<PAGE>   1
                                                                    EXHIBIT 10.3


                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (this  "Agreement") is entered into as of 
December 18, 1997 by and between Watson General Corporation, a California  
corporation (the "Company") and David Booth ("Employee").

                                   WITNESSETH:

         WHEREAS, the Company and Employee desire to enter into this Agreement
to assure the Company of the continuing and exclusive service of Employee and to
set forth the terms and conditions of Employee's employment with the Company.

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

         1. Term. The Company agrees to employ Employee and Employee hereby
accepts such employment, in accordance with the terms of this Agreement ,
commencing on the date of this Agreement and terminating on the third
anniversary thereof, unless this Agreement is earlier terminated as provided
herein.

         2. Services and Exclusivity of Services. So long as this Agreement
shall continue in effect, Employee shall devote Employee's full business time,
energy and ability exclusively to the business, affairs and interests of the
Company and its affiliates or subsidiaries ("Affiliates") and matters related
thereto, shall use Employee's best efforts and abilities to promote the
Company's interests and shall perform the services contemplated by this
Agreement in accordance with policies established by and under the direction of
the board of directors of the Company (the "Board") or the President of the
Company.

         Without the prior express written authorization of the Board, Employee
shall not, directly or indirectly, during the term of this Agreement: (a) render
services to any other person or firm for compensation or (b) engage in any
activity competitive with or adverse to the Company's business, whether alone,
as a partner, officer, director, employee, consultant, agent, or other similar
position, or as a significant investor of or in any other entity. (An investment
of greater than 5% of the outstanding capital or equity securities of an entity
shall be deemed significant for these purposes.)

         Employee represents to the Company that Employee has no other 
outstanding commitments inconsistent with any of the terms of this Agreement or 
the services to be rendered hereunder.

         3. Duties and Responsibilities. Employee shall serve as Vice President
of the Company or in such comparable position as the Board shall designate from
time to time. In the performance of Employee's duties, Employee shall report
directly to the President 

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of the Company and shall be subject to the direction of the President and to
such limits on Employee's authority as the President or the Board may from time
to time impose.

         Employee agrees to observe and comply with the rules and regulations of
the Company as adopted by the Board or the President respecting the performance
of Employee's duties and agrees to carry out and perform orders, directions and
policies of the Company and its Board as they may be, from time to time, stated
either orally or in writing.

         4.  Compensation

                  (a) Base Compensation. During the term of this Agreement, the
Company agrees to pay Employee a minimum base salary at the rate of Ninety
Thousand Dollars ($90,000) per year, payable in accordance with the Company
practices in effect from time to time (the "Base Salary").

                  (b) Annual Cash Bonus. During the term of this Agreement, the
Company agrees to pay Employee an annual cash bonus (the "Cash Bonus"), payable
after the conclusion of each fiscal year, in the amount set forth below, based
upon the extent to which the Company's earnings before interest taxes,
depreciation and appreciation ("EBITDA") achieve the targeted EBITDA for such
year as specified in Exhibit A to this Agreement (which Exhibit is hereby
incorporated herein by this reference). The annual cash bonus for year one shall
be prorated to reflect the portion of such year that Employee was employed by
the company pursuant to this agreement. (If, for example, Employee is employed
pursuant to this Agreement for six months of year one, Employee shall be
entitled to 6/12 of the bonus otherwise payable for year one).


<TABLE>
<CAPTION>

         Level of EBITDA Budget Attained For Year             Amount of Bonus
         ----------------------------------------             ---------------

        <S>                                                 <C>    
         Attain 70% of EBITDA Budget                          $        10,000
         Attain 80% of EBITDA Budget                          $        20,000
         Attain 90% of EBITDA Budget                          $        30,000
         Attain 100% of EBITDA Budget                         $        40,000
         Attain 110% of EBITDA Budget                         $        55,000
         Attain 120% of EBITDA Budget                         $        75,000
</TABLE>

                  (c) Commissions. Employee shall not be entitled to any
commissions.

                  (d) Stock Option Agreement. Concurrent with the execution of
this Agreement by the parties hereto, the Company shall issue to Employee a
stock option agreement in the form of Exhibit B hereto.

                  (e) Investment Intent of Employee. Employee acknowledges that
each stock option issuable to Employee pursuant to this Agreement and the shares
of Common Stock issuable upon exercise of such option (collectively, the
"Restricted Securities") 

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have not been registered under the Securities Act of 1933, as amended (the
"Act"), or applicable state securities laws. Employee acknowledges that the
offer, sale and delivery of the Restricted Securities to Employee is made in
reliance upon Employee's representations, warranties, agreements and
undertakings reflected herein. Employee represents and warrants that Employee is
acquiring the Restricted Securities solely for Employee's own account and
interest and not with a view to distribute them to the public, until such time,
if any, as the resale of the Restricted Securities by Employee is the subject of
an effective registration statement or is otherwise permitted under the Act.
Employee understands and agrees that unless the Restricted Securities either are
registered under the Act or are disposed of in transactions for which exemptions
from such registration are available, Employee must continue to own and hold the
Restricted Securities for Employee's own account and interest indefinitely.
Employee further understands that whether an exemption from the registration
requirements of the Act will be available for such future transactions as
Employee may propose will depend upon the nature of each such transaction, the
pertinent surrounding facts and circumstances then extant, and the then
applicable law. Any certificate evidencing the Restricted Securities shall bear
a legend substantially in the following form:

                  THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN
                  ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
                  SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
                  SECURITIES LAW AND MAY NOT BE SOLD OR TRANSFERRED IN THE
                  ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
                  SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW.

                  (f) Additional Benefits. Employee shall also be entitled to
all rights and benefits for which Employee is otherwise eligible under any bonus
plan, incentive, participation or extra compensation plan, profit-sharing plan,
life, medical, dental, disability, or insurance plan or policy or other plan or
benefit that the Company or its Affiliates may provide for Employee or (provided
Employee is eligible to participate therein) for senior employees or for
employees of the Company generally, as from time to time in effect, during the
term of this Agreement (collectively, "Additional Benefits"). The Company
reserves the right to modify, suspend or discontinue any and all of the above
referenced benefit plans, practices, policies and programs at any time (whether
before or after termination of employment) without notice to or recourse by
Employee.

                  (g)  Vacation. Employee shall be entitled to three (3) weeks 
paid vacation during each twelve months of employment in accordance with the
policies and practices of the Company.

                  (h)  Continuing Education Requirements. During the term of 
this Agreement, the Company shall reimburse Employee for the reasonable costs 
and expenses incurred by Employee in satisfying Employee's continuing education
requirements as an attorney.

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                  (i) Moving Expenses. Employee will be reimbursed an amount not
to exceed $5,000.00 for reasonable, pre-approved moving expenses to relocate
from Knoxville, Tennessee to the Denver, Colorado metropolitan area.

         5. Termination. This Agreement and all obligations hereunder (except
the obligations contained in Sections 7, 8, 9, 10 and 11 (Confidential
Information, Inventions and Patents, No Solicitation of Customers,
Noninterference with Employees and Assistance in Patent Applications) which
shall survive any termination hereunder) shall terminate upon the earliest to
occur of any of the following:

                  (a)  Expiration of Term.  The expiration of the term provided 
for in Section 1 or the voluntary termination by Employee or retirement from the
Company in accordance with the normal retirement policies of the Company.

                  (b)  Death or Disability of Employee. The death or disability
of Employee. For the purposes of this Agreement, disability shall mean the
absence of Employee performing Employee's duties with the Company on a full-time
basis for a period of seventy (70) or more business days in any twelve (12)
month period, as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to Employee or Employee's legal representative
(such agreement as to acceptability not to be withheld unreasonably). If
Employee shall become disabled, Employee's employment may be terminated by
written notice from the Company to Employee.

                  (c) For Cause. The Company may terminate Employee's employment
and all of Employee's rights to receive Base Salary, Cash Bonus and any
Additional Benefits hereunder to the extent not yet accrued for cause. For
purposes of this Agreement, the term "cause" shall be defined as any of the
following:

                           (i) Employee's breach of any of the duties and
responsibilities under this Agreement (other than as a result of incapacity due
to Employee's disability);

                           (ii) Employee's conviction by, or entry of a plea of
guilty or nolo contendere in, a court of competent jurisdiction for a felony or
misdemeanor (other than minor traffic violations or similar offenses).

                           (iii) Employee's commission of an act of fraud upon
the Company or any personal dishonesty, incompetence, negligence, or willful or
negligent misconduct, including such misconduct which results from immoderate
use of alcoholic beverages or narcotics or other substance abuse.

                           (iv) Employee's willful failure or refusal to perform
Employee's duties or responsibilities under this Agreement or Employee's
material violation of any duty of loyalty to the Company or a breach of 
Employee's fiduciary duty.

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<PAGE>   5

                  Notwithstanding the foregoing, Employee shall not be
terminated for cause pursuant to clauses (i) through (iv) of this Section 5(c)
unless and until Employee has received written notice of proposed termination
for cause which specifies in reasonable detail the cause and Employee has had an
opportunity to be heard before the Board of the Company. Employee shall be
deemed to have had such an opportunity if given written or telephonic notice at
least 72 hours in advance of a meeting.

                  (d) Without Cause. Notwithstanding any other provision of this
Section 5, the Company shall have the right to terminate Employee's employment
with the Company without cause at any time, but any such termination other than
as expressly provided in Section 5(a), (b), or (c) herein shall be without
prejudice to Employee's rights to receive the Base Salary and Cash Bonus
provided under this Agreement for the lesser of twelve (12) months or the
remainder of the term of this Agreement.

                  (e) Exclusive Remedy. Employee agrees that the payments
expressly provided and contemplated by this Agreement shall constitute the sole
and exclusive obligation of the Company in respect of Employee's employment with
and relationship to the Company and that the payment thereof shall be the sole
and exclusive remedy for any termination of Employee's employment. Employee
covenants not to assert or pursue any other remedies, at law or in equity, with
respect to any termination of employment.

         6. Business Expenses. During the term of this Agreement, to the extent
that such expenditures satisfy the criteria under the Internal Revenue Code for
deductibility by the Company (whether or not fully deductible by the Company)
for federal income tax purposes as ordinary and necessary business expenses, the
Company shall reimburse Employee promptly for reasonable business expenditures
made and substantiated in accordance with policies, practices and procedures
established from time to time by the Company generally with respect to other
senior employees and incurred in the pursuit and furtherance of the Company's
business and good will.

         7. Confidential Information. Employee acknowledges that the nature of
Employee's engagement by the Company is such that the Employee shall have access
to information of a confidential and/or trade secret nature which has great
value to the Company and which constitutes a substantial basis and foundation
upon which the business of the company is based. Such information includes
financial, manufacturing and marketing data, techniques, processes, formulas,
developmental or experimental work, work in process, methods, trade secrets
(including, without limitation, customer lists and lists of customer sources),
or any other secret or confidential information relating to the products,
services, customers, sales or business affairs of the Company or its Affiliates
(the "Confidential Information). Employee shall keep all such Confidential
Information in confidence during the term of the this Agreement and at all times
thereafter and shall not disclose any of such Confidential Information to any
other person, except to the extent such disclosure is (i) necessary to the
performance of this Agreement and in furtherance of the Company's best
interests, or (ii) required by applicable law. 

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<PAGE>   6

Upon termination of Employee's employment with the Company, Employee shall
deliver to the Company all documents, records, notebooks, work papers, and all
similar material containing any of the foregoing information, whether prepared
by Employee, the Company or anyone else.

         8. Inventions and Patents. Except as may be limited by applicable law,
all inventions, designs, improvements, patents, copyrights and discoveries
conceived by Employee during the term of this Agreement which are useful in or
directly or indirectly related to the business of the Company or to any
experimental work carried on by the Company, shall be the property of the
Company. Employee will promptly and fully disclose to the Company all such
inventions, designs, improvements, patents, copyrights and discoveries (whether
developed individually or with other persons) and shall take all steps necessary
and reasonable required to assure the Company's ownership thereof and to assist
the Company in protecting or defending the Company's proprietary rights therein.

         9. Non-Solicitation of Customers. Employee agrees that for a period of
one year after the termination of employment with the Company, Employee will
not, on behalf of Employee or on behalf of any other individual, association or
entity, call on any of the customers of the Company or any Affiliate of the
Company for purpose of soliciting or inducing any of such customers to acquire
(or providing to any of such customers) any product or service provided by the
Company or any Affiliate of the Company, nor will Employee in any way, directly
or indirectly, as agent or otherwise, in any other manner solicit, influence or
encourage such customers to take away or to divert or direct their business to
Employee or any other person or entity by or with which Employee is employed,
associated, affiliated or otherwise related.

         10. Noninterference with Employees. In order to protect the
Confidential Information, Employee agrees that during the term hereof and for a
period of one year thereafter, Employee will not, directly or indirectly, induce
or entice any employee of the Company or its Affiliates to leave such employment
or cause anyone else to leave such employment.

         11. Assistance in Patent Applications. Employee agrees to assist the
Company in obtaining United States or foreign letters patent and copyright
registrations covering inventions assigned hereunder to the Company and that
Employee's obligation to assist the Company shall continue beyond the
termination of Employee's employment. If the Company is unable because of
Employee's mental or physical incapacity or for any other reason to secure
Employee's signature to apply or to pursue any application for any United States
or foreign letters patent or copyright registrations covering inventions
assigned to the Company, then Employee hereby irrevocably designates and
appoints the Company and its duly authorized officers and agents as Employee's
agent and attorney-in-fact to act for and in Employee's behalf and stead to
execute and file any such applications and to do all other lawfully permitted
acts to further the prosecution and issuance of letters patent or copyright
registrations thereon with the same legal force and 

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<PAGE>   7


effect as if executed by Employee. Employee thereby waives and quitclaims to the
Company any and all claims of any patent or copyright resulting from any such
application for letters patent or copyright registrations assigned hereunder to
the Company. Employee will further assist the Company in every way to enforce
any copyrights or patents obtained including, without limitation, testifying in
any suit or proceeding involving any of the copyrights or patents or executing
any documents deemed necessary by the Company, all without further consideration
but at the expense of the Company.

         12. Remedies. The parties hereto agree that the services to be rendered
by Employee pursuant to this Agreement, and the rights and privileges granted to
the Company pursuant to this Agreement, are of a special, unique, extraordinary
and intellectual character, which gives them a peculiar value, the loss of which
cannot be reasonably or adequately compensated in damages in any action at law,
and that a breach by Employee of any of the terms of this Agreement will cause
the Company great and irreparable injury and damage. Employee hereby expressly
agrees that the Company shall be entitled to the remedies of injunction,
specific performance and other equitable relief to prevent a breach of this
Agreement by Employee. This Section 12 shall not be construed as a waiver of any
other rights or remedies which the Company may have for damages or otherwise.

         13. Severability. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, to achieve the intent of the parties to the extent possible. In any
event, all other provisions of this Agreement shall be deemed valid and
enforceable to the extent possible.

         14. Succession. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns and any such successor
or assignee shall be deemed substituted for the Company under the terms of this
Agreement for all purposes. As used herein, "successor" and "assignee" shall
include any person, firm, corporation or other business entity which at any
time, whether by purchase, merger or otherwise, directly or indirectly acquires
a majority of the stock of the Company or to which the Company assigns this
Agreement by operation of law or otherwise. The obligations and duties of
Employee hereunder are personal and otherwise not assignable. Employee's
obligations and representations under this Agreement will survive the
termination of Employee's employment, regardless of the manner of such
termination

         15. Notices. Any notice or other communication provided for in this
Agreement shall be in writing and sent if to the Company to its principal office
to the Attention of the President or at such other address as the Company may
from time to time in writing designate, and if to Employee at such address as
Employee may from time to time in writing designate. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number (if any) specified pursuant to this Section
15 and a verification of receipt is received, (ii) if given by mail, three days
after such communication is deposited in the mails with first class postage

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prepaid, addressed as aforesaid or (iii) if given by any other means, when
actually delivered at such address.

         16. Entire Agreement. This Agreement contains the entire agreement of
the parties relating to the subject matter hereof and supersedes any prior
agreements, undertakings, commitments and practices relating to Employee's
employment by the Company.

         17. Amendments. No amendment or modification of the terms of this
Agreement shall be valid unless made in writing and duly executed by both
parties.

         18. Waiver. No failure on the part of any party to exercise or delay in
exercising any right hereunder shall be deemed a waiver thereof or of any other
right, nor shall any single or partial exercise preclude any further or other
exercise of such right or any other right.

         19. Governing Law. This Agreement, and the legal relations between the
parties, shall be governed by and construed in accordance with the laws of the
State of Colorado without regard to conflicts of law doctrines and any court
action arising out of this Agreement, subject to Section 20 below, shall be
brought in any court of competent jurisdiction within the State of Colorado,
unless otherwise agreed in writing by the parties.

         20. Arbitration. Any dispute, controversy or claim arising out of or in
respect to this Agreement (or its validity, interpretation or enforcement), the
employment relationship or the subject matter hereof shall at the request of
either party be submitted and settled by arbitration conducted in Denver,
Colorado in accordance with the Voluntary Labor Arbitration Rules of the
American Arbitration Association. The arbitration of such issues, including the
determination of any amount of damages suffered, shall be final and binding upon
the parties to the maximum extent permitted by law. Judgment upon the award
rendered by the arbitrator may be entered by any court having jurisdiction
thereof. Include only one of the following clauses: Each party shall bear its
own expenses and one-half the aggregate amount of arbitration costs, except that
the arbitrator may in his or her discretion award reasonable expenses (including
reimbursement of the assigned arbitrator costs) to the prevailing party.

         21. Withholding. All compensation payable hereunder, including salary
and other benefits, shall be subject to applicable taxes and withholding
requirements.

         22. Counterparts. This Agreement and any amendment hereto may be
executed in one or more counterparts. All of such counterparts shall constitute
one and the same agreement and shall become effective when a copy signed by each
party has been delivered to the other party.


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<PAGE>   9

         23. Headings. Section and other headings contained in this Agreement
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.

         24. Interpretation. The provisions of this Agreement shall be
interpreted in a reasonable manner to effect the intent of the parties.

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

                                             THE COMPANY:

                                             WATSON GENERAL CORPORATION





                                             By /s/ DAN R. COOK
                                                --------------------------------
                                                    Dan R. Cook, President


                                             EMPLOYEE:




                                             /s/ DAVID BOOTH
                                             -----------------------------------
                                                 David Booth




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<PAGE>   10


                                    EXHIBIT A



[Targeted EBITDA for each fiscal year]

                            Year 1   $ 2,184,288.00
                            Year 2   $ 5,589,087.00
                            Year 3   $ 7,772,816.00
                            Year 4   $ 9,602,402.00


                                       10


<PAGE>   11


                                    EXHIBIT B

                             STOCK OPTION AGREEMENT


         This Stock Option Agreement (the "Agreement") is made as of the 18th
day of December, 1997, between Watson General Corporation, a California
corporation (the "Company"), and David Booth ("Employee").

         The Company hereby grants options to purchase shares of the Company's
Common Stock to Employee, and Employee hereby accepts the options, on the
following terms and conditions:

Section 1.        GRANT OF OPTIONS.

         On the date of this Agreement, and on each anniversary thereof that
Employee is employed by the Company or a subsidiary or successor of the Company,
the Company shall issue to Employee an option ("Option") to purchase up to an
aggregate of Thirty Thousand (30,000) shares of the Company's authorized but
unissued Common Stock (the "Shares"), all of which Shares shall be reserved for
issuance pursuant to the Option upon the grant of the Option .

Section 2.        EXERCISE PRICE.

         The exercise price per share for each Option issued pursuant to this
Agreement shall be the average of the closing price per share for the Company's
Common Stock during the twenty (20) trading days immediately prior to the date
the Option is required to be issued pursuant to Section 1 above, subject to
adjustment as provided in Section 6 hereof.

Section 3.        WHEN OPTIONS MAY BE EXERCISED.

         Each Option granted pursuant to Section 1 above shall be exercisable as
follows:

                  (a) Provided that Employee is still employed by the Company or
any subsidiary or successor of the Company at the time of exercise, Employee
shall have the right to purchase up to Ten Thousand (10,000) of the Shares
subject to the Option at any time and from time to time, from the date the
Option is issued through 5:00 p.m., California time, on the fifth anniversary of
such date.

                  (b) Provided that Employee is still employed by the Company or
any subsidiary or successor of the Company at the time of exercise, Employee
shall have the right to purchase up to an additional Ten Thousand (10,000) of
the Shares subject to the Option at any time and from time to time, from the
first anniversary of the date the Option is issued through 5:00 p.m., California
time, on the sixth anniversary of such date.

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<PAGE>   12

                  (c) Provided that Employee is still employed by the Company or
any subsidiary or successor of the Company at the time of exercise, Employee
shall have the right to purchase up to an additional Ten Thousand (10,000) of
the Shares subject to the Option at any time and from time to time, from the
second anniversary of the date the Option is issued through 5:00 p.m.,
California time, on the seventh anniversary of such date.

Section 4.        INVESTMENT REPRESENTATION OF EMPLOYEE.

         Employee acknowledges that the Option and the Shares issuable upon
exercise of the Option (the "Restricted Securities") have not been registered
under the Securities Act of 1933, as amended (the "Act") or applicable state
securities laws. Employee acknowledges that the offer, sale and delivery of the
Restricted Securities to Employee is made in reliance upon Employee's
representations, warranties, agreements and undertakings reflected herein.
Employee represents and warrants that Employee is acquiring the Restricted
Securities solely for Employee's own account and interest and not with a view to
distribute them to the public. Employee understands and agrees that unless the
Restricted Securities either are registered under the Act or are disposed of in
transactions for which exemptions from such registration are available, Employee
must continue to own and hold the Restricted Securities for Employee's own
account and interest indefinitely. Employee further understands that whether an
exemption from the registration requirements of the Act will be available for
such future transactions as Employee may propose will depend upon the nature of
each such transaction, the pertinent surrounding facts and circumstances then
extant, and the then applicable law.

         Any certificate evidencing the Restricted Securities shall bear a
legend substantially in the following form:

                  THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN
                  ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
                  SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
                  SECURITIES LAW AND MAY NOT BE SOLD OR TRANSFERRED IN THE
                  ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
                  SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW.

Section 5.        EXERCISE OF OPTIONS.

         Each Option, or any portion of the Option, may be exercised from time
to time, in whole or in part, in accordance with the provisions of Section 3
above, which exercise shall be effective immediately upon written notice to the
Company at its principal offices, setting forth the number of Shares with
respect to which the Option is being exercised, accompanied by the full amount
of the purchase price for such Shares. The purchase price shall be payable in
cash or by check. Upon receipt of notice and payment, the 

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<PAGE>   13


Company shall promptly make arrangements for the issuance to Employee of the
number of Shares as to which the Option was exercised. Upon exercise of the
Option, the number of Shares subject to the Option shall be automatically
reduced to the extent of the number of Shares as to which the Option is
exercised, and the Option shall remain in effect as to the remaining number of
Shares. The Company reserves the right to require Employee, before receipt of
the Shares, to represent and warrant in writing, in form and substance
reasonably satisfactory to the Company, that the Shares purchased are being
acquired without any view to distribution and to agree in writing to the
imposition of legends on the share certificates setting forth any restrictions
upon disposition required by applicable federal or state securities laws.

Section 6.        ADJUSTMENTS.

         If all or any portion of an Option issued pursuant to Section 1 above
is exercised subsequent to any stock dividend, split-up, recapitalization,
combination or exchange of shares, merger, consolidation, acquisition of
property for stock, separation, reorganization, or liquidation, as a result of
which shares of any class shall be issued in respect of outstanding shares of
Common Stock, or shares of Common Stock shall be changed into the same or a
different number of shares of the same or another class or classes, Employee
shall receive, upon the exercise of such exercise right, the aggregate number
and class of shares which, if the Option had been exercised at the date hereof
and the shares acquired thereby had not been disposed of, Employee would be
holding as a result of any such stock dividend, split-up, recapitalization,
combination or exchange of shares, merger, consolidation, acquisition of
property for stock, separation, reorganization, or liquidation; provided,
however, that no fractional share shall be issued upon any such exercise.

Section 7.        ASSIGNABILITY OF OPTIONS.

         No Option granted pursuant to this Agreement may be assigned,
transferred, pledged, hypothecated, sold or otherwise disposed of, in whole or
in part, either voluntarily or involuntarily, except with the prior written
consent of the Company, and such Option may be exercised, during the lifetime of
the Employee, only by Employee. Any attempted assignment, transfer, pledge,
hypothecation, sale or other disposition of the Option contrary to the
provisions hereof, and the levy of any execution, attachment or similar process
upon the Option, shall be null and void and without effect.

Section 8.        RESERVATION OF SHARES.

         The Company will at all times reserve and keep available out of its
authorized capital stock, solely for issuance upon the exercise of Options
granted pursuant to this Agreement, such number of shares of Common Stock as
shall be issuable upon the exercise of the Option(s). Such Common Stock, when
issued pursuant to this Agreement, shall be duly and validly issued, fully paid
and nonassessable.

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<PAGE>   14


Section 9.        RIGHTS OF OPTIONEE.

         Prior to the exercise of an Option, except as otherwise provided
herein, Employee shall not be entitled to any rights of a stockholder of the
Company, including without limitation the right to vote, to receive dividends or
other distributions or to exercise any preemptive rights, and shall not be
entitled to receive notice of any proceedings of the Company.

Section 10.       GENERAL PROVISIONS.

                  10.1  Severability. If any provision of this Agreement is held
to be unenforceable for any reason, it shall be adjusted rather than voided, if
possible, to achieve the intent of the parties to the extent possible. In any
event, all other provisions of this Agreement shall be deemed valid and
enforceable to the extent possible.

                  10.2  Successors. This Agreement shall inure to the benefit of
 and be binding upon the successors of the parties hereto.

                  10.3  Notices. Any notice or other communication provided for
in this agreement shall be in writing and sent if to the Company to its
principal office at 12265 W. Bayaud Avenue, Suite 110, Lakewood, Colorado 80228,
Attention: President, or at such other address as the Company may from time to
time in writing designate, and if to Employee at such address as Employee may
from time to time in writing designate. Each such notice or other communication
shall be effective (i) if given by telecommunication, when transmitted to the
applicable number specified in (or pursuant to) this Section 10 and a
verification of receipt is received, (ii) if given by mail, three days after
such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when actually
delivered at such address.

                  10.4  Entire Agreement. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and supersedes
any prior agreements, undertakings, commitments and practices relating to the
subject matter hereof.

                  10.5  Amendments. No amendment or modification of the terms of
this Agreement shall be valid unless made in writing and duly executed by both
parties.

                  10.6  Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado without regard to
conflicts of law doctrines and any court action arising out of this Agreement
shall be brought in any court of competent jurisdiction within the State of
Colorado.

                  10.7  Headings. Section and other headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.


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<PAGE>   15

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


                                             WATSON GENERAL CORPORATION




                                             By: /s/ DAN R. COOK
                                                 -------------------------------
                                                     Dan R. Cook, President


                                             EMPLOYEE:




                                             /s/ DAVID BOOTH
                                             -----------------------------------
                                                 David Booth


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