Document:

Warrant issued to Lehman Brothers, Inc. on November 16, 2006

 Exhibit 4.2 
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT. THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“1933 ACT”) OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 WARRANT TO PURCHASE 115,000 SHARES OF THE COMMON STOCK OF 
 drugstore.com inc. 
 Warrant No. W-7 
 EFFECTIVE DATE: November 16, 2006 
 EXPIRATION DATE: February 14, 2008 
 This
certifies that LEHMAN BROTHERS INC., or its transferees or assigns (each individually, the “Holder”), as transferee of Heidrick & Struggles, Inc.
(the “Initial Holder”), for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, shall be entitled to purchase from DRUGSTORE.COM,
INC., a Delaware corporation (the “Company”), having its principal place of business at 411 108th Ave NE, Suite 1400, Bellevue WA 98004, a maximum of 115,000 fully paid and nonassessable shares of the Company’s Common
Stock (“Common Stock”) for cash at a price equal to $2.36 per share (the “Exercise Price”) at any time, or from time to time, up to and including 5:00 p.m. Pacific time on the Expiration Date,
upon the surrender to the Company at its principal place of business (or at such other location as the Company may advise the Holder in writing) of this Warrant properly endorsed, a Form of Subscription in substantially the form attached hereto duly
filled in and signed and, as applicable, upon payment in cash or by check of the aggregate Exercise Price for the number of shares for which this Warrant is being exercised determined in accordance with the provisions hereof, or the surrender of the
right to acquire the number of shares of Common Stock determined in accordance with Section 1.2. The Exercise Price and the number of shares of Common Stock purchasable hereunder are subject to adjustment as provided in Section 3 of this
Warrant. 
 The Warrant was issued pursuant to the Agreement between the Company and the Initial Holder dated as of February 14,
2005 (the “Agreement”) and is being transferred from the Initial Holder to the Holder pursuant to the Warrant Purchase Agreement between the Initial Holder and the Holder dated as of November 10, 2006 (the
“Purchase Agreement”). The Holder of this Warrant is subject to certain restrictions, and entitled to certain rights as set forth in the Agreement and the Purchase Agreement. This Warrant is referred to as the
“Warrant(s)” in the Agreement and the Purchase Agreement. 
  

 This Warrant is subject to the following terms and conditions: 
 1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR
SHARES. 
 1.1 General. This Warrant is exercisable at the option of the holder of record hereof at any time
or from time, to time, up to the Expiration Date for all or any part of the shares of Common Stock (but not for a fraction of a share), which may be purchased hereunder. This Warrant may be exercised by the holder of record hereof by tendering to
the Company at its principal office a completed notice of exercise in the form attached hereto as Exhibit A (the “Notice of Exercise”). The Company agrees that the shares of Common Stock purchased under this Warrant shall be
and are deemed to be issued to the Holder hereof as the record owner of such shares as of the close of business on the date on which this Warrant, properly endorsed, and appropriate payment for such shares shall have each been delivered to the
Company at its principal place of business. Certificates for the shares of Common Stock so purchased, together with any other securities or property to which the Holder is entitled upon such exercise, shall be delivered to the Holder by the Company
at the Company’s expense within a reasonable time after the rights represented by this Warrant have been so exercised, and in any event, within ten (10) business days of such exercise. In case of a purchase of less than all the shares
which may be purchased under this Warrant, the Company shall cancel this Warrant and execute and deliver a new Warrant or Warrants of like tenor for the balance of the shares purchasable under the Warrant surrendered upon such purchase to the Holder
hereof within a reasonable time. Each stock certificate so delivered shall be in such denominations of Common Stock as may be requested by the Holder hereof and shall be registered in the name designated by such Holder. 
 1.2 Net Issue Exercise. Holder agrees that it cannot “net issue exercise” this Warrant in accordance with the provisions of this
section, except in connection with or following an Organic Change (as defined in Section 3.3 below). Notwithstanding any provisions herein to the contrary, if the fair market value of one share of the Company’s Common Stock is greater than
the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, the Holder may elect a “Net Issue Exercise” pursuant to which it will receive shares equal to the value (as determined below)
of this Warrant (or the portion thereof being exercised) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Form of Subscription and notice of such election in which event the Company shall issue
to the Holder a number of shares of Common Stock computed using the following formula: 
  

					
	 	 	X	 	= Y (A-B)
		 		 	         A

 Where X = the number of shares of Common Stock to be issued to the Holder 
  

	
	Y = the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is
being exercised, the portion of the Warrant being exercised (at the date of
such exercise)

  

	
	A = the fair market value of one share of the Company’s Common Stock

  

	
	B = Exercise Price (as adjusted to the date of such exercise).

  

 2. 

 For purposes of the above calculation, the fair market value of one share of Common Stock shall be determined by the
Company’s Board of Directors in good faith, as of the date of exercise of the Warrant; provided, however, that where there is a public market for the Company’s Common Stock, the fair market value per share shall be the average of the
closing prices of the Company’s Common Stock quoted on the Nasdaq National Market (or similar system) or on any exchange on which the Common Stock is listed, whichever is applicable, over the five (5) trading day period commencing on the
trading day immediately following the day on which the Warrant is exercised. 
 2. SHARES TO
BE FULLY PAID; RESERVATION OF SHARES. The Company covenants and agrees that all shares of Common Stock which may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance, be duly authorized, validly issued, fully paid and nonassessable and free from all preemptive rights of any shareholder and free of all taxes, liens and charges with
respect to the issue thereof. The Company further covenants and agrees that, during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved, for the purpose of issue
or transfer upon exercise of the subscription rights evidenced by this Warrant, a sufficient number of shares of authorized but unissued Common Stock, or other securities and property, when and as required to provide for the exercise of the rights
represented by this Warrant. The Company will take all such action as may be reasonably necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any
requirements of any domestic securities exchange upon which the Common Stock may be listed; provided, however, that the Company shall not be required to effect a registration under Federal or State securities laws with respect to such exercise. The
Company will not take any action which would result in any adjustment of the Exercise Price (as set forth in Section 3 hereof) if the total number of shares of Common Stock issuable (i) upon exercise of the Warrant would exceed 10% of the
total number of shares of Common Stock outstanding on the Effective Date or (ii) after such action upon exercise of all outstanding warrants, together with all shares of Common Stock then outstanding and all shares of Common Stock then issuable
upon exercise of all options and upon the conversion of all convertible securities and other equity purchase rights then outstanding, would exceed the total number of shares of Common Stock then authorized by the Company’s Articles/Certificate
of Incorporation (the “Company Charter”). 
 3. ADJUSTMENT OF EXERCISE
PRICE AND NUMBER OF SHARES. The Exercise Price and the number of shares purchasable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the occurrence of certain events described in Sections 3.1 and 3.2 below. Upon each adjustment of the Exercise Price, the Holder of this Warrant shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares purchasable pursuant hereto immediately prior to such adjustment, and dividing the
product thereof by the Exercise Price resulting from such adjustment. 
 3.1 Subdivision or Combination of Stock. In case the
Company shall at any time subdivide its outstanding shares of Common Stock into a greater number of shares, the 

  

 3. 

 
Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced, and conversely, in case the outstanding shares of Common
Stock of the Company shall be combined into a smaller number of shares (by reverse stock split or otherwise), the Exercise Price in effect immediately prior to such combination shall be proportionately increased. 
 3.2 Dividends in Common Stock, Other Stock, Property, Reclassification. If at any time or from time to time the Holders of Common Stock (or
any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received or become entitled to receive, without payment therefor, 
 (a) Common Stock or any shares of stock or other securities which are at any time directly or indirectly convertible into or exchangeable for
Common Stock, or any rights or options to subscribe for, purchase or otherwise acquire any of the foregoing by way of dividend or other distribution, 
 (b) any cash paid or payable otherwise than as a cash dividend, or 
 (c) Common Stock or
additional stock or other securities or property (including cash) by way of spinoff, split-up, reclassification, combination of shares or similar corporate rearrangement, (other than shares of Common Stock issued as a stock split or adjustments in
respect of which shall be covered by the terms of Section 3.1 above), 
 then, and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Common Stock receivable thereupon, and without payment of any additional consideration therefor, the amount of stock and other securities and property (including cash in the
cases referred to in clauses (b) and (c) above) (collectively, “Other Property”) which such Holder would hold on the date of such exercise had he been the holder of record of such Common Stock as of the date on
which holders of Common Stock received or became entitled to receive such Other Property. Notwithstanding the foregoing, the Company may, in lieu of delivering such Other Property to the Holder, adjust the Exercise Price of the Warrant or the number
of shares of Common Stock to be delivered upon exercise of the Warrant as the Board of Directors, in its reasonable judgment, deems appropriate and equitable, in order to take into account the value of such Other Property. 
 3.3 Reorganization, Consolidation, Merger or Sale. If any recapitalization or reorganization of the capital stock of the Company other than
pursuant to Section 3.2(c) above, or any consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets shall be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities, or other assets or property as consideration for such holders’ shares of Common Stock (an “Organic Change”), then, as a condition of such Organic Change, lawful and adequate provisions shall be
made by the Company whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the shares of the Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights
represented by this Warrant) such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the rights represented by this Warrant. In the event of any Organic Change, appropriate provision shall be made by the 

  

 4. 

 
Company with respect to the rights and interests of the Holder of this Warrant to the end that the provisions hereof (including, without limitation,
provisions for adjustments of the Exercise Price and of the number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be applicable, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof. Prior to the consummation of any such consolidation, merger or sale, the successor entity (if other than the Company) resulting from such consolidation or the corporation purchasing such assets shall assume
by written instrument reasonably satisfactory in form and substance to the Holders executed and mailed or delivered to the registered Holder hereof at the last address of such Holder appearing on the books of the Company, the obligation to deliver
to such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. 
 3.4 Certain Events. If any change in the outstanding Common Stock of the Company or any other event occurs as to which the other provisions of this Section 3 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the Holder of the Warrant in accordance with such provisions, then the Board of Directors of the Company shall make an adjustment in the number and class of shares available under the Warrant, the Exercise Price
or the application of such provisions, so as to protect such purchase rights as aforesaid. The adjustment shall be such as will give the Holder of the Warrant upon exercise for the same aggregate Exercise Price the total number, class and kind of
shares as the Holder would have owned had the Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment. 
 3.5 Notices of Change. 
 (a)
Immediately upon any adjustment in the number or class of shares subject to this Warrant and/or of the Exercise Price, the Company shall give written notice thereof to the Holder, setting forth in reasonable detail and certifying the calculation
of such adjustment. 
 (b) The Company shall give written notice to the Holder at least 10 business days prior to the date on which
the Company closes its books or takes a record for determining rights to receive any dividends or distributions. 
 (c) The Company
shall also give written notice to the Holder at least 30 business days prior to the date on which an Organic Change shall take place. 
 4. ISSUE TAX. The issuance of certificates for shares of Common Stock upon the exercise of the Warrant shall be made without charge to the Holder of the Warrant for any issue
tax (other than any applicable income taxes) in respect thereof; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the then Holder of the Warrant being exercised. 
 5. CLOSING OF
BOOKS. The Company will at no time close its transfer books against the transfer of any warrant or of any shares of Common Stock issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant, unless otherwise required to do so by law. 
  

 5. 

 6. NO VOTING OR DIVIDEND
RIGHTS; LIMITATION OF LIABILITY. Nothing contained in this Warrant shall be construed as conferring upon the Holder hereof the right to vote or to consent or to receive notice as a
shareholder of the Company or any other matters or any rights whatsoever as a shareholder of the Company. No dividends or interest shall be payable or accrued in respect of this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been exercised. No provisions hereof, in the absence of affirmative action by the holder to purchase shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the holder hereof, shall give rise to any liability of such Holder for the Exercise Price or as a shareholder of the Company, whether such liability is asserted by the Company or by its creditors. 
 7. WARRANTS TRANSFERABLE. Subject to compliance with applicable federal and state securities laws and the provisions
of Section 10(c) below, this Warrant and all rights hereunder are transferable, in whole or in part, without charge to the holder hereof (except for transfer taxes), upon surrender of this Warrant properly endorsed. Each taker and holder of this
Warrant, by taking or holding the same, consents and agrees that this Warrant, when endorsed in blank, shall be deemed negotiable, and that the holder hereof, when this Warrant shall have been so endorsed, may be treated by the Company, at the
Company’s option, and all other persons dealing with this Warrant as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented by this Warrant, or to the transfer hereof on the books of the Company
any notice to the contrary notwithstanding; but until such transfer on such books, the Company may treat the registered owner hereof as the owner for all purposes. 
 8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and obligations of the Company, of the
holder of this Warrant and of the holder of shares of Common Stock issued upon exercise of this Warrant, shall survive the exercise of this Warrant. 
 9. FURTHER REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. 
 (a) Articles and Bylaws. The Company has made available to Holder true, complete and correct copies of the Company Charter and Bylaws, as amended,
through the date hereof. 
 (b) Due Authority. The execution and delivery by the Company of this Warrant and the performance of all
obligations of the Company hereunder, including the issuance to Holder of the right to acquire the shares of Common Stock, have been duly authorized by all necessary corporate action on the part of the Company, and the Warrant is not inconsistent
with the Company Charter or Bylaws and constitutes a legal, valid and binding agreement of the Company, enforceable in accordance with its terms. 
 (c) Consents and Approvals. No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, federal or other governmental authority or agency is required with respect to the
execution, delivery and performance by the Company of its obligations under this Warrant, except for any filing required by applicable federal and state securities laws, which filing will be effective by the time required thereby. 
  

 6. 

 (d) Issued Securities. All issued and outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and nonassessable. All outstanding shares of capital stock were issued in full compliance with all federal and state securities laws. 
 (e) Exempt Transaction. Subject to the accuracy of the Holders representations in Section 10 hereof, the issuance of the Common Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the registration requirements of Section 5 of the Securities Act of 1933, as amended (the “1933 Act”), in reliance upon Section 4(2)
thereof, and (ii) the qualification requirements of the applicable state securities laws. 
 (f) Compliance with Rule 144. At the
written request of the Holder, who proposes to sell Common Stock issuable upon the exercise of the Warrant in compliance with Rule 144 promulgated by the Securities and Exchange Commission, the Company shall furnish to the Holder, within thirty
(30) days after receipt of such request, a written statement confirming the Company’s compliance with the filing requirements of the Securities and Exchange Commission as set forth in such Rule, as such Rule may be amended from time to
time. 
 10. REPRESENTATIONS AND COVENANTS OF THE
HOLDER. 
 This Warrant has been entered into by the Company in reliance upon the following representations and covenants
of the Holder: 
 (a) Investment Purpose. The Warrant and the Common Stock issuable upon exercise of the Warrant will be acquired for
investment and not with a view to the sale or distribution of any part thereof, and the Holder has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption pursuant to the 1933
Act. 
 (b) Private Issue. The Holder understands (i) that the Warrant and the Common Stock issuable upon exercise of this
Warrant is not registered under the 1933 Act or qualified under applicable state securities laws on the ground that the issuance contemplated by this Warrant will be exempt from the registration and qualifications requirements thereof pursuant to
Section 4(2) of the 1933 Act and any applicable state securities laws, and (ii) that the Company’s reliance on such exemption is predicated on the representations set forth in this Section 10. 
 (c) Disposition or Transfer of Holders Rights. In no event will the Holder make a disposition of, or otherwise transfer, the Warrant or the Common
Stock issuable upon exercise of the Warrant unless and until (i) it shall have notified the Company of the proposed disposition, and (ii) if requested by the Company, it shall have furnished the Company with an opinion of counsel (which
counsel may either be inside or outside counsel to the Holder) satisfactory to the Company and its counsel to the effect that (A) appropriate action necessary for compliance with the 1933 Act has been taken, or (B) an exemption from the
registration requirements of the 1933 Act is available. Notwithstanding the foregoing, the restrictions imposed upon the transferability of any of its rights to acquire Common Stock or Common Stock issuable on the exercise of such rights do not
apply to transfers from the beneficial owner of any 

  

 7. 

 
of the aforementioned securities to its nominee or from such nominee to its beneficial owner, and shall terminate as to any particular share of Common Stock
when (1) such security shall have been effectively registered under the 1933 Act and sold by the holder thereof in accordance with such registration or (2) such security shall have been sold without registration in compliance with Rule 144
under the 1933 Act, or (3) a letter shall have been issued to the Holder at its request by the staff of the Securities and Exchange Commission or a ruling shall have been issued to the Holder at its request by such Commission stating that no
action shall be recommended by such staff or taken by such Commission, as the case may be, if such security is transferred without registration under the 1933 Act in accordance with the conditions set forth in such letter or ruling and such letter
or ruling specifies that no subsequent restrictions on transfer are required. Whenever the restrictions imposed hereunder shall terminate, as hereinabove provided, the Holder or holder of a share of Common Stock then outstanding as to which such
restrictions have terminated shall be entitled to receive from the Company, without expense to such holder, one or more new certificates for the Warrant or for such shares of Common Stock not bearing any restrictive legend. 
 (d) Financial Risk. The Holder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its investment. 
 (e) Risk of No Registration. The Holder
understands that if the Company does not register with the Securities and Exchange Commission pursuant to Section 12 of the 1933 Act, or file reports pursuant to Section 15(d), of the Securities Exchange Act of 1934 (the “1934
Act”), or if a registration statement covering the securities under the 1933 Act is not in effect when it desires to sell (i) the Warrant, or (ii) the Common Stock issuable upon exercise of the Warrant, it may be required to
hold such securities for an indefinite period. The Holder also understands that any sale of the Warrant or the Common Stock issuable upon exercise of the Warrant which might be made by it in reliance upon Rule 144 under the 1933 Act may be made only
in accordance with the terms and conditions of that Rule. 
 (f) Accredited Investor. Holder is an “accredited
investor” within the meaning of Rule 501 of Regulation D under the 1933 Act, as presently in effect. 
 11.
MODIFICATION AND WAIVER. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the
same is sought. 
 12. NOTICES. Any notice, request or other document required or permitted to be given or delivered to
the holder hereof or the Company shall be delivered or shall be sent by an established overnight service provider (e.g., Federal Express), or registered or certified mail, postage prepaid, to each such holder at its address as shown on the books of
the Company or to the Company at the address indicated therefor in the first paragraph of this Warrant or such other address as either may from time to time provide to the other in accordance with this Section. 
 13. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any corporation
succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets. All of the obligations of the Company relating to the Common Stock issuable upon the exercise of this Warrant shall survive the
exercise and termination of this Warrant. All of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the holder hereof. 
  

 8. 

 14. DESCRIPTIVE HEADINGS AND GOVERNING
LAW. The description headings of the several sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. This Warrant shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the laws of the State of Washington, without giving effect to principles of conflicts of laws. 
 15. LOST WARRANTS. The Company represents and warrants to the Holder hereof that upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant, the
Company, at its expense, will make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant. 
 16. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise of this Warrant. The Company shall, in lieu of issuing any fractional share, pay the holder entitled to such fraction a sum in
cash equal to such fraction multiplied by the then effective Exercise Price. 
  

 9. 

 IN WITNESS WHEREOF, the Company has caused this
Warrant to be duly executed by its officers, thereunto duly authorized. 
  

					
		 	 DRUGSTORE.COM, INC.
 a Delaware corporation

			
		 	 By:
	 	 /s/ Robert A. Barton

		 	 Name:
	 	Robert A. Barton
		 	 Title:
	 	Vice President, Finance and Chief Financial Officer

  

			
	 ATTEST:
	 	
		
	 /s/ P. Amy Reischauer
	 	
	 Assistant Secretary
	 	

  
  

					
	 ACCEPTED AND AGREED:
	 	
		
	 LEHMAN BROTHERS INC.
 a Delaware corporation
	 	
			
	 By:
	 	 /s/ Stephen L. Roti
	 	
	 Name:
	 	 Stephen L. Roti
	 	
	 Title:
	 	 Managing Director
	 	

 EXHIBIT A 
 NOTICE OF EXERCISE 
 Date:
                    , 200   
 drugstore.com, inc. 
 411 108th Ave NE, Suite 1400 
 Bellevue, WA 98004

 Attn: President 
 Ladies and Gentlemen: 
  

	 ̈	The undersigned hereby elects to exercise the warrant issued to it by drugstore.com, inc. (the “Company”) and dated
                             , (the “Warrant”) and to purchase
thereunder
                                        
                     shares of the Common Stock of the Company (the “Shares”) at a purchase price of
                                        
                     Dollars ($            ) per Share or an aggregate
purchase price of
                                        
                     Dollars ($            ) (the “Exercise
Price”). Pursuant to the terms of the Warrant the undersigned has delivered the Exercise Price herewith in full in cash or by certified check or wire transfer. 

  

	 ̈	The undersigned hereby elects to convert
                                        
percent (    %) of the value of the Warrant into shares of Common Stock, pursuant to the net exercise provisions of Section 1.2 of the Warrant. 

 The undersigned represents that is acquiring the Common Stock for its own account, to hold for investment, and the undersigned will not make any sale, transfer or other
disposition of the Common Stock in violation of the Securities Act of 1933, as amended (the “Securities Act”), or in violation of any applicable state securities law. 
 The undersigned has been advised that the Common Stock has not been registered under the Securities Act or state securities laws on the ground that this transaction is exempt from registration, and that reliance by
the Company on such exemptions is predicated in part on the undersigned’s representations set forth in this Notice of Exercise. 
 The undersigned has
been informed that under the Securities Act, the Common Stock must be held indefinitely unless it is subsequently registered under the Act or unless an exemption from such registration is available with respect to any proposed transfer or
disposition by the undersigned of the Common Stock. 

 Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in
such other name as is specified below: 
  
 Name:                                     
                                        
                                  
 Address:                                     
                                        
                              
                                       
                                        
                                        
      
  

Very truly yours, 
                                       
                                       
                                        
      
 By:                                      
                                        
                                       
 Title:Employment Agreement Michael A. Lupo

 Exhibit 10.37 
 EMPLOYMENT AGREEMENT 
 This Employment Agreement (the “Agreement”) is dated
as of December 31, 2006, between Huttig Building Products, Inc., a Delaware corporation, with its principal office located at 555 Maryville University Drive, Suite 240, St. Louis, Missouri 63141 (the “Company”), and Michael A.
Lupo (“Mr. Lupo”). 
 In consideration of the premises and the representations, warranties, covenants and agreements
contained herein, the Company and Mr. Lupo agree as follows: 
 1. Employment. 
 (a) Appointment as Strategic Advisor. Provided that he remains employed with the Company as of such date, effective January 1, 2007,
the Company shall employ Mr. Lupo in the position of Strategic Advisor and Mr. Lupo agrees to be employed by the Company in such capacity, subject to the terms and conditions hereinafter set forth. In his capacity as Strategic Advisor,
Mr. Lupo shall have such duties and responsibilities as the Board of Directors of the Company shall reasonably assign from time to time. In his capacity as Strategic Advisor, it is expected that Mr. Lupo will work at least 20 percent of
the time that he had worked, on average, during his three previous calendar years of employment by the Company. 
 (b) Resignation as
CEO. Effective December 31, 2006, Mr. Lupo shall resign as President and Chief Executive Officer of the Company, and as an officer and member of the Board of Directors of each of the Company’s subsidiaries. 
 (c) Service as a Director. During the Term (as hereafter defined), Mr. Lupo shall not be entitled to any additional compensation for
his service as a director, except for reimbursement of expenses consistent with the Company’s expense reimbursement policy 
 2.
Term of Employment. The term of Mr. Lupo’s employment as Strategic Advisor to the Company shall begin on January 1, 2007 (the “Commencement Date”) and shall continue through December 31, 2007 (the
“Term”), unless earlier terminated as set forth herein. 
 3. Compensation and Benefits. 
 (a) Salary. For all services rendered by Mr. Lupo under this Agreement on behalf of the Company during the one-year Term, the Company
shall pay Mr. Lupo a salary of One Hundred Eighty Thousand and No/100 Dollars ($180,000.00), payable in accordance with the Company’s normal payroll practices. 
 (b) Vacation and Other Welfare and Retirement Benefit Plans. Mr. Lupo shall be entitled to such vacation and holiday time and shall be entitled to participate in such health, welfare and retirement
benefit plans and arrangements as may be offered by the Company to other similarly situated employees of the Company including, without limitation, participation 

  

 1 

 
in any 401(k), deferred compensation or other plans of the Company; provided that, nothing contained herein shall or shall be deemed to require the Company
to develop or continue to maintain any particular plan or arrangement. 
 (c) Automobile. During the Term, the Company agrees
to provide to Mr. Lupo, at the Company’s expense, use of a leased automobile. The Company shall pay or reimburse Mr. Lupo for all costs of operating such Company-provided automobile, including gas and oil expenses, repair and
maintenance costs and insurance costs. Mr. Lupo shall comply with Company policies with respect to such automobile and the submission of automobile expenses for reimbursement. Mr. Lupo shall have the option to purchase such automobile at
the expiration of the Term at the lease buyout price on that date. 
 (d) Health Insurance. Mr. Lupo and his spouse are
currently covered under a retiree health insurance program from a prior employer. During the Term, the Company agrees to continue to pay or reimburse Mr. Lupo for the premiums under such insurance program as the same may be in effect from time
to time, upon submission of reasonable documentation by Mr. Lupo, in an amount not to exceed $950 per month. 
 (e) EVA
Plan. During the Term, Mr. Lupo shall not be entitled to participate in the Company’s EVA Incentive Compensation Plan or in any other bonus, equity incentive or other incentive compensation plan of the Company.
Notwithstanding, nothing herein shall cause Mr. Lupo to forfeit his right to receive a distribution of the deferred balance in his EVA account as of the Commencement Date, 
 (f) Equity Incentives. During the Term, Mr. Lupo will not receive any grants of restricted stock, restricted stock
units, stock options or other equity incentives. While Mr. Lupo remains employed as Strategic Advisor hereunder, equity incentives granted to Mr. Lupo prior to the Commencement Date shall continue to vest and, with respect to vested stock
options, remain exercisable, in accordance with the terms of the applicable equity incentive plans and award agreements. 
 4.
Termination. 
 (a) In General. This Agreement may terminate prior to the end of the Term for any reason,
including upon the death or Disability (as defined below) of Mr. Lupo. In the event of a termination for any reason, the Company shall pay to Mr. Lupo (or his estate, in the event of his death) upon the last date of employment (the
“Termination Date”) all amounts of accrued and owing compensation, including salary through the Termination Date, accrued but unpaid or unused vacation as may be required under applicable law, and any other amounts of compensation
or timely submitted reimbursements accrued and owing as of the Termination Date (the “Accrued Obligations”). As used herein, “Disability” means Mr. Lupo is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or Mr. Lupo is, by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and
health plan covering employees of the Company. 
  

 2 

 (b) By the Company Without Cause. If the Company terminates Mr. Lupo’s employment
during the Term without Cause (as defined below), in exchange for a release of all claims Mr. Lupo may have against the Company, its affiliates, and its or their officers, directors, employees and agents, the Company shall pay Mr. Lupo
100% of the salary due Mr. Lupo for the balance of the one-year Term hereof (the “Severance Payment”). The Severance Payment shall be paid to Mr. Lupo evenly over the remainder of the Term, in accordance with the normal
payroll cycle. The right to the Severance Payment contemplated in this Paragraph 4(b) shall cease if Mr. Lupo breaches any material provision of any agreement between Mr. Lupo and the Company, including without limitation Paragraph 5 or
any other material term of this Agreement. This paragraph shall survive termination of this Agreement. 
 (c) Definition of
Cause. For purposes of this Agreement, Cause shall constitute either (i) personal dishonesty or breach of fiduciary duty involving personal profit at the expense of the Company; (ii) repeated failure of the Mr. Lupo to perform
his duties hereunder which are demonstrably willful and deliberate on his part and which are not remedied in a reasonable period of time after receipt of written notice from the Company; (iii) the commission of a criminal act related to the
performance of duties, or the furnishing of proprietary confidential information about the Company to a competitor, or potential competitor, or third party whose interests are adverse to those of the Company; (iv) habitual intoxication by
alcohol or drugs during work hours; (v) conviction of a felony; or (vi) any breach of any material Company policy or any material term of this Agreement or any other agreement by and between Mr. Lupo and the Company. 
 5. Mr. Lupo Covenants. 
 (a) Confidentiality. Except as directed by the Board of Directors of the Company or as may be required by law, Mr. Lupo hereby agrees to keep confidential and not divulge to any other person or entity at any
time any of the business secrets or other confidential information regarding the Company and its affiliates, except to the extent that such information has become public knowledge through no fault of Mr. Lupo’s. 
 (b) Nonsolicitation. From the date hereof through one year after the expiration of the Term, Mr. Lupo agrees that he
shall not, directly or indirectly, offer or provide to, interfere with, induce or attempt to induce an employee of the Company or any of its affiliates to accept employment or affiliation with any firm or corporation (other than the Company or any
of its affiliates) of which Mr. Lupo is an officer, director, employee, partner, principal, agent, representative, consultant or otherwise affiliated. 
 (c) Nondisparagement. Mr. Lupo represents that he will not, in any way, disparage the Company or any subsidiary, affiliate or parent of the Company, or any officer, agent, employee,
successor or assign of any of them, or make or solicit any comments, statements or the like to the media or to others that may be considered to be derogatory or detrimental to the good name or business reputation of any of the aforementioned persons
or entities. 
  

 3 

 (d) Noncompetition. From the date hereof through one year after the expiration of the Term,
Mr. Lupo agrees that he shall not, unless acting with the prior written consent of the Company, directly or indirectly: (i) own, manage, operate, finance, control or participate in the ownership, management, operation, financing or control
of, or be associated as an officer, director, executive, partner, principal, agent, representative, consultant or otherwise with, any business or enterprise which at any time during such period designs, manufactures, assembles, sells, distributes or
provides products (or related services) in competition with those designed, manufactured, assembled, sold, distributed or provided by the Company in any part of the United States; or (ii) directly or indirectly, solicit the business of, or do
business with, any customer, supplier, or prospective customer or supplier of the Company with whom Mr. Lupo had direct or indirect contact or about whom Mr. Lupo may have acquired any knowledge while employed by the Company during the
five (5) years immediately prior to the end of Mr. Lupo’s employment; provided, however, that this provision shall not be construed to prohibit the ownership by Mr. Lupo of not more than 2% of any class of
securities of any corporation which is engaged in any of the foregoing businesses that has a class of securities registered pursuant to the Securities Exchange Act of 1934. 
 (e) Rights and Remedies Upon Breach. It is recognized that the services to be rendered under this Agreement by Mr. Lupo are special,
unique and of extraordinary character. If Mr. Lupo breaches, or threatens to commit a breach of, any of the provisions of Paragraph 5(a) through Paragraph 5(d) (the “Covenants”), then the Company and/or any of its
affiliates shall have the following rights and remedies, each of which shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies
available to the Company under law or in equity: 
 (i) Specific Performance. The right and remedy to have the
Covenants specifically enforced by any court having equity jurisdiction, including obtaining an injunction to prevent any continuing violation thereof, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable
injury to the Company and that money damages will be difficult to ascertain and will not provide adequate remedy to the Company. 
 (ii) Severability of Covenants. If any of the Covenants, or any part thereof, are hereafter construed to be invalid or unenforceable in any jurisdiction, the same shall not affect the remainder of the Covenants or the
enforceability thereof in any other jurisdiction, which shall be given full effect, without regard to the invalidity or unenforceability in such other jurisdiction. 
 (iii) Blue-Pencilling. If any of the Covenants, or any part thereof, are held to be unenforceable because of the duration of
such provision or the geographical scope covered thereby, the parties agree that the court making such determination shall have the power to reduce the duration or geographical scope of such provision and, in its reduced form, such provision shall
then be 

  

 4 

 
enforceable and shall be enforced; provided, however, that the determination of such court shall not affect the enforceability of the Covenants in any other
jurisdiction. 
 (f) Assignability. Mr. Lupo specifically acknowledges and agrees that in the event the Company should
undergo any change in ownership or change in structure or control, or should the Company transfer some or all of its assets to another entity, the Covenants contained herein and the right to enforce the Covenants may be assigned by the Company to
any company, business, partnership, individual or entity, and that Mr. Lupo will continue to remain bound by the Covenants. 
 (g)
Survival. This Paragraph 5 shall survive termination or expiration of this Agreement. 
 6. Termination of Change of
Control Agreement. As of the Commencement Date, the Change of Control Agreement between the Company and Mr. Lupo dated March 1, 2005 shall terminate and be of no further force or effect. 
 7. Notices. Any notice, request, instruction or other document to be given hereunder by any party to the other shall be in writing and
shall be deemed to have been duly given (i) on the date of delivery if delivered personally, or by telecopy or telefacsimile, (ii) on the first business day following the date of dispatch if delivered by Federal Express or other next-day
courier service, or (iii) on the third business day following the date of receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by
the party to receive such notice. 
  

					
	 (a)
	  	If to the Company:	  	Huttig Building Products, Inc.
		  		  	555 Maryville University Drive, Suite 240
		  		  	St. Louis, Missouri 63141
		  		  	Attention: General Counsel
			
	 (b)
	  	If to Mr. Lupo:	  	Michael A. Lupo
		  		  	10105 N.W. 69th Manor
		  		  	Parkland, Florida 33076

 8. Waiver of Breach. The waiver of either the Company or Mr. Lupo of a breach
of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by either the Company or Mr. Lupo. 
 9. Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of both the Company and Mr. Lupo and their respective successors, assigns, heirs and legal representatives, but neither this Agreement
nor any rights hereunder shall be assigned by either the Company or Mr. Lupo without the consent in writing of the other party, except as otherwise set forth herein. 
  

 5 

 10. Governing Law and Venue. This Agreement shall be governed by and constructed in
accordance with the laws of the State of Missouri. However, in the event of any legal or equitable action arising under this Agreement, the venue of such action shall not lie exclusively within Missouri but may lie in any court having proper
jurisdiction over such matter. 
 11. Enforcement Costs. If any party hereto institutes any action or proceeding to enforce
this Agreement the prevailing party in such action or proceeding shall be entitled to recover from the nonprevailing party all legal costs and expenses incurred by the prevailing party in such action, including, but not limited to, reasonable
attorney fees, paralegal fees, law clerk fees, and other legal costs and expenses, whether incurred at or before trial, and whether incurred at the trial level or in any appellate, bankruptcy, or other legal proceeding. 
 12. Amendment. This Agreement supersedes any and all other agreements, either oral or written, between the parties hereto with respect to
the subject matter hereof. No change or modification of this Agreement shall be valid unless the same is in writing and signed by the person or party to be charged. 
 13. Severability. If any portion of this Agreement shall be, for any reason, invalid or unenforceable, the remaining portion or portions shall nevertheless be valid, enforceable and carried into effect,
unless to do so would clearly violate the present legal and valid intention of the parties hereto. 
 14. Headings. The
headings of this Agreement are inserted for convenience only and are not to be considered in construction of the provisions hereof. 
 IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer, and Mr. Lupo has hereunto set his hand, as of the day and year first-above written. 
  

			
	 COMPANY:

	Huttig Building Products, Inc.
		
	By:	 	 /s/ Darlene K. Schroeder

	Name:	 	Darlene K. Schroeder
	Title:	 	VP Human Resources
	
	MR. LUPO:
	
	 /s/ Michael A. Lupo

	Michael A. Lupo

  

 6

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