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                             EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 31st day of August,
------------------------
2000 by and between D & K Healthcare Resources, Inc. (the "Company") with
offices at 8000 Maryland Avenue, Suite 920, St. Louis, Missouri 63105; and
Thomas S. Hilton (the "Executive") of 602 Carman View Court, Manchester,
Missouri 63021.

        WHEREAS, the Company desires to enter an employment contract with
Executive upon the terms and conditions set forth herein;

        WHEREAS, the Executive is desirous of entering into such contract.

        NOW, THEREFORE, in consideration of the premises and mutual covenants
herein set forth, the parties hereto agree as follows:

1.      EMPLOYMENT
        ----------

        The Company agrees to employ the Executive, and the Executive agrees
        to be employed by the Company, subject to the terms and conditions
        set forth in this Agreement.

2.      POSITION AND RESPONSIBILITIES
        -----------------------------
2.1     The Executive shall during the continuance of his employment:

2.1.1   serve the Company to the best of his ability in the capacity of
        Senior Vice President and Chief Financial Officer or in such other
        capacity or capacities, consistent with the Executive's level of
        experience and expertise as may be specified from time to time by the
        Chief Operating Officer or the Chief Executive Officer;

2.1.2   faithfully and diligently perform such duties and exercise such
        powers consistent with such office, subject to the direction and
        supervision of the Chief Operating Officer and the Chief Executive
        Officer,

2.1.3   if and so long as the Chief Operating Officer or the Chief Executive
        Officer so directs, perform and exercise the said duties and powers
        on behalf of any Affiliated Company and act as a director or other
        officer of any Affiliated Company; and

2.1.4   unless prevented by sickness, injury or otherwise agreed by the Chief
        Operating Officer or the Chief Executive Officer, devote his full
        time and attention and abilities during his hours of work (which
        shall be normal business hours and such additional hours as may be
        necessary for the proper performance of his duties) to the
        performance of his duties under this Agreement.

3.      REMUNERATION
        ------------

3.1     The Company shall pay to the Executive during the continuance of his
        employment a salary at the rate of $208,000 per year and at the
        Executive's option either the use of an automobile appropriate for
        his position or an automobile allowance at the rate of $750 per
        month. The salary shall be payable in equal semi-monthly installments
        in arrears or as otherwise determined by the Company on a
        company-wide basis.

3.2     During the continuance of his employment the Executive shall be
        entitled to an annual bonus based upon the achievement of performance
        criteria established by the Company. The target amount for the
        achievement of 100% of targeted performance will not be less that 35%
        of the Executive's then annual salary.

3.3     The salary and bonus shall be reviewed from time to time and the
        rates thereof may be increased by the Company.

3.4     Notwithstanding anything to the contrary contained in the terms of
        any stock option granted to the Executive under the Stock Option Plan
        (but Subject, however, to any restriction contained in the Stock
        Option Plan as in effect on the date hereof that, pursuant to the
        terms of the Stock Option Plan, cannot be modified by mutual agreement
        of the Company with an individual optionee), all stock options granted
        to the Executive by the

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        Company shall vest and become fully exercisable upon the first to occur
        of a Change in Control, as defined herein, or the termination of the
        Executive's employment by the Company without Cause, non-renewal by the
        Company or termination by the Executive for Good Reason and the
        Executive shall be allowed a period of 12 months following the
        effective date of such termination, to exercise options granted under
        the Stock Option Plan. The terms of any agreement in effect on the date
        hereof between the Company and the Executive granting or otherwise
        relating to such options shall be deemed amended hereby to the extent
        such terms are inconsistent with the foregoing.

4.      INSURANCE AND OTHER BENEFITS
        ----------------------------

        The Executive shall be entitled to participate in any Benefit Plans
        (including any medical expense insurance and permanent health and
        accident insurance and travel insurance plans) of the Company enjoyed
        by or made available to other senior executive officers of the
        Company to the extent that the Executive qualifies under the
        eligibility provisions of any such plan, as presently in effect or as
        they may be modified from time to time. The Company shall continue to
        pay for the Executive's membership in the organizations for which the
        Company currently pays.

5.      EXPENSES
        --------

5.1     The Company shall reimburse the Executive in respect of all
        reasonable and appropriate travel, accommodation, entertainment and
        other similar out-of-pocket expenses actually incurred or expended by
        him in the performance of his duties hereunder.

5.2     Except where specified to the contrary all expenses shall be
        reimbursed subject to the Executive providing appropriate authorized
        evidence (including receipts, invoices, tickets and/or vouchers as
        may be appropriate) of the expenditure in respect of which he claims
        reimbursement.

6.      VACATION
        --------

        The Executive shall (in addition to the usual public and Company
        holidays) be entitled during the continuance of his employment to 15
        business days' paid vacation in each vacation year of the Company,
        which shall be the calendar year.

7.      INTELLECTUAL PROPERTY
        ---------------------

7.1     Subject to applicable law, if at any time in the course of his
        employment the Executive makes or discovers or participates in the
        making or discovery of any Intellectual Property relating to or
        capable of being used in the business of the Company or any
        Affiliated Company he shall immediately disclose full details of such
        Intellectual Property to the Company and all such Intellectual
        Property shall be the sole property of the Company. At the request
        and expense of the Company he shall do all things which may be
        necessary or desirable for obtaining appropriate forms of protection
        for the Intellectual Property in such parts of the world as may be
        specified by the Company and for vesting all rights in the same in
        the Company or its nominee.

7.2     All rights and obligations under this Clause 7 in respect of
        Intellectual Property made or discovered by the Executive during his
        employment shall continue in full and force and effect after the
        termination of his employment and shall be binding upon the
        Executive's personal representatives.

8.      CONFIDENTIALITY
        ---------------

8.1     Except as necessary or appropriate to the proper performance of his
        duties, or with the prior written consent of the Company, or as
        ordered by a court of competent jurisdiction, the Executive shall not
        at any time either during the continuance of his employment or after
        its termination disclose or communicate to any person or use for his
        own benefit or the benefit of any person other than the Company or
        any Affiliated Company any information relating to the Company or any
        Affiliated Company that is not generally known to the public
        ("Confidential Information") which may come to his knowledge in the
        course of his employment.

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8.2     All notes and memoranda of any trade secret or other Confidential
        Information concerning the business of the Company and the Affiliated
        Companies or any of its or their suppliers, agents, distributors,
        clients, customers or others which shall have been acquired, received
        or made by the Executive during the course of his employment shall be
        the property of the Company and shall be surrendered by the Executive
        to someone duly authorized in that behalf at the termination of his
        employment or at the request of the Board of Directors at any time
        during the course of his employment.

9.      TERM AND TERMINATION OF EMPLOYMENT
        ----------------------------------

9.1     Term. The term of the Executive's employment under this Agreement
        ----
        shall be three years from the date first set forth above and, unless
        sooner terminated as set forth herein, and shall automatically renew
        for successive one year terms thereafter unless either party gives
        the other a notice of non-renewal at least 90 days before the end of
        the then current term.

9.2     Termination by the Company without Cause; Termination by the
        ------------------------------------------------------------
        Executive for Good Reason. The Company may terminate the employment
        -------------------------
        of the Executive at any time without Cause by giving the Executive
        notice of termination. The Executive may terminate his employment by
        the Company at any time for Good Reason by giving a notice of
        termination to the Company, and the effective date of such
        termination shall be determined in accordance with Clause 12.2.

9.2.1   Except as provided in Clause 9.2.2, in the event of a termination
        by the Company without Cause, non-renewal by the Company or
        termination by the Executive for Good Reason:

        (a)   the Company shall continue to pay his salary and provide his
              other benefits hereunder, including automobile allowance and
              benefits pursuant to Clause 4 (less the monthly payroll
              deductions if any, charged to the Executive immediately prior
              to such termination in respect of such benefits) through the
              remainder of the then current term, but in no event for less
              than for 12 months (without giving effect to any reduction
              thereto unless such reduction was made with the Executive's
              prior written consent); and

        (b)   the Executive shall also be entitled to a bonus for that year
              equal to 35% of his then annual salary (irrespective of whether
              performance objectives have been achieved), but prorated from
              the beginning of such year through such effective date of
              termination, provided, however, that in the event of a
              termination for Good Reason pursuant to Clause 14.1.8(b), the
              annual salary used for computation under this Clause 9.2.1(b)
              shall be the one in effect prior to the reduction referred to
              in Clause 14.1.8(b); and

9.2.2   Notwithstanding the other provisions of Clause 9.2.1 in the event
        that (x) the Company terminates the Executive's employment without
        Cause in anticipation of, or pursuant to a notice of termination
        delivered to the Executive within 24 months after, a Change in
        Control, or (y) the Executive terminates his employment for Good
        Reason pursuant to a notice of termination delivered to the Company
        in anticipation of, or within 24 months after, a Change in Control or
        (z) the Company delivers a notice of non-renewal to the Executive in
        anticipation of, or within 24 months after, a Change of Control:

        (a)   the Company shall pay to the Executive, within 30 days after
              such notice of termination or non-renewal is given, a lump-sum
              cash amount equal to (i) two times the sum of (A) his then
              current annual salary and  (B) 35% of his then current annual
              salary (representing his annual bonus for the achievement of
              100% of performance objectives, irrespective of whether
              performance objectives have been achieved), plus (ii) a
              prorated bonus for the then current fiscal year equal to 35% of
              his then annual salary, (irrespective of whether performance
              objectives have been achieved), plus (iii) if such notice is
              given within the first 12 months after the date first set forth
              above, then, the salary the Executive should have been paid
              from the date of termination through the end of such 12 month
              period, provided, however, that in the event of a termination
              for Good Reason pursuant to Clause 14.1.8(b), the annual salary
              used for computation under this Clause 9.2.2(a) shall be the
              one in effect prior to the reduction referred to in
              Clause14.1.8(b); and

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        (b)   for a period of 24 months after the effective date of such
              termination, the Company shall provide the Executive with
              benefits hereunder, including automobile allowance and benefits
              pursuant to Clause 4 (less the monthly payroll deduction, if
              any, charged to the Executive immediately prior to such
              termination in respect of any such benefits) at the respective
              levels of coverage in effect at the time the termination
              (without giving effect to any reduction thereto unless such
              reduction was made with the Executive's consent)or the cash
              equivalents of the foregoing on a monthly basis.

9.2.3   In the event of a termination without Cause by the Company,
        non-renewal by the Company or termination for Good Reason by the
        Executive, in addition to the rights and benefits to which the
        Executive would be entitled under Clause 9.2.1 or 9.2.2, as the case
        may be:

        (a)   subject to the provisions of Clause 3.4 the Company shall
              vest as of the effective date of such termination all options
              granted to the Executive under the Stock Option Plan and allow
              the Executive a period of 12 months following such effective
              date within which to exercise such options;

        (b)   the Company shall provide the Executive with appropriate
              outplacement services through Drake Bean Morin, Inc. (or other
              nationally recognized outplacement firm) at a cost to the
              Company of no more than 15% of the Executive's annual salary
              immediately prior to termination (without giving effect to any
              reduction thereto unless such reduction was made with the
              Executive's consent); and

        (c)   the Executive shall also be entitled to a contribution under
              the Company's Executive Retirement Benefit Plan for that fiscal
              year equal to the greater of (i) the amount that would have
              been contributed for that fiscal year determined in accordance
              with past practice or (ii) the highest amount contributed by
              the Company on behalf of the Executive under that Plan for any
              of the three prior fiscal years, but prorated from the
              beginning of the fiscal year in which termination occurs
              through the effective date of termination.

9.3     Termination by the Company for Cause. The Company may at any time
        ------------------------------------
        terminate the Executive's employment for Cause by giving the
        Executive a notice of termination. In the event of a termination by
        the Company for Cause the Executive shall be entitled to receive any
        unpaid amount of his then current salary through the effective date
        of such termination, as well as any other benefits which shall have
        vested and become payable to him under the Benefit Plans as of such
        effective date.

9.4     Retirement. The employment of the Executive shall terminate
        ----------
        automatically upon his Retirement. "Retirement" shall mean a
        termination of the Executive's employment initiated by the Executive,
        other than for Good Reason, whereby the Executive is entitled to
        receive an immediately payable benefit, including any applicable
        early retirement benefit, under any other pension or retirement plan
        then generally applicable to its salaried employees or under any
        retirement arrangement established with respect to the Executive with
        his prior written consent; in either case, whether or not the
        Executive commences to receive such benefit at the time of such
        termination. In the event of the termination of the Executive's
        employment pursuant to his Retirement, the Executive shall be
        entitled to any other benefits which shall have vested and become
        payable to him under the Benefit Plans as of the effective date of
        such Retirement or to which the Executive is otherwise entitled upon
        his Retirement under any Benefit Plan or other policy or program of
        the Company or any Affiliated Company in accordance with the
        respective terms of such Benefit Plan, policy or program.

9.5     Death or Disability.
        -------------------

9.5.1   Disability. Subject to the requirements of the Americans with
        ----------
        Disabilities Act of 1990, as amended, the Family and Medical Leave
        Act of 1993, as amended, and/or any other legislation applicable to
        the Executive's employment by the Company, the Company may terminate
        the employment of the Executive, by giving him not less than 30 days
        written notice prior if the Executive shall have been absent from
        work due to sickness, injury or other incapacity for a continuous
        period of more than 120 days or if, in the opinion of a physician
        reasonably selected by the Company, the Executive is likely to be
        unable to perform his duties for a continuous period of more than 120
        days provided, that the Company shall withdraw such notice if during
        its pendency the Executive fully resumes his performance hereunder
        and provides the Company with a certificate from a physician
        reasonably acceptable to the Company certifying the Executive's
        ability to perform his duties hereunder. Circumstances justifying
        termination of the Executive's employment by the Company pursuant to

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        this Clause 9.5.1 are referred to herein as "Disability". Any refusal
        by the Executive to submit to a medical examination by a physician or
        other appropriate expert selected by the Company for the purposes of
        certifying his ability to perform his duties and responsibilities
        hereunder shall, at the option of the Company, be deemed to constitute
        conclusive evidence of the Executive's inability to perform such duties
        and responsibilities.

9.5.2   Death. In the event of the death of the Executive while employed by
        -----
        the Company, his employment shall terminate automatically but the
        Executive's salary payable hereunder shall nevertheless continued to
        be paid to the Executive's surviving spouse, or if there is no
        surviving spouse, then to the Executive's designee or representative
        (as the case may be) through the 12 month period following the end of
        the calendar month in which the death occurred.

9.6     Upon the termination of his employment the Executive shall be
        entitled to accrued vacation pay calculated on a pro rata basis in
        respect of each completed month of service in the vacation year in
        which his employment terminates and the appropriate amount shall be
        paid in cash to the Executive, provided that if the Executive shall
        have taken more days than his accrued entitlement the Company is
        hereby authorized to make an appropriate deduction from the
        Executive's final salary payment.

9.7     The Executive shall have no obligation to take any action to mitigate
        or offset any amounts payable by the Company pursuant to this Clause
        9, by seeking other employment or otherwise, nor shall the amount of
        any payment provided for in this Agreement be reduced by any
        compensation earned by the Executive as the result of employment by
        another employer after the date of termination of the Executive's
        employment or otherwise.

9.8     The termination of the Executive's employment for any reason
        whatsoever shall not operate to terminate this Agreement as an
        entirety or to adversely affect the respective continuing rights and
        obligations of the parties under Clauses 5, and 7 through 16,
        inclusive, of this Agreement, all of which shall survive the
        effective date of such termination of employment in accordance with
        their respective terms.

9.9     The Executive acknowledges that the Company may have in effect from
        time to time a written severance plan or policy, which plan or policy
        is or may be subject to change at the discretion of the Company. The
        executive shall not be entitled to any notice, payment in lieu of
        notice or other severance payments under such plan or policy, but if
        the notice period (or payment) to which the Executive would have been
        entitled under such plan or policy as it may then exist is greater
        than the notice period (or payment in lieu of such notice) to which
        the Executive would be entitled under this Agreement, then the notice
        period (and payment is Lieu thereof) for termination hereunder shall
        be deemed to be such greater amounts.

9.10    Upon the termination of his employment (for whatever reason and
        howsoever arising) the Executive shall at the request of the Company
        immediately resign without claim for compensation from office as a
        Director of any Affiliated Company and from any other office held by
        him in the Company or any Affiliated Company (but without prejudice
        to any claim he may have for damages for breach of this Agreement)
        and the Executive hereby irrevocably authorizes the Company to
        appoint some person in his name and on his behalf to sign and deliver
        such resignations to the Board in the event of the Executive's
        failure to so resign.

10.     EXECUTIVE'S COVENANTS
        ---------------------

10.1    The Executive acknowledges that during the course of his employment
        with the Company he will receive and have access to Confidential
        Information of the Company and its Affiliated Companies (including
        without limitation those matters specified in Clause 8.2 of this
        Agreement, as well as detailed client/customer lists and information
        relating to the operations and business requirements of those
        client/customers) and accordingly he is willing to enter into the
        covenants described in Clauses 10.2 and 10.3 in order to provide the
        Company and is Affiliated Companies with what he considers to be
        reasonable protection for those interests.

10.2    The Executive hereby covenants with the Company that during the
        term of his employment he will not either directly or indirectly
        engage or participate in any activity competitive with or adverse to
        the business or interests of the Company or any of its Affiliated
        Companies.

10.3    The Executive hereby covenants with the Company that during the
        12 month period (24 months with respect to Clause 10.3.3) following the
        last day of the Executive's employment, the Executive shall not,
        directly or

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        indirectly, as a stockholder (other than as a less than 1% stockholder
        of a publicly and traded Company), partner, officer, director, agent,
        consultant, employee, or otherwise:

10.3.1  engage in any business in the United States of America that competes
        with the business then conducted by the Company or any Affiliated
        Company ("Company" defined in this clause to mean all Affiliated
        Companies, divisions, successors, and assigns of the Company);

10.3.2  purposefully interfere or attempt to interfere with any of the
        Company's or any Affiliated Company's contract (regardless of whether
        these contracts are in writing or verbal) or business relationships
        or advantages existing and in effect as of the employment date of
        termination of Executive's employment;

10.3.3  solicit for employment, either directly or indirectly, for himself
        or for another, any persons who are or were employed by the Company
        or any Affiliated Company as a head of any function, the direct
        report of such function head, or in any other key technical,
        marketing or sales position during the six month period prior to the
        termination of his employment; or

10.3.4  request or cause or attempt to cause any customer or supplier of
        the Company or an Affiliated Company to alter or terminate any
        business relationship with the Company or any Affiliated Company

10.4    The covenants contained in Clauses 10.3.1, 10.3.2, 10.3.3 and
        10.3.4 are intended to be separate and severable and enforceable as
        such.

10.5    In the event of a breach of Clauses 10.3.1, 10.3.2, 10.3.3 and
        10.3.4, the Executive acknowledges that in addition to any other
        remedies available under law to the Company and any Affiliated
        Company, the Company and any Affiliated Company may be entitled to an
        injunction enjoining the Executive or any person or persons acting
        for or with the Executive in any capacity whatsoever from violating
        any of the terms thereof.

11.     ASSIGNMENT
        ----------

11.1    This Agreement shall be binding upon and shall inure to the benefit
        of the Company and any successor of the Company.

11.2    This Agreement shall be binding upon and shall inure to the benefit
        of Executive, his legal representatives, heirs, legatees, executors,
        administrators and assigns, except that Executive's obligations to
        perform services under this Agreement are personal and are expressly
        declared to be nonassignable and nontransferable by him without the
        consent in writing of the Company.

11.3    In the event of a Change in Control, the Company shall require the
        successor to the Company as the Executive's employer (whether such
        succession is direct or indirect, by purchase, merger, consolidation
        or otherwise, to all or a substantial portion of the business and/or
        assets of the Company) to expressly assume and agree 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. As used in this Agreement, the term "Company" as hereinbefore
        defined and any successor to all or a substantial portion of its
        business and/or assets as aforesaid.

12.     NOTICES
        -------

12.1    Any notice to be given under this Agreement shall be given in writing
        and shall be deemed to be sufficiently served by one party on the
        other if it is delivered personally or is sent by facsimile
        transmission, overnight service or registered or recorded delivery
        prepaid post addressed to either the Company's principal office for
        the time being or the Executive's last known address as the case my
        be.

12.2    Any purported termination of the Executive's employment by the
        Company or by the Executive or non-renewal of the term of the
        Executive's employment shall not be effective unless communicated in
        writing to the other party hereto in accordance with Clause 12.1
        above and relevant provisions of Clauses 9 and 14. A notice of
        termination shall identify the specific termination provision of this
        Agreement relied upon, shall specify the intended effective date of
        such termination (which date shall comply with the notice period

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        requirements of the provision so identified) and shall set forth in
        reasonable detail the facts and circumstances claimed to provide a
        basis for termination under the provision so identified.

13.     MISCELLANEOUS
        -------------

13.1    Golden Parachute Tax
        --------------------

13.1.1  Anything in this Agreement to the contrary notwithstanding, in the
        event that any payment by the Company to or for the benefit of the
        Executive, whether paid or payable pursuant to the terms of this
        Agreement or otherwise, including any accelerated vesting of any
        options granted under the Stock Option Plan (such payment or income,
        excluding any payment pursuant to Clause 13.1, a "Payment") is either
        reasonable determined by the Company to be subject, or is subjected
        by the IRS (after exhaustion by the Company of its remedies described
        in Clause 13.1.3), to the excise tax imposed by Section 4999 of the
        Internal Revenue Code of  1986, as amended, (the "Code") or any
        interest or penalties with respect to such excise tax (such excise
        tax, together with any such interest and penalties, are hereinafter
        collectively referred to as the "Excise Tax"), then the Executive
        shall be entitled to receive from the Company, within 15 days
        following the determination described in Clause 13.1.2 below, an
        additional payment (an "Excise Tax Adjustment Payment") in an amount
        such that after payment by the Executive of all applicable U.S.
        federal, state and local taxes (computed at the maximum marginal
        rates and including any interest or penalties imposed with respect to
        such taxes) and the Hospital Insurance portion of FICA tax, including
        any Excise Tax imposed upon the Excise Tax Adjustment Payment, the
        Executive retains an amount of the Excise Tax Adjustment Payment
        equal to the Excise Tax imposed upon the Payments.

13.1.2  In the event that as the result of a position taken by the Company
        or the IRS, the Executive is required to make a payment of any Excise
        Tax, the determination of the amount of the Excise Tax Adjustment
        Payment shall be made by a nationally recognized accounting firm
        acceptable to the Executive and the Company (the "Accounting Firm"),
        which shall provide detailed supporting calculations to the Company
        and the Executive. Subject to the provisions of Clause 13.1.3 below,
        the amount of the Excise Tax Adjustment Payment shall be promptly
        paid by the Company to or for the benefit of the Executive. The
        determination of the Excise Tax Adjustment Payment by the Accounting
        Firm shall be binding upon the Company and the Executive.

13.1.3  The Executive shall notify the Company in writing of any claim by
        the IRS that, if successful, would require the payment by the Company
        of the Excise Tax Adjustment Payment. Such notification shall be
        given as soon as practicable but no later than 10 business days after
        the Executive is informed in writing of such claim and shall apprise
        the Company of the nature of such claim and the date on which such
        claim is requested to be paid. The Executive shall not pay such claim
        prior to the expiration of the 30-day period following the date on
        which it gives such notice to the Company (or such shorter period
        ending on the date that any payment of taxes with respect to such
        claim is due). If the Company notifies the Executive in writing prior
        to the expiration of such period that it desires to contest such
        claim, the Executive shall:

        (a)   give the Company any information reasonably requested by the
              Company relating to such claim,

        (b)   take such action in connection with contesting such claim as
              the Company shall reasonably request in writing from time to
              time, including, without limitation, accepting legal
              representation with respect to such claim by an attorney
              reasonably selected by the Company,

        (c)   cooperate with the Company in good faith in order effectively
              to contest such claim, and

        (d)   permit the Company to participate in any proceedings relating
              to such claim;

        provided, however, that the Company shall bear and pay directly all
        costs and expenses (including additional interest and penalties)
        incurred in connection with such contest and shall indemnify and hold
        the Executive harmless, on an after-tax basis, for any Excise Tax or
        income tax (including interest and penalties with respect thereto)
        imposed as a result of such representation and payment of costs and
        expenses. Without limiting the foregoing provisions of the Clause
        13.1.3, the Company shall control all proceedings taken in connection
        with such contest and, at its sole option, may pursue or forgo any
        and all administrative appeals, proceedings, hearings and conferences
        with the taxing authority in respect of such claim and may, at its sole

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        option, either direct the Executive to pay the tax claimed and sue for
        a refund or contest the claim in any permissible manner, and the
        Executive agrees to prosecute such contest to a determination before
        any administrative tribunal, in a court of initial jurisdiction and in
        one or more appellate courts, as the Company shall determine; provided,
        however, that if the Company directs the Executive to pay such claim
        and sue for a refund, the Company shall advance the amount of such
        payment to the Executive on an interest-free basis and shall indemnify
        and hold the Executive harmless, on an after-tax basis, from any Excise
        Tax or income tax (including interest or penalties with respect
        thereto) imposed with respect to such advance or with respect to any
        imputed income with respect to such advance; and further provided that
        any extension of the statute of limitations relating to payment of
        taxes for the taxable year of the Executive with respect to which such
        contested amount is claimed to be due is limited solely to such
        contested amount. Furthermore, the Company's control of the contest
        shall be limited to issues with respect to which an Excise Tax
        Adjustment Payment would be payable hereunder and the Executive shall
        be entitled to settle or contest, as the case may be, any other issue
        raised by the IRS or any other taxing authority.

13.1.4  If, after the receipt by the Executive of an amount advanced by the
        Company pursuant to Clause 13.1.3, the Executive becomes entitled to
        receive any refund with respect to such claim, the Executive shall
        (subject to the Company's complying with the requirements of Clause
        13.1.3) promptly pay to the Company the amount of such refund
        (together with any interest paid or credited thereon after taxes
        applicable thereto). If, after the receipt by the Executive of an
        amount advanced by the Company pursuant to Section 13.1.3, a
        determination is made that the Executive shall not be entitled to any
        refund with respect to such claim and the Company does not notify the
        Executive in writing of its intent to contest such denial of refund
        prior to the expiration of 30 days after such determination, then
        such advance shall be forgiven and shall not be required to be repaid
        and the amount of such advance shall offset, to the extent thereof,
        the amount of Excise Tax Adjustment Payment required to be paid.

13.2    The Executive hereby warrants that by virtue of entering into this
        Agreement he will not be in breach of any express or implied terms of
        any court order, contract or of any other obligation legally binding
        upon him.

13.3    Any benefits provided by the Company to the Executive or his family
        which are not expressly referred to in this Agreement shall be
        regarded as ex gratia benefits provided at the entire discretion of
        the Company and shall not form part of the Executive's contract of
        employment.

13.4    Except as expressly provided in the Clause 13, the Executive shall
        be responsible for the payment of all individual taxes on all amounts
        paid or benefits provided to him under this Agreement. All
        compensation (including with limitation, salary and any severance
        payments) paid to the Executive shall be subject to such deductions
        as from time to time may be required by law or regulation or by
        agreement with, or consent of the Executive.

13.5    Any waiver by either party of any breach of any provision of this
        Agreement must be set forth in a writing signed by such party, in
        order for it to be effective, and no such waiver shall operate as a
        waiver of any subsequent breach of that provision or any breach of
        any other provision of this Agreement.

13.6    The Company will indemnify the Executive (and his legal
        representatives, heirs, estate or other successors) to the fullest
        extent permitted (including payment of expenses in advance of final
        disposition of any proceeding) by the laws of the jurisdiction of the
        incorporation of the Company as in effect at the time of the subject
        act or omission, or by the certificate of incorporation and by-laws
        of the Company as in effect at such time or on the date of this
        Agreement, or by the terms of any indemnification agreement between
        the Company and the Executive, whichever affords or afforded greatest
        protection to the Executive, and the Executive shall be entitled to
        the protection of any insurance policies the Company or an Affiliated
        Company may elect to maintain generally for the benefit of its
        directors and officers (and to the extent the Company or an
        Affiliated Company maintains such an insurance policy or policies,
        the Executive shall be covered by such policy or policies, in
        accordance with its or their terms, to the maximum extent of the
        coverage available for a person serving or having served in the
        positions and offices in which the Executive is serving or has
        served), against all costs, charges and expenses whatsoever incurred
        or sustained by him (or his legal representative, heirs, estate or
        other successors) at the time such costs, charges and expenses are
        incurred or sustained, in connection with any action, suit or
        proceeding to which he (or his legal representatives, heirs, estate
        or other successors) may be made a party by reason of his being or
        having been a director, officer or employee of the

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        Company or any Affiliated Company, or be reason of he serving or having
        served any other enterprise as a director, officer or employee at the
        request of the Company or any Affiliated Company.

14.     DEFINITIONS AND INTERPRETATION
        ------------------------------

14.1    In this Agreement unless the context otherwise requires or as
        otherwise defined herein the following expressions have the following
        meanings:

14.1.1  "AFFILIATED COMPANY"

        Any legal entity that, directly or indirectly, controls, is
        controlled by or is under common control with the Company, where
        "control" means the power to direct or cause the direction of the
        management and policies of such entity, whether through ownership of
        voting securities, by contract or otherwise.

14.1.2  "BENEFIT PLANS"

        The 401(k) plan and other pension, retirement, life insurance,
        medical, health, accident, disability, welfare, savings, deferred
        compensation or similar plans of the Company and its Affiliated
        Companies.

14.1.3  "THE BOARD OF DIRECTORS"

        The Board of Directors for the time being of the Company including
        any duly appointed committee thereof.

14.1.4  "CAUSE"

        Any of the following:

        (a)   the Executive's willful and continued failure substantially
              to perform his duties hereunder (other than as a result of
              sickness, injury or other physical or mental incapacity or as a
              result of termination by the Executive for Good Reason);
              provided, however, that such failure shall constitute "Cause"
              only if (x) the Company delivers a written demand for
              substantial performance to the Executive that specifies the
              manner in which the Company believes the Executive has failed
              substantially to perform his duties hereunder and (y) the
              Executive shall not have corrected such failure within 10
              business days after his receipt of such demand;

        (b)   willful misconduct by the Executive in the performance of his
              duties hereunder that is demonstrably and materially injurious
              to the Company or any Affiliated Company for which he is
              required to perform duties hereunder;

        (c)   the Executive's conviction of (or plea of nolo contendere to)
              a felony under the laws of the United States or any state
              thereof;

        (d)   the Executive's illegal or immoderate use or abuse of alcoholic
              beverages or drugs in a manner that in the reasonable opinion
              of the Company demonstrably and materially impairs the
              Executive's ability to perform his duties under this Agreement
              or demonstrably and materially adversely affects the
              Executive's or the Company's reputation with customers or in
              the community as a whole; provided, however, that this clause
              (d) shall not apply to use of prescription drugs in the manner
              prescribed by a physician or other duly licensed medical or
              health practitioner authorized to issue prescriptions for such
              prescription drugs.

        No action, or failure to act, shall be considered "willful" if it is
        done by the Executive in good faith and with the reasonable belief
        that he action or omission was in the best interest of the Company.

14.1.5  "CHANGE IN CONTROL"

        The occurrence of any of the following:

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        (a)   any event pursuant to which any "Person" becomes an "Acquiring
              Person" (as such terms are defined in that certain Rights
              Agreement dated as of November 12, 1998 between the Company and
              Harris Trust and Savings Bank as Rights Agent, as such rights
              Agreement initially entered into effect as of such date);

        (b)   a merger, consolidation, exchange, combination or other
              transaction involving the Company and another entity (or the
              securities of the Company and such other entity) as a result of
              which the holders of all of the shares of Common Stock of the
              Company outstanding prior to such transaction do not hold,
              directly or indirectly, shares of the outstanding voting
              securities of, or other voting ownership interest in, the
              surviving, resulting or successor entity in such transaction in
              substantially the same proportions as those in which they held
              the outstanding shares of Common Stock of the Company
              immediately prior to such transaction;

        (c)   the sale, transfer, assignment or other disposition by the
              Company in one transaction or a series of transactions within
              any period of 18 consecutive calendar months (including,
              without limitation, by means of the sale of capital stock of
              any subsidiary or subsidiaries of the Company) of assets which
              account for an aggregate of 50% or more of the consolidated
              revenues of the Company and its subsidiaries, as determined in
              accordance with U.S. generally accepted accounting principles,
              for the fiscal year most recently ended prior to the date of
              such transaction (or, in the case of a series of transactions
              as described above, the first such transaction); provided,
              however, that no such transaction shall be taken into account
              if substantially all the proceeds thereof (whether in cash or
              in kind) are used after such transaction in the ongoing conduct
              by the Company and/or its subsidiaries of the business
              conducted by the Company and/or its subsidiaries prior to such
              transaction;

        (d)   the Company is dissolved; or

        (e)   a majority of the directors of the Company are persons who were
              not members of the Board of Directors as of the date (the
              "Reference Date") which is the more recent of the date hereof
              and the date which is two years prior to the date on which such
              determination is made, unless the first election or appointment
              (or the first nomination for election by the Company's
              shareholders) of each director who was not a member of the
              Board of Directors on the Reference Date was approved by a vote
              of at least two-thirds of the Board of Directors in office
              prior to the time of such first election, appointment or
              nomination.

14.1.6  "THE CHIEF EXECUTIVE OFFICER"

        The Chief Executive Officer of the Company.

14.1.7  "THE CHIEF OPERATING OFFICER"

        The Chief Operating Officer of the Company.

14.1.8  "GOOD REASON"

        The occurrence of any of the following (other than by reason of a
        termination of the Executive for Cause or Disability):

        (a)   the position or responsibilities of the Executive are
              significantly reduced, (including, without limitation, by
              reason of the elimination of such position or the failure to
              elect the Executive to such position or by reason of a change
              in the reporting responsibilities to and of such position, or,
              following a Change in Control, by reason of a substantial
              reduction in the size of the Company or other substantial
              change in the character or scope of the Company's operations),
              or the Executive is assigned without his written consent to any
              duties inconsistent with his positions, duties,
              responsibilities and status with the Company immediately prior
              to such assignment;

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        (b)   the salary provided in Clause 3 hereof (as the same may be
              increased from time to time in accordance with said Clause 3)
              is reduced (except if such reduction occurs prior to a Change
              in Control and is part of an across-the-board reduction
              applicable to all senior level executives of the Group);

        (c)   the annual incentive compensation provided for in Clause 3.2
              hereof is eliminated or reduced, or, if after a Change in
              Control, the Executive's participation level is reduced or the
              manner of assessing actual performance is changed in a manner
              that results in the Executive earning less such compensation
              for a given period than he would have for the same period
              absent such change;

        (d)   the Executive's aggregate level of benefits under the Benefit
              Plans is reduced, except if such reduction occurs prior to a
              Change in Control and is part of an across-the-board reduction
              in such benefits applicable to all senior level executives of
              the Group;

        (e)   after a Change in Control, the Company fails to continue to
              provide the Executive with benefits and perquisites which are
              substantially similar in the aggregate to those to which the
              Executive is entitled under the Company's Benefit Plans in
              which the Executive was participating immediately prior to the
              Change in Control, or fails to provide the Executive with
              directors' or officers' insurance, as applicable, at least at
              the level maintained immediately prior to the Change in
              Control;

        (f)   the Executive is required to change his regular work location
              to a location that is more than 35 miles from his regular work
              location prior to such change;

        (g)   the Company fails to pay the Executive any amount otherwise
              vested and due hereunder or under any plan or policy of the
              Company, or fails to comply with any other provision of or
              perform any of its other obligations under this Agreement; or

        (h)   the Company fails to obtain from any successor and to deliver
              to the Executive such successor's written agreement to assume
              and agree to perform the Company's obligations under this
              Agreement.

        If the Executive delivers to the Company a notice of termination in
        connection with an event described in Clauses (a) through (g)
        above, the Company shall have 10 business days from the date of
        receipt of such notice to effect a cure of the event described
        therein and upon cure thereof by the Company to the Executive's
        reasonable satisfaction, such event shall no long constitute "Good
        Reason" for purposes of this Agreement.

14.1.9  "INTELLECTUAL PROPERTY"

        Letters patent, trademarks, trade names, service marks, designs,
        copyrights, utility models, design rights, applications for
        registration of any of the foregoing and the right to apply for
        them in any part of the world, inventions, drawings, computer
        programs, trade secrets and other nonpublic proprietary
        information, know-how and right of like nature arising or
        subsisting anywhere in the world in relation to all of the
        foregoing whether registered or unregistered.

14.1.10 "IRS"

        The United States Internal Revenue Service, or any successor agency
        of the United States Government.

14.1.11 "STOCK OPTION PLAN"

        D & K Healthcare Resources, Inc. Amended and Restated 1992 Long Term
        Incentive Plan as the same may be amended from time to time, or any
        employee stock option plan that replaces, supersedes or supplements
        such plan.

14.2    The headings in this Agreement are for convenience only and shall not
        affect its construction or interpretation.

14.3    Any reference in this Agreement to a statutory provision shall be
        deemed to include a reference to any statutory amendment,
        modification or re-enactment of it or to any legislation that
        supersedes it.

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14.4    This Agreement together with the Company plans, agreements and other
        arrangements referred to herein contains the entire understanding
        between the parties and supersedes the Original Agreement and any
        other prior agreements, arrangements and understandings (written or
        oral) between the Company and the Executive relating to the
        employment of the Executive with the Company which such agreements,
        arrangements and understandings shall be deemed to have been
        terminated by mutual consent; provided, however, that this Agreement
        shall not terminate any agreement in effect on the date hereof
        between the Company and the Executive granting or otherwise relating
        to any stock option, and any such agreement shall be deemed to be
        modified and amended hereby to the extent that the terms of such
        agreement are inconsistent with the terms hereof.

14.5    The various Clauses of this Agreement are severable and if any
        Clause or identifiable part thereof is held to be invalid or
        unenforceable by an court of competent jurisdiction then such
        invalidity or unenforceability shall not affect the validity or
        enforceability of the remaining Clauses or identifiable parts thereof
        in this Agreement, and the parties hereto agree that the portion so
        held invalid, unenforceable or void shall, if possible, be deemed
        amended or reduced in scope, or otherwise be stricken from this
        agreement, to the extent required for the purposes of the validity
        and enforcement hereof.

14.6    In the event of a dispute between the Executive and the Company with
        respect to any of the Executive's rights under this Agreement, the
        Company shall reimburse the Executive for any and all legal fees and
        disbursements incurred by him in connection with enforcing such
        rights, at the time such fees and disbursements are incurred (but in
        no event more frequently than monthly); provided, however, that if
        the Executive's claim is found by a court of competent jurisdiction
        to have been frivolous, the Executive shall reimburse the Company for
        all amounts paid by the Company pursuant to this Clause 14.6.

14.7    Unless the context otherwise requires, any reference in this
        Agreement to the employment of the Executive refers to the
        Executive's employment with the Company.

14.8    This Agreement is governed by and shall be construed in accordance
        with the laws of the State of Missouri and the parties to this
        Agreement hereby submit to the nonexclusive jurisdiction of the
        federal and state courts sitting in St. Louis County, Missouri.


        IN WITNESS WHEREOF,     this Agreement has been executed and
        delivered by an authorized representative of the Company and by the
        Executive as of the date first above written.


                                    D & K HEALTHCARE RESOURCES, INC.


                                    By:  /s/  Martin D. Wilson
                                         ---------------------

                                    Name: Martin D. Wilson
                                          ----------------
                                    Title: President and COO
                                           -----------------


                                    EXECUTIVE:

                                    /s/ Thomas S. Hilton
                                    --------------------

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