[drugstore.com, inc. logo]

411 108th Ave NE " Suite 1400 " Bellevue, Washington 98004 " Telephone
425.372.3200 " Facsimile 425.372.3800

January 30, 2007

Mr. Robert A. Barton

c/o drugstore.com

411 108th Ave. NE, Suite 1400

Bellevue, WA 98004

Re. Transition and Separation Agreement

Dear Bob:

This letter agreement (this "Agreement") will confirm our understanding with
regard to your decision to transition out of your current role as an employee
and Chief Financial Officer ("CFO") of drugstore.com and its subsidiaries (the
"Company").

 

Transition.
Subject to the terms set forth herein, you will remain a full time employee of
the Company and serve as its CFO through the earlier of (a) April 30, 2007,
(b) the date on which your successor commences his or her employment with the
Company as its CFO, or (c) such other date as may be mutually agreed upon in
writing by you and the Company (the "Transition Date"). The Company will
endeavor to identify and hire a qualified successor before April 30, 2007.
Role through the Transition Date.
From the date hereof until the Transition Date, you will continue to
conscientiously and diligently perform the duties of CFO of the Company on a
full-time basis. The Company may allocate some of your job responsibilities to
others. However, subject to the foregoing, the Company will rely upon you to
continue to function as its CFO until a successor is available to assume that
role.
Role through the Separation Date.
Subject to the terms set forth herein, following the Transition Date and through
the Separation Date (defined below) you will remain available to assist the
Company, as it may request, in transitioning your current duties to your
successor(s) or in serving in an advisory capacity to me, the Company's CEO. As
used above "Separation Date" means the earlier of (a) September 30, 2007,
(b) the date on which you begin providing substantial, compensated services to
any individual or entity other than the Company, whether as an employee or
independent contractor, or (c) such other date as may be mutually agreed upon in
writing by you and the Company.
Salary and benefits.
From the date hereof through your Separation Date, subject to the terms set
forth herein, the Company will continue to pay your regular base salary and you
will continue to be eligible for all benefits and perquisites that you currently
enjoy; provided, however, that you will not be eligible for any new equity
grants or other new incentive bonus opportunities.
Bonus.
You are entitled to receive your bonus for the Company's fiscal year ending
December 31, 2006. Further, with respect to the fiscal year ending December 31,
2007, subject to (i) your compliance with the terms of this Agreement and any
other agreement with the Company by which you are bound, and (ii) the discretion
of the Company's CEO, the Company will pay you in 2008 an amount equal to the
bonus you would have been eligible to receive for the fiscal year based on your
current, regular base salary and on full year results, prorated for period
through your Separation Date. Any payment of such bonus will be made to you at
the same time in 2008 as bonuses are paid to other senior executives of the
Company for the fiscal year ending December 31, 2007.
Equity compensation
. As long as you remain employed by drugstore.com, stock options of the Company
that have been granted to you as of the date hereof will continue to vest
through your Separation Date. Assuming successful discharge of your duties
through the Separation Date, the Company will extend to December 31, 2007 the
time period for exercising any vested stock options.
Accrued obligations.
You will be paid for accrued, unused vacation dates, if any, and any other
accrued obligations of the Company (e.g., unpaid base salary, unreimbursed
business expenses, etc.) after your Separation Date in a manner consistent with
the Company's then applicable policies for such payments to terminating
employees.
Severance and Release Agreement.
As a condition of receiving the above benefits, you agree to execute on or near
the Separation Date, a Severance and Release Agreement substantially in the form
attached.
Integration.
While we will honor our commitments to you under this Agreement in good faith,
nothing in this Transition and Separation Agreement is intended to alter your
at-will employment status at drugstore.com. This Transition and Separation
Agreement represents the entire understanding between you and the Company
concerning the matters described herein, and supersedes all prior
communications. It can only be modified expressly in a writing signed by both
parties.

On behalf of the Company, I wish to thank you for the many contributions you
have made to drugstore.com over the years. I also appreciate your willingness to
enable the Company to effect an orderly transition. I look forward to continuing
to work with you through the transition and wish you good luck in your future
endeavors.

 

Sincerely,

drugstore.com, inc.

/s/ Dawn G. Lepore

By: Dawn G. Lapore

Title: President and CEO; Chairman of the Board

Agreed to and accepted:

 

/s/ Robert A. Barton

By: Robert A. Barton

Date: January 31, 2007

 

Attachment to Letter to Robert A. Barton dated January 30, 2007

SEVERANCE AND RELEASE AGREEMENT

THIS SEVERANCE AND RELEASE AGREEMENT (the "Agreement") is entered into by Robert
A. Barton (hereinafter referred to as "Employee") and drugstore.com, its parent,
affiliates, subsidiaries, officers, directors, and managers (hereinafter
referred to as "drugstore.com" or "Employer"). The effective date of this
Agreement is .

RECITALS

WHEREAS, Employee has been employed by the Company as Vice President, Finance &
Operations, Chief Financial Officer and Treasurer; and

WHEREAS, the Employee wishes to terminate his employment with the Company,
effective ; and

WHEREAS, the Employee is hereby advised of his right to consult an attorney
prior to signing this Agreement. Employee has either consulted an attorney of
his choice or voluntarily elected not to consult legal counsel, and understands
that he is waiving all potential claims against the Company arising prior to the
effective date of this Agreement and relating to his employment in any way; and

WHEREAS, Employee acknowledges that he enters into this Agreement knowingly and
voluntarily without coercion or duress from any source. Employee has had a
reasonable time in which to consider whether he wished to sign this Agreement.

AGREEMENTS

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises contained below, it is agreed as follows:

EMPLOYMENT AND OFFICES: ENDING DATE AND RESPONSIBILITIES

The Company and Employee acknowledge and agree that Employee's employment with
the Company and its affiliates, and his status as an officer, will terminate
effective (the "Separation Date"). Employee understands and agrees that this
termination is effective with respect to all offices and positions he holds with
the Company and any of its affiliates.

BENEFITS FROM EMPLOYER

As consideration for the release of claims set forth below and other obligations
under this Agreement:

The Company will allow Employee to exercise vested option grants until
December 31, 2007. In addition, the Company will pay Employee an amount
equivalent to up to two weeks salary (up to 80 hours) to compensate employee for
accrued but unused vacation. Finally, the Company will facilitate the transfer
of the cell phone number that employee uses ((XXX) XXX-XXXX) to a personal
account in the name of the Employee or to a corporate account for the benefit of
Employee.

VALID CONSIDERATION

Employee and drugstore.com agree that the offer by drugstore.com to Employee to
extend the option exercise period described in the preceding paragraph is not
required by drugstore.com's policies or procedures or by any pre-existing
contractual obligation of drugstore.com or by any statute, regulation or
ordinance, and is offered by drugstore.com solely as consideration for this
Agreement. In the event Employee fails to abide by the terms of this Agreement,
drugstore.com may elect, at its option and without waiver of other rights or
remedies it may have, not to pay or provide any unpaid severance payments or
benefits, and to seek to recover previously paid severance pay.

STOCK OPTIONS

Employee acknowledges and agrees that no shares will vest after his Separation
Date.

REAFFIRMATION OF CONFIDENTIALITY AND INVENTIONS AGREEMENT

Employee expressly reaffirms and incorporates herein as part of this Agreement
the Confidentiality and Inventions Agreement dated August 30, 1998, which
Employee signed as part of his employment with drugstore.com, a copy of which is
attached hereto as Exhibit A, which shall remain in full effect.

RELEASE OF CLAIMS

Employee expressly waives any claims against drugstore.com (including, for
purposes of this paragraph 6, all parents, affiliates, subsidiaries, officers,
directors, stockholders, managers, employees, former employees, agents,
investors, and representatives, predecessors and successors) and further
releases drugstore.com (including its parents, affiliates, subsidiaries,
officers, directors, stockholders, managers, employees, former employees,
agents, investors, and representatives, predecessors and successors) from any
claims, whether known or unknown, which existed or may have existed at any time
up to the date of this Agreement, including claims related in any way to
Employee's employment with drugstore.com or the ending of that relationship.
This release includes, but is not limited to, any claims for wages, bonuses,
employment benefits, stock options, or damages of any kind whatsoever, claims
arising out of any common law torts, arising out of any contracts, express or
implied, any covenant of good faith and fair dealing, express or implied, any
theory of wrongful discharge, any theory of negligence, any theory of
retaliation, any theory of discrimination or harassment in any form, any legal
restriction on drugstore.com's right to terminate employees, or any federal,
state, or other governmental statute, executive order, or ordinance, including,
without limitation, Title VII of the Civil Rights Act of 1964 as amended, the
Civil Rights Act of 1991, the Civil Rights Act of 1866, 42 U.S.C. Section 1981,
the Americans with Disabilities Act, the Age Discrimination in Employment Act,
the Older Workers Benefit Protection Act, the Family and Medical Leave Act, the
Employee Retirement Income Security Act, the Washington Law Against
Discrimination, or any other legal limitation on or regulation of the employment
relationship. Employee agrees to indemnify and hold drugstore.com harmless from
and against any and all loss, costs, damages, or expenses, including, without
limitation, reasonable attorneys' fees incurred by drugstore.com arising out of
any breach of this Agreement by Employee or resulting from any representation
made herein by Employee that was false when made. Notwithstanding any other
provision of this Agreement to the contrary, this waiver and release shall not
apply to any claims by either party arising under that certain Indemnification
Agreement between Employee and drugstore.com, and which is reaffirmed and
incorporated herein as part of this Agreement.

Employee represents that Employee has not filed any complaints, charges or
lawsuits against drugstore.com with any governmental agency or any court, and
agrees that Employee will not initiate, assist or encourage any such actions,
except as required by law. Employee further agrees that if a commission, agency,
or court assumes jurisdiction of such claim, complaint or charge against
drugstore.com on behalf of Employee, Employee will request the commission,
agency or court to withdraw from the matter. This clause does not prohibit
employee from enforcing the terms of this Agreement.

Employee represents and warrants that he is the sole owner of the actual or
alleged claims, rights, causes of action, and other matters which are released
herein, that the same have not been assigned, transferred, or disposed of in
fact, by operation of law, or in any manner and that he has the full right and
power to grant, execute and deliver the releases, undertakings, and agreements
contained herein.

NO ADMISSION OF WRONGDOING

This Agreement shall not be construed as an admission by either party of any
wrongful act, unlawful discrimination, or breach of contract. Employer
specifically disclaims any liability to or discrimination against Employee or
any other person.

NONDISPARAGEMENT

Employee agrees to refrain from making any derogatory or disparaging comments to
the press or any individual or entity regarding drugstore.com's business or
related activities or the relationship between the parties.

RETURN OF PROPERTY

Employee confirms that Employee has returned to Employer all files, memoranda,
records, credit cards, pagers, computers, computer files, passwords and
passkeys, Card Keys, or related physical or electronic access devices, and any
and all other property received from Employer or any of its current or former
employees or generated by Employee in the course of employment.

BREACH OR DEFAULT

Any party's failure to enforce this Agreement in the event of one or more events
that violate this Agreement shall not constitute a waiver of any right to
enforce this Agreement against subsequent violations.

SEVERABILITY

The provisions of this Agreement are severable, and if any part of it is found
to be unlawful or unenforceable, the other provisions of this Agreement shall
remain fully valid and enforceable to the maximum extent consistent with
applicable law. If any one or more of the provisions of this Agreement is for
any reason held to be excessively broad as to duration, geographical scope,
activity, subject or for any other reason, it will be construed by limiting it
and reducing it, so as to be enforceable to the extent compatible with the
applicable law as it then appears in order to carry out the intent of the
provision to the greatest extent possible.

ENTIRE AGREEMENT

This Agreement sets forth the entire understanding between Employee and
drugstore.com and supersedes any prior agreements or understandings, express or
implied, pertaining to the terms of Employee's employment with drugstore.com and
the employment relationship. Employee acknowledges that in executing this
Agreement, Employee does not rely upon any representation or statement by any
representative of drugstore.com concerning the subject matter of this Agreement,
except as expressly set forth in the text of the Agreement. No modification or
waiver of this Agreement will be effective unless evidenced in a writing signed
by both parties.

GOVERNING LAW

This Agreement will be governed by and construed exclusively in accordance with
the laws of the State of Washington without reference to its choice of law
principles. Any disputes arising under this Agreement shall be brought in a
court of competent jurisdiction in the State of Washington.

KNOWING AND VOLUNTARY AGREEMENT

Employee represents and agrees that Employee has read this Agreement,
understands its terms and the fact that this Agreement releases any claims that
Employee might have against Employer. Further, Employee understands that
Employee has the right to consult counsel of choice and has either done so or
knowingly waived the right to do so, and enters into this Agreement without
duress or coercion from any source.

OPPORTUNITY TO CONSIDER AND REVOKE AGREEMENT

Employee agrees that he has been encouraged to seek legal counsel to review this
Agreement, has been provided the opportunity to consider for twenty-one (21)
days whether to enter this Agreement, and has voluntarily chosen to enter the
Agreement on this date. Employee may revoke this Agreement for a period of seven
(7) days following the execution of this Agreement; this Agreement shall become
effective following expiration of this seven (7) day period (the "Effective
Date"). Employee acknowledges that he is voluntarily executing this Agreement,
that he has carefully read and fully understands all aspects of this Agreement,
that he has not relied upon any representations or statements not set forth
herein or made by Employer's agents or representatives.

IN WITNESS WHEREOF, the parties have executed this Agreement.

drugstore.com, inc.

By:
Its:

Robert A. Barton

_______________________________