Exhibit 10.1

THIRD AMENDMENT

TO

LOAN AND SECURITY AGREEMENT

THIS THIRD AMENDMENT to Loan and Security Agreement (this “Amendment”) is
entered into this [16th] day of March, 2006, by and between Silicon Valley Bank
(“Bank”) and DRUGSTORE.COM, INC., a Delaware corporation (“Borrower”) whose
address is 411 108th Avenue NE, Suite 1400, Bellevue, WA 98004.

RECITALS

A. Bank and Borrower have entered into that certain Amended and Restated Loan
and Security Agreement dated as of December 29, 2004, as amended by that certain
First Amendment to Loan and Security Agreement by and between Bank and Borrower
dated as of August 4, 2005 and that certain Second Amendment to Loan and
Security Agreement between Bank and Borrower dated as of December 9, 2005
(collectively, as the same may from time to time be further amended, modified,
supplemented or restated, the “Loan Agreement”).

B. Bank has extended credit to Borrower for the purposes permitted in the Loan
Agreement.

C. Borrower has requested that Bank amend the Loan Agreement to (i) increase the
amount available to be borrowed under the Committed Revolving Line, (ii) extend
the maturity date, (iii) revise the financial covenants, and (iv) make certain
other revisions to the Loan Agreement as more fully set forth herein.

D. Bank has agreed to so amend certain provisions of the Loan Agreement, but
only to the extent, in accordance with the terms, subject to the conditions and
in reliance upon the representations and warranties set forth below.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:

1. Definitions. Capitalized terms used but not defined in this Amendment shall
have the meanings given to them in the Loan Agreement.

2. Acknowledgement of Extension of Revolving Maturity Date. Prior to the date
hereof, Borrower and Bank agreed that the “Revolving Maturity Date”, as defined
in Section 13 of the Loan Agreement, would be extended to March 15, 2006. No
such agreement is effective unless in writing signed by Bank. Therefore, as of
the date hereof, Borrower and Bank acknowledge and agree to such extension (such
date to be further amended as set forth below).

3. Amendments to Loan Agreement.

(a) Section 2.1.2(d). Section 2.1.2(d) is amended in its entirety and replaced
with the following:

(d) As of the Term Loan Conversion Date, Borrower elected to convert $1,000,000
of the Advances into a term loan (the “Term Loan”), which is being repaid by
Borrower in equal monthly installments of principal in the amount of $27,777.78,
plus all accrued interest, on the first day of each month. On the date which is
36 months from the first day of the month following the Term Loan Conversion
Date, Borrower shall repay all outstanding Term Loan principal and accrued
interest. Any amounts repaid with respect to the Term Loan may not be reborrowed
pursuant to the Term Loan and no additional amounts may be requested under the
Term Loan.

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(b) Section 2.1.2(e). A new Section 2.1.2(e) is hereby added to read as follows:

(e) Notwithstanding the foregoing, Borrower may elect, upon 30 days prior
written notice to Bank, to convert up to $2,500,000 in the aggregate of the
outstanding Advances into a term loan (the “Term Loan II”), provided that, at
the time Borrower delivers any such notice, Borrower shall pay to Bank a
nonrefundable fee equal to one quarter of one percent (0.25%) of the amount of
the Term Loan II. Such notice may only be delivered during the 60 days
immediately prior to the Revolving Maturity Date. On the first day of the month
following the Term Loan II Conversion Date, Borrower shall pay any accrued but
unpaid interest with respect to the Term Loan II and the Advances which were
converted into the Term Loan II. Beginning on the first day of the next month,
Borrower will repay the Term Loan in 36 equal monthly installments of principal
plus interest. On the date which is 36 months from the first day of the month
following the Term Loan II Conversion Date, Borrower shall repay all outstanding
Term Loan II principal and accrued interest. Borrower may only request one Term
Loan II hereunder.

(c) Section 2.4.2 (Additional Interest Rates; Payments).

Section 2.4.2(i) is hereby amended to read “(i) Advances accrue interest on the
outstanding principal balance at a per annum rate equal to the Prime Rate;”.

A new Section 2.4.2(iv) is hereby added to the first sentence of Section 2.4.2
to read “(iv) the Term Loan II accrues interest on the outstanding principal
balance at a floating per annum rate equal to one half of one percentage point
(0.50%) above the greater of (A) the Prime Rate as in effect from time to time
and (B) the Prime Rate as of the Term Loan Conversion Date”.

(d) Section 6.7 (Financial Covenants). Section 6.7 is amended in its entirety
and replaced with the following:

6.7 Financial Covenants. Borrower will maintain:

(i) Cash Balance. At all times, a balance of unrestricted cash of at least
$20,000,000.

(ii) EBITDA Loss. As of the last day of each month, Borrower’s EBITDA Loss for
the three months immediately preceding the date of measurement shall not exceed
(i) through the month ending March 31, 2006, ($5,000,000), (ii) thereafter
through the month ending June 30, 2006, ($2,750,000), (iii) thereafter through
the month ending September 30, 2006, ($1,250,000), and (iv) for each month
thereafter, Zero ($0).

(e) Section 13 (Definitions). Section 13.1 is hereby amended to add or amend the
following defined terms to read as follows:

“Committed Revolving Line” is an Advance of up to $7,500,000.

“Revolving Maturity Date” is March 14, 2007.

“Term Loan II Conversion Date” means the date on which Advances are converted
into the Term Loan II pursuant to Section 2.1.2(e) hereof.

(f) Exhibit C (Compliance Certificate). Exhibit C is amended in its entirety and
replaced with Exhibit C attached hereto.

4. Limitation of Amendments.

(a) The amendments set forth in Section 2, above, are effective for the purposes
set forth herein and shall be limited precisely as written and shall not be
deemed to (a) be a consent to any amendment, waiver or modification of any other
term or condition of any Loan Document, or (b) otherwise prejudice any right or
remedy which Bank may now have or may have in the future under or in connection
with any Loan Document.

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(b) This Amendment shall be construed in connection with and as part of the Loan
Documents and all terms, conditions, representations, warranties, covenants and
agreements set forth in the Loan Documents, except as herein amended, are hereby
ratified and confirmed and shall remain in full force and effect.

5. Representations and Warranties. To induce Bank to enter into this Amendment,
Borrower hereby represents and warrants to Bank as follows:

(a) Immediately after giving effect to this Amendment (a) the representations
and warranties contained in the Loan Documents are true, accurate and complete
in all material respects as of the date hereof (except to the extent such
representations and warranties relate to an earlier date, in which case they are
true and correct as of such date), and (b) no Event of Default has occurred and
is continuing;

(b) Borrower has the power and authority to execute and deliver this Amendment
and to perform its obligations under the Loan Agreement, as amended by this
Amendment;

(c) The organizational documents of Borrower delivered to Bank prior to the
Effective Date remain true, accurate and complete and have not been amended,
supplemented or restated and are and continue to be in full force and effect;

(d) The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, have been duly authorized;

(e) The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not and will not contravene (a) any law or regulation binding on
or affecting Borrower, (b) any contractual restriction with a Person binding on
Borrower, (c) any order, judgment or decree of any court or other governmental
or public body or authority, or subdivision thereof, binding on Borrower, or
(d) the organizational documents of Borrower;

(f) The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not require any order, consent, approval, license, authorization
or validation of, or filing, recording or registration with, or exemption by any
governmental or public body or authority, or subdivision thereof, binding on
either Borrower, except as already has been obtained or made; and

(g) This Amendment has been duly executed and delivered by Borrower and is the
binding obligation of Borrower, enforceable against Borrower in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium or other similar laws of
general application and equitable principles relating to or affecting creditors’
rights.

6. Counterparts. This Amendment may be executed in any number of counterparts
and all of such counterparts taken together shall be deemed to constitute one
and the same instrument.

7. Effectiveness. This Amendment shall be deemed effective as of March [16],
2006, upon (a) the due execution and delivery to Bank of this Amendment and the
Borrowing Resolutions by each party thereto, and (b) Borrower’s payment of a
nonrefundable amendment fee in an amount equal to $19,375.

[Signature page follows.]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered as of the date first written above.

 

BANK     BORROWER

Silicon Valley Bank

   

DRUGSTORE.COM, INC.

By:

  /s/ Scott Bergquist    

By:

 

/s/ Robert Barton

Name:

 

Scott Bergquist

   

Name:

 

Robert Barton

Title:

 

Division Manager

   

Title:

 

CFO

       

/s/ Dawn G. Lepore

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EXHIBIT C

COMPLIANCE CERTIFICATE

 

TO:        SILICON VALLEY BANK

   Date:                     FROM:        DRUGSTORE.COM, INC.   

The undersigned authorized officer of DRUGSTORE.COM, INC. (“Borrower”) certifies
that under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the “Agreement”), (1) Borrower is in complete compliance for
the period ending                      with all required covenants except as
noted below, (2) there are no Events of Default, (3) all representations and
warranties in the Agreement are true and correct in all material respects on
this date except as noted below; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed
all required tax returns and reports, and Borrower has timely paid all foreign,
federal, state and local taxes, assessments, deposits and contributions owed by
Borrower, and (5) no Liens have been levied or claims made against Borrower or
any of its Subsidiaries relating to unpaid employee payroll or benefits of which
Borrower has not previously provided written notification to Bank. Attached are
the required documents supporting the certification. The undersigned certifies
that these are prepared in accordance with generally GAAP consistently applied
from one period to the next except as explained in an accompanying letter or
footnotes. The undersigned acknowledges that no borrowings may be requested at
any time or date of determination that Borrower is not in compliance with any of
the terms of the Agreement, and that compliance is determined not just at the
date this certificate is delivered. Capitalized terms used but not otherwise
defined herein shall have the meanings given them in the Agreement.

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant

  

Required

  

Complies

Monthly financial statements + CC

  

Monthly within 30 days

  

Yes     No

Annual (Audited)

  

FYE within 120 days

  

Yes     No

10-Q, 10-K and 8-K

  

Within 5 days after filing with SEC

  

Yes     No

 

Financial Covenant

   Required   Actual    Complies

Maximum Trailing 3 Mo. EBITDA Loss

   See Section
6.7(ii)   $                Yes    No

Minimum Cash

   $20,000,000   $                Yes    No

Borrower has deposit accounts located at the following institutions:
                    

 

DRUGSTORE.COM, INC.     BANK USE ONLY      

Received by:

    

By:   

           AUTHORIZED SIGNER

Name:

        

Date:

    

Title:

        

Verified:

             AUTHORIZED SIGNER      

Date:

          

Compliance Status:

  Yes    No