORPORATE OFFICE:                  8000 MARYLAND AVENUE
                                            SUITE 920
                                            ST. LOUIS, MISSOURI   63105

         CAPE GIRARDEAU DIVISION:           1823 RUST AVENUE
                                            CAPE GIRARDEAU, MISSOURI   63703

         LEXINGTON DIVISION:                516 WEST FOURTH STREET
                                            LEXINGTON, KENTUCKY   40508

b)     Provide the address and primary contact for all correspondence and
       notices.


       JIM LARGENT
       DIVISION VP & GENERAL MANAGER - CAPE GIRARDEAU DIVISION
       1823 RUST AVENUE
       CAPE GIRARDEAU, MISSOURI   63703
       (800) 851-3814

c)     List all key personnel, contacts and addresses. Please include name,
       title, telephone number, fax number and e-mail address.


       PLEASE REFER TO EXHIBIT 1 FOR A COMPLETE LIST OF KEY CONTACTS FOR BOTH
       THE CAPE GIRARDEAU AND LEXINGTON DIVISIONS. PLEASE REFER TO EXHIBIT 2
       FOR A LIST OF D&K'S MANAGEMENT TEAM.



D&K Healthcare Resources, Inc.                                          Proposal
July 15, 1999                                                        Page 1 of 3
<PAGE>   11



d)     Provide an outline of your customer service program.

       EACH D&K DISTRIBUTION CENTER IS STAFFED WITH AN EXPERIENCED CUSTOMER
       SERVICE TEAM CONSISTING OF HIGHLY TRAINED REPRESENTATIVES WHO ARE WELL
       PREPARED TO PROVIDE TPC/TPPA MEMBER PHARMACIES WITH THE SUPPORT THEY
       NEED. OUR TOLL-FREE NUMBERS WILL ACCESS OUR CUSTOMER SERVICE
       DEPARTMENTS DIRECTLY FOR ASSISTANCE WITH:

       -  PRODUCT INFORMATION AND AVAILABILITY
       -  DROP SHIP SERVICE
       -  EMERGENCY ORDERS
       -  MATERIAL SAFETY DATA SHEETS
       -  PRICE STICKER
       -  SHELF LABELS

       CUSTOMER SERVICE DEPARTMENT - CAPE GIRARDEAU DIVISION
       PHONE:   (800) 851-3814
       HOURS:   MONDAY THROUGH THURSDAY:  8:00 AM - 6:00 PM (CT)
                FRIDAY:  8:00 AM - 5:00 PM (CT)

       CUSTOMER SERVICE DEPARTMENT - LEXINGTON DIVISION
       PHONE:   (800) 333-9397
       HOURS:   MONDAY THROUGH FRIDAY 8:00 AM - 5:30 PM (ET)

e)     If you are chosen as our Prime Vendor we will need one contact person
       for all divisions for resolving any problems that may arise.

       CONTACT FOR CAPE GIRARDEAU DIVISION:        JIM LARGENT
                                                   DIVISION VP & GENERAL MANAGER

       CONTACT FOR LEXINGTON DIVISION:             GARY EADIE
                                                   DIRECTOR OF SALES




D&K Healthcare Resources, Inc.                                          Proposal
July 15, 1999                                                        Page 2 of 3
<PAGE>   12



II.  SERVICES AND PROGRAMS

a)     MANAGING INVENTORY: Propose an effective program to manage store
       inventories. Include in your proposal methods to control inventory
       shrink, reduce outdates, improve store turns and to shorten days of
       inventory and discuss what tools would be available. Please provide
       data on current service levels.


       D&K HAS PROPOSED OUR PARTNERS PROGRAM AS THE INVENTORY MANAGEMENT
       SOLUTION FOR TPC/TPPA MEMBER PHARMACIES. THIS ADVANCED SOFTWARE PROGRAM
       IS THE PROVEN SYSTEM TO CONTROL INVENTORIES, REDUCE OUTDATES, AND IMPROVE
       INVENTORY TURNS IN THE FAST PACED COMMUNITY PHARMACY SETTING. IT IS THE
       ONLY STATISTICALLY BASED, AUTOMATED INVENTORY REPLENISHMENT PROGRAM
       CURRENTLY IN USE TODAY BY INDEPENDENT PHARMACIES. D&K HAS HAD THIS FULLY
       FUNCTIONING PROGRAM IN PLACE AND OPERATING IN CUSTOMER PHARMACIES FOR THE
       PAST TWO YEARS. PARTNERS IS THE ONLY PROGRAM IN USE IN THE MARKET TODAY
       THAT IS FULLY AUTOMATED AND USES HISTORICAL DISPENSING/USAGE DATA TO
       PRODUCE ORDERS BASED ON PROJECTED DEMAND. PARTNERS CONTROLS INVENTORY BY
       UTILIZING TWENTY-FOUR (24) MONTHS OF PRODUCT MOVEMENT HISTORY FROM THE
       STORE'S PHARMACY SYSTEM WHICH IS DOWNLOADED INTO THE D&K AS/400 COMPUTER.
       TO GET STARTED, D&K WILL TAKE A PHYSICAL INVENTORY TO DETERMINE INVENTORY
       BALANCES IN DISPENSING UNIT OF MEASURE. WITH THESE INVENTORY BALANCES AND
       PRIOR 24 MONTHS DEMAND DOWNLOADED TO OUR AS/400, PLUS RECEIVING A DAILY
       PRODUCT USAGE TRANSMISSION FROM THE CLIENT PHARMACY SYSTEM, PARTNERS WILL
       ACCURATELY FORECAST DEMAND AND CREATE AN ORDER TO PROVIDE JUST-IN-TIME
       INVENTORY. PARTNERS IS DESIGNED TO REDUCE INVENTORY BY 25% WHILE
       INCREASING SERVICE LEVELS. PARTNERS WILL ALSO CUT LABOR COSTS BY
       MINIMIZING THE TIME SPENT BY THE PHARMACY STAFF ORDERING, CHECKING AND
       STOCKING PRODUCT. THE HIDDEN COSTS ASSOCIATED WITH RETURNING ORDERING
       ERRORS AND CARRYING EXCESS INVENTORY IS ALSO ELIMINATED.


       WITH BRANDED RX SERVICE LEVELS APPROACHING 100%, D&K TAKES PRIDE IN ITS
       ABILITY TO CONSISTENTLY DELIVER INDUSTRY LEADING FILL-RATE PERFORMANCE.
       D&K HAS INVESTED HEAVILY IN SOPHISTICATED INVENTORY CONTROL SYSTEMS TO
       PERPETUALLY TRACK ITS INVENTORY, ANALYZE DEMAND HISTORY AND ACCURATELY
       PROJECT FUTURE DEMAND TO ENHANCE FILL RATE PERFORMANCE. THE RESULT OF
       THIS COMPREHENSIVE INVENTORY MANAGEMENT SYSTEM ALLOWS D&K THE ABILITY TO
       CONSISTENTLY OFFER AN OVERALL FILL RATE THAT EXCEEDS 97.5%.



D&K Healthcare Resources, Inc.                                          Proposal
July 15, 1999                                                        Page 3 of 3
<PAGE>   13


 b)    VENDOR CONTRACTS: Vendor contracts are submitted by the manufacturer
       to a wholesaler contracts department. Explain your procedure for loading
       vendor contract prices. Include in your explanation how will the contract
       be verified, what time frame is involved, appointed contact personnel,
       and responsible parties for contract maintenance. What guarantee of
       performance do you have on TPC/TPPA's generic contracts?


       D&K TAKES GREAT PRIDE IN ITS ABILITY TO EFFECTIVELY PROVIDE CONTRACT
       ADMINISTRATION SUPPORT TO TPC/TPPA MEMBER PHARMACIES. UPON RECEIPT OF
       VENDOR CONFIRMATIONS, D&K IMMEDIATELY INITIATES THE CONTRACT LOADING OR
       UPDATING PROCESS. TO EXPEDITE THE PROCESS, D&K ACCEPTS VENDOR
       CONFIRMATIONS BY FAX OR EDI, IN ADDITION TO MAIL. THE CONTRACT ROLL-OVER
       PROCESS TAKES TWO WEEKS AND CAN BE REDUCED TO ONE WEEK WHEN RECEIVED VIA
       EDI. UPDATES RECEIVED BY 12:00 NOON ARE ROUTINELY LOADED THE SAME DAY AS
       RECEIVED AND ARE REFLECTED ON THAT EVENING'S INVOICES. D&K ALSO VERIFIES
       PHARMACY ELIGIBILITY TO MINIMIZE DENIED CHARGEBACKS. THE CONTRACT
       ADMINISTRATORS ARE KATHY LEE, CAPE GIRARDEAU DIVISION AND LINDA
       SCHWEITZER, LEXINGTON DIVISION. TO MONITOR TPC/TPPA'S GENERIC CONTRACT
       PERFORMANCE, D&K PROVIDES TPC/TPPA COPIES OF API PURCHASE ORDERS AND
       RECEIVERS. IN ADDITION, WE PROVIDE A DETAILED REPORT DOCUMENTING API'S
       FILL-RATE PERFORMANCE.


 c)    DSD POLICY AND PROCEDURE: What is your procedure for stores
       deliveries? Include in your explanation, order cut-off time, delivery
       days, delivery times, Holiday scheduling, "emergency" orders, your policy
       on shelf life of products, storage requirements during transportation,
       "special order" items, etc. Attach a copy of your current Policy and
       Procedures. Delivery must be by 12:00 noon to all members.


       D&K RECOGNIZES AND UNDERSTANDS THE CRITICAL ROLL THAT CONSISTENT, TIMELY
       DELIVERING OF MERCHANDISE PLAYS IN A PHARMACY'S DAY-TO-DAY OPERATION. TO
       INSURE QUALITY DELIVERY SERVICE, WE CONSTANTLY MONITOR THE PERFORMANCE OF
       THE D&K DELIVERY FLEET AND OUR CONTRACT CARRIERS. ALL DELIVERIES ARE MADE
       BEFORE 12:00 NOON, THE NEXT BUSINESS DAY, MONDAY THROUGH FRIDAY. ORDER
       CUT-OFF TIME IS 6:30 PM. REFRIGERATED ITEMS ARE SENT IN COOLERS PACKED
       WITH FROZEN COLD PACKS TO INSURE ITEM TEMPERATURE INTEGRITY. HOLIDAY
       SHIPPING SCHEDULES ARE PUBLISHED AND DISTRIBUTED TO THE PHARMACIES WELL
       IN ADVANCE OF THE HOLIDAY TO ENSURE MINIMAL DISRUPTION TO THE ORDERING
       ROUTINE. PLEASE REFER TO EXHIBIT 1 FOR A LIST OF ALL APPROPRIATE
       PERSONNEL, ALONG WITH PAGER AND CELL PHONE NUMBERS. THESE NUMBERS MAY BE
       USED FOR LIFE-THREATENING EMERGENCY ORDERS ON WEEKENDS, HOLIDAYS OR AFTER
       HOURS. WEEKDAY EMERGENCY ORDERS WILL BE HANDLED WITH TOP PRIORITY AND
       SHIPPED EXPRESS OR AIRFREIGHT. D&K ALSO HAS IN PLACE AN EMERGENCY
       BACK-ORDER RELAY SYSTEM BETWEEN OUR FOUR DIVISIONS TO ACT AS A BACK UP
       MEASURE IN CASE ANY DIVISION IS OUT OF A PARTICULAR PRODUCT. D&K WILL
       HONOR ANY REQUEST FROM OUR CUSTOMERS TO STOCK AN ITEM. WE PREFER THAT
       CUSTOMERS GIVE US AN APPROXIMATE MONTHLY USAGE ON PRODUCT ADDITION
       REQUESTS TO ENSURE PROPER STOCKING LEVELS ARE ESTABLISHED. IT IS D&K'S
       POLICY TO SHIP PRODUCT WITH A MINIMUM OF SIX MONTHS SHELF LIFE REMAINING.
       THE EXCEPTIONS TO THIS POLICY WOULD BE BIO-TECHNOLOGY AND OTHER PRODUCTS
       THAT ARE ONLY AVAILABLE WITH SHORTER SHELF-LIFE.



       FOR YOUR CONVENIENCE A COPY OF OUR POLICY AND PROCEDURE MANUAL HAS BEEN
       SENT UNDER SEPARATE COVER.



D&K Healthcare Resources, Inc.                                          Proposal
July 15, 1999                                                        Page 4 of 8
<PAGE>   14


d)     PRICING: If your bid is based on one price for pharmaceuticals, will
       all pharmaceuticals including OTC's be sold at the same pricing? Must be
       one price for all members. No tiered pricing will be accepted. List all
       payment options for our members (i.e. credit terms). Does Rx trade name
       include pass through pricing?


       PHARMACEUTICALS AND OTC/HBA MERCHANDISE WILL BE INVOICED AT THE SAME
       PRICE, AND IN ADDITION, D&K AGREES TO INVOICE ALL MEMBER PHARMACIES AT
       THE SAME PRICE BASED UPON THE PAYMENT TERMS SELECTED. ALL MANUFACTURERS'
       PROMOTIONAL DISCOUNTS AND ALLOWANCES WILL BE PASSED THROUGH TO TPC/TPPA
       MEMBER PHARMACIES DURING THE MANUFACTURERS' PROMOTIONAL PERIODS. PLEASE
       REFER TO EXHIBIT 3 FOR D&K'S PROPOSED PRICING FOR TPC/TPPA.


e)     RETURNS: What is your procedure for returning products? Attach a copy
       of your company's returns policy. Also, include answers for the
       following: (a) Some manufacturers require all returns to be processed
       through the wholesaler-even partials. Do you accept returns on these
       products? (i.e. Mead Johnson Nutritional) (b) Will there be a deduction
       taken on our credits for manufacturer credits processed through your
       accounting office? What is the turnaround on credits for manufacturer
       credits processed through your accounting office? What is the turnaround
       on credits? We prefer no more than one week.


       D&K USES RADIO FREQUENCY (RF) TECHNOLOGY TO EXPEDITE RETURN PROCESSING ON
       ALL IN HOUSE RETURNS. NORMAL RETURN MERCHANDISE WILL BE PROCESSED IN ONE
       WEEK AND WILL BE INCLUDED ON THE TPC/TPPA MEMBER PHARMACY'S CURRENT
       STATEMENT. WE FOLLOW ALL MANUFACTURERS' RETURNED GOODS POLICIES. IF A
       MANUFACTURER ONLY ACCEPTS PARTIAL RETURNS THROUGH A WHOLESALER, WE WILL
       ACCEPT THOSE RETURNS FOR CREDIT. WE ALSO OFFER THE SERVICES OF CAPITAL
       RETURNS TO HANDLE MERCHANDISE NOT RETURNABLE TO WHOLESALERS. CAPITAL
       RETURNS WILL ACCEPT MERCHANDISE OVER ONE YEAR OUT-OF-DATE, OUTDATED
       SCHEDULE II'S, PARTIAL BOTTLES, AND HAZARDOUS MATERIALS. D&K WILL CREDIT
       ALL RETURNS PROCESSED THROUGH CAPITAL RETURNS ON TPC/TPPA MEMBER
       PHARMACIES' STATEMENTS. D&K CHARGES 10% ON ALL OUTDATED OR NON-SALEABLE
       MERCHANDISE RETURNED FOR CREDIT. CREDITS FROM THE MANUFACTURER FOR DIRECT
       RETURNS ARE PASSED THROUGH TO THE CUSTOMER, WITHOUT ANY DEDUCTIONS,
       WITHIN ONE WEEK OF RECEIPT. PLEASE REFER TO EXHIBIT 4 FOR OUR COMPLETE
       RETURNED GOODS POLICY.


f)     List all fees for any services and programs you may offer.


       PLEASE REFER TO EXHIBIT 5 FOR A SUMMARY OF SERVICE AND PROGRAM FEES.



D&K Healthcare Resources, Inc.                                          Proposal
July 15, 1999                                                        Page 5 of 8
<PAGE>   15


III. INVOICING

       Is your company capable of providing custom invoicing? If yes, are you
       capable of placing data such as customer-requested vendor numbers on
       invoices? Are you able to identify contract pricing on invoices? Are you
       capable of categorizing and separating invoices according to "control"
       products, "noncontrol" products and "supply" products? Do you offer
       customer price tags? What is the procedure for stocking new items for our
       members?


       D&K'S INVOICES ARE SEPARATED BY PRESCRIPTION, OTC/HBA, CONTROL PRODUCTS,
       SCHEDULE II'S, AND SUPPLIES. ALL DROP-SHIPPED ORDERS ARE BILLED ON D&K'S
       INVOICES, WITH A REFERENCE TO THE MANUFACTURER PO NUMBER FOR EASY
       REFERENCE. CONTRACT ITEMS ARE CODED ON THE INVOICE AS WELL AS ANY PRICE
       INCREASE OR DECREASE. D&K OFFERS MULTIPLE ENCODED PRICE STICKER FORMATS
       FOR BOTH RX AND OTC PRODUCTS. INFORMATION PROVIDED ON THE STICKER IS AWP,
       NET LANDED PRICE, QUANTITY PURCHASED, DATE PURCHASED, AND D&K'S ITEM
       NUMBER. PRICE STICKERS MAY BE CUSTOMIZED AND ENHANCED TO BETTER MEET THE
       NEEDS OF TPC/TPPA MEMBER PHARMACIES. D&K WILL HONOR REQUESTS FROM
       TPC/TPPA MEMBER PHARMACIES TO STOCK AN ITEM. WE PREFER THAT THE STORE
       PROVIDE US AN APPROXIMATE MONTHLY USAGE ON PRODUCT ADDITION REQUESTS TO
       ENSURE THAT PROPER STOCKING LEVELS ARE ESTABLISHED.

IV. REPORT DATA

       Explain what measures for reporting data (80/20, purchase histories,
       monthly dollars, etc.) are available. Include in your answer, forms used
       (i.e. electronic, on-line viewing, hard copy, etc.) and tools provided by
       the wholesaler (for example, hardware and software). What is the time
       frame for getting reports? How are "special request" reports handled? Any
       changes incurred for `special request" reports? Please provide a copy of
       your annual report.


       ONE OF D&K'S STRENGTHS IS ITS ABILITY TO PROVIDE CUSTOMIZED MANAGEMENT
       REPORTS TO MEET THE UNIQUE NEEDS OF OUR CUSTOMERS. WE RECOGNIZE THE VALUE
       OF INFORMATION AND HOW IMPORTANT IT IS TO ACCESS CRITICAL DATA IN A
       TIMELY AND ACCURATE MANNER. CUSTOMIZED REPORT REQUESTS ARE TYPICALLY
       PROCESSED AND AVAILABLE WITHIN TWO BUSINESS DAYS. D&K IS PRESENTLY
       SUPPLYING A NUMBER OF REPORTS DESIGNED TO TPC/TPPA'S SPECIFICATIONS. IN
       ADDITION, TPC/TPPA IS ALSO UTILIZING D&K'S RESOURCE HQ, A POWERFUL
       PC-BASED ONLINE REPORTING SYSTEM. THE INFORMATION IS UPDATED DAILY AS
       TPC/TPPA DIALS IN TO RECEIVE PURCHASE HISTORY REPORTS IDENTIFYING
       CONTRACT, NON-CONTRACT AND API GENERIC PURCHASES. D&K ALSO PROVIDES
       COPIES OF ALL REPORTS AT THE END OF EACH MONTH. PRINTED REPORTS ARE SENT
       DIRECTLY TO TPC/TPPA HEADQUARTERS WITH A COPY TO GLYNN WILLIAMS. ALL
       HARDWARE, SOFTWARE AND REPORTS ARE PROVIDED AT NO CHARGE. D&K IS ANXIOUS
       TO PROVIDE ADDITIONAL REPORTS IN THE DESIRED FORMAT, AS REQUESTED BY
       TPC/TPPA AND ITS MEMBER PHARMACIES. PLEASE REFER TO EXHIBIT 6 FOR D&K'S
       ANNUAL REPORT.




D&K Healthcare Resources, Inc.                                          Proposal
July 15, 1999                                                        Page 6 of 8
<PAGE>   16



V. SUPPORTIVE MEASURES

       What supportive measures are available through your company? Include in
       your answer, measures regarding managers, meetings, store grand openings,
       promotional programs, merchandising support, personnel, amount of time it
       would take to convert stores to your company, etc. Provide number of
       location of houses available to service this contract.


       D&K BELIEVES IT IS IMPERATIVE THAT SEMI-ANNUAL BUSINESS REVIEW MEETINGS
       ARE HELD WITH THE MANAGEMENT OF BOTH TPC/TPPA AND D&K. THESE
       PARTNERSHIP-BUILDING SESSIONS OFFER BOTH PARTIES THE OPPORTUNITY TO
       MAXIMIZE THE ECONOMIC BENEFIT OF THE AGREEMENT AND TO ENSURE THE MUTUALLY
       AGREED UPON OBJECTIVES RECEIVE THE PROPER FOCUS IN BOTH ORGANIZATIONS. IN
       ADDITION TO THE SEMI-ANNUAL MEETING, D&K PROPOSES QUARTERLY MEETINGS
       BETWEEN TPC/TPPA'S REPRESENTATIVE, STEVE HATFIELD, AND D&K'S MANAGEMENT
       TEAM.


       D&K SERVICING DIVISION PERSONNEL WILL ATTEND STORE GRAND OPENINGS. D&K
       WILL ALSO PROVIDE A GRAND OPENING GIVE-AWAY PRIZE AS WELL AS SECURE
       AVAILABILITY OF NO-CHARGE PROMOTIONAL MERCHANDISE FROM OTC MANUFACTURERS.
       OPENING ORDERS WILL BE GIVEN ADDITIONAL DATING WITH NO PAYMENT DUE FOR
       THE FIRST 90 DAYS, THEN PAYMENTS OF 1/3 OF OPENING ORDER FOR THE NEXT
       THREE MONTHS. D&K ESTIMATES IT WILL TAKE 1-2 DAYS TO TAG A NEW MEMBER
       PHARMACY. RESETS AND REMODELS WOULD DEPEND UPON THE SIZE AND SCOPE OF THE
       PROJECT.

       PLEASE REFER TO EXHIBIT 7 FOR A COMPLETE LIST OF D&K'S PROMOTIONAL
       PROGRAMS.


       D&K REALIZES HOW CRUCIAL IT IS TO PROPERLY MERCHANDISE, ACCURATELY TAG
       AND EXPEDITIOUSLY COMPLETE THE STORE CONVERSION PROCESS. TO ACCOMMODATE
       THESE PROCEDURES, D&K HAS RECENTLY MORE THAN DOUBLED ITS MERCHANDISING
       STAFF AND HAS UPGRADED THE LAPTOP/PC-BASED SHELF LABELING SYSTEM, USED TO
       CONVERT NEW TPA/TPPC MEMBER PHARMACIES TO D&K. MED PLUS MERCHANDISER IS
       D&K'S CUSTOMIZED VERSION OF THE D.P. HAMACHER TEMPS PLAN-O-GRAM PROGRAM.
       IT IS DESIGNED TO D&K'S SPECIFICATIONS ENSURING THE REGIONAL NEEDS OF OUR
       CUSTOMERS ARE MET. D&K'S MERCHANDISERS ARE AVAILABLE FOR IN-STORE
       DEPARTMENT RESET ASSISTANCE, ALLOWING TPC/TPPA MEMBER PHARMACIES TO
       PLAN-O-GRAM THEIR FRONT-END DEPARTMENTS TO MAXIMIZE THIS HIGH MARGIN
       OPPORTUNITY. IN ADDITION, D&K PROVIDES A CHOICE OF THREE ZONE RETAIL
       PRICING OPTIONS. THERE IS NO CHARGE FOR STORE TAGGING OR STORE
       PLAN-O-GRAMS.


       D&K DIVISIONS ARE LOCATED IN MINNEAPOLIS, MINNESOTA, LEXINGTON, KENTUCKY,
       CAPE GIRARDEAU, MISSOURI, AND ABERDEEN, SOUTH DAKOTA.




D&K Healthcare Resources, Inc.                                          Proposal
July 15, 1999                                                        Page 7 of 8
<PAGE>   17



VI. REPACKS

       Explain the type of repack program available through your company.
       Include in your explanation buying re-packs, lead-times, pricing issues,
       credits, returns and morgue products. Please provide your generic program
       including rebates.


       D&K IS PLEASED TO OFFER SAVPAK, ONE OF THE MOST EXTENSIVE REPACK PROGRAMS
       IN THE INDUSTRY. DISCOUNTS OF UP TO 5% ARE ROUTINELY AVAILABLE ON OVER
       140 BRANDED PRODUCTS. REPACK ITEMS MAY BE AUTOMATICALLY SUBSTITUTED FOR
       BRANDED ITEMS.


VII. INTERNET CAPABILITIES

       What capabilities do you offer utilizing the Internet? List all available
       options of ordering systems.


       D&K, THROUGH OUR TYCON SUBSIDIARY, IS IN THE PROCESS OF CREATING AN
       INTERNET PHARMACY CAPABILITY FOR OUR CUSTOMERS. THIS WILL PERMIT TPC/TPPA
       MEMBER PHARMACIES TO PROTECT THEIR BUSINESSES FROM OTHER INTERNET
       PHARMACIES AND ALLOW THEM TO PARTICIPATE IN THIS EMERGING HEALTHCARE
       TREND. D&K WOULD WELCOME THE OPPORTUNITY TO HAVE TPC/TPPA AND ITS MEMBER
       PHARMACIES INVOLVED IN THE FINAL DEVELOPMENT OF THIS PROGRAM.


VIII. GENERICS

       What is your markup above dead net cost on generics inclusive of all
       manufacturer rebates and special prices?


       D&K WILL INVOICE NON-CONTRACT GENERIC PHARMACEUTICAL PRODUCTS BASED ON
       THE MANUFACTURER'S PUBLISHED WHOLESALER PRICE (WAC) IN EFFECT AT THE TIME
       OF DELIVERY. THE PRODUCTS WILL BE DISCOUNTED FROM WAC BY THE AMOUNT OF
       THE TPC/TPPA BUY-PLAN IN AFFECT AT THE TIME OF ORDERING. ALL DISCOUNTS
       AND ALLOWANCES WILL BE PASSED THROUGH TO TPC/TPPA MEMBER PHARMACIES
       DURING THE MANUFACTURERS' PROMOTIONAL PERIOD.


D&K Healthcare Resources, Inc.                                          Proposal
July 15, 1999                                                        Page 8 of 8
<PAGE>   18




                                   SCHEDULE B*

*Confidential portion omitted and filed separately with the Commission.