Agreement - WellPoint Health Networks Inc. and Drugstore.com Inc.


 
                                   AGREEMENT
                                   ---------

     This Agreement ("Agreement"), dated as of June 23, 2000 ("Effective Date"),
is between WellPoint Health Networks Inc., a Delaware corporation ("WellPoint"),
on its own behalf and on behalf of all of its Affiliates, and drugstore.com,
inc., a Delaware  corporation ("drugstore.com"), on its own behalf and on behalf
of its wholly-owned subsidiary, DS Pharmacy, Inc. ("DS Pharmacy").

                                   RECITALS
                                   --------

     Whereas, WellPoint is a health care company whose Affiliate Professional
Claim Services, Inc. (doing business as WellPoint Pharmacy Management) provides
pharmacy claims administration services and clinical management services and
arranges for pharmaceutical mail service dispensing for the benefit of its
customers.  Certain other Affiliates of WellPoint, including but not limited to
Blue Cross of California, BC Life & Health Insurance Company and UNICARE Life & Health Insurance Company, arrange for the provision of health care services for
the benefit of enrolled or eligible populations, on an insured, partially
insured and/or self-funded basis.  All benefits and obligations referred to
herein as those of WellPoint shall be deemed to refer as well to all of
WellPoint's Affiliates.

     Whereas, drugstore.com is an Internet Pharmacy which owns and operates an
Internet based online shopping site for the retail sale of products customarily
sold in retail pharmacies.

     In consideration of the agreements, covenants and conditions set forth
herein, the parties hereto agree as follows:

Section 1.  Definitions

     Whenever used in this Agreement with initial letters capitalized, the
following terms will have the following specified meanings:

     "Above-the-Fold" means situated within the portion of a page of a Site that
is designed to be visible on a standard computer screen without requiring the
user to scroll horizontally or vertically through the page.

     "Affiliate" means, with respect to a party, any Person that, directly or
indirectly, Controls, or is Controlled by, or is under common Control with, such
party.

     "Change in Control" means (i) the time at which a Person, or two or more
Persons acting in concert, acquire more than 50% of the voting power of the
entity; (ii) the shareholders of a party approve a plan of complete liquidation
of an entity; or (iii) the shareholders of an entity approve an agreement for
the sale or disposition by such entity of all or substantially all of the assets
of such entity, or any transaction having a similar effect.

 
     "Competitor" of WellPoint means any Third Party that is either a PBM or a
Health Plan.  "Competitor" of drugstore.com means a Third Party that, directly
or through an Affiliate, sells via the Internet (i) Pharmaceutical Products or
(ii) Pharmaceutical Products and OTC Products.

     "Confidential Information" means all trade secrets, know-how and nonpublic
information that relates to research, development, trade secrets, know-how,
inventions, source code, technical data, software programming, concepts,
designs, procedures, manufacturing, purchasing, accounting, engineering,
marketing, merchandising, selling, business plans or strategies and other
proprietary or confidential information, protectable under the laws of the
United States or any other nation, state or jurisdiction (including, but not
limited to, any foreign equivalents thereto).

     "Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether by contract or through the ownership of voting securities, including the
ownership of more than fifty percent (50%) of the equity, partnership or similar
interest in such Person.

     "drugstore.com Site" means the site currently located at www.drugstore.com
and any successor site or Mirror Site.

     "Health Plan" means any Person, such as an insurance company, health
maintenance organization, health plan or other Person, in the business of
arranging for the provision of health care services, for the benefit of an
enrolled or eligible population, on an insured, partially insured and/or self-
funded basis.

     "Home Page" means (i) with respect to the drugstore.com Site, the page that
is displayed to the user when the URL www.drugstore.com or any successor URL is
entered (ii) with respect to the WellPoint Site, the page that is displayed to
the user when the URL www.WellPointRx.com or any successor URL is entered, and
(iii) with respect to the sites of any WellPoint's Affiliates that are Health
Plans, such pages as WellPoint shall reasonably determine provided that such
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pages are prominent within such sites.  For the purposes of the foregoing
sentence, drugstore.com acknowledges and agrees that "prominent" does not
necessarily mean the first page of a Site or the first item presented on any
particular page.

     "Identified Members" are WellPoint Members that are identified by
drugstore.com as WellPoint Members whether by means of a drugstore.com-approved
Link from the WellPoint Site or the website of a WellPoint Plan Sponsor, by
means of a Link from a drugstore.com promotional URL delivered by WellPoint to
WellPoint Members via e-mail or other promotions or by other means as mutually
agreed in writing by WellPoint and drugstore.com.

     "Internet Pharmacy" means a pharmacy that receives orders from customers
through the Internet, including without limitation the Internet division or
operations of pharmacy chains or other retail merchants (such as supermarket
chains and discount stores) that dispense prescriptions drugs and that, as an
adjunct to their traditional 

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pharmacy operations, also accept prescriptions orders via the Internet and mail
or deliver the Pharmaceutical Products to their customers.

     "Internet" means the Internet or the World Wide Web (or any successor or
other online network including those using delivery over television, cable, set
top boxes, intranets, extranets and personal digital assistants (but does not
mean traditional telephone service)).

     "IP Right" means any copyright, Trademark, patent, trade secret, moral
right or other intellectual property or proprietary right of any kind (including
applications therefor and, in the case of patents, any continuation or
divisional patent applications claiming priority thereto), whether arising under
the laws of the United States or any other nation, state or jurisdiction
(including any foreign equivalents thereto).

     "Link" means a hypertext link connecting a website to another.

     "Member Data" means any and all information regarding WellPoint Members
(who are identified as such) including, without limitation, any and all
information reasonably obtainable in connection with any WellPoint Member
purchases facilitated through the drugstore.com Site, whether in separately
identifiable or aggregated form, including, without limitation, first or last
name; E-mail or other address; postal code; gender or other demographic
characteristics; year or date of birth; social security or other tax
identification number; occupation or other socio-economic or financial
information; nature, subject matter, date or amount paid in any purchase(s),
preferences or habits; plan type, site of origination and any other identifying
information, to be mutually agreed upon, whether or not actually provided,
collected, derived or deduced, and regardless of its accuracy or completeness.

     "Mirror Site" means an Internet Site that (i) contains the exact form and
content of a Site, (ii) is located at a geographic location distinct from a Site
and (iii) is created for the purpose of improving the performance of and/or
accessibility to a Site.

     "OTC Products" means health, beauty, wellness and personal care products,
including over-the-counter drugs, first aid, contraceptives, vitamins and
fitness supplements, natural health remedies (such as nutritional supplements,
herbs and homeopathy), personal care products relating to hair care, body care,
skin care and eye care (e.g., contact lens solutions, but not contact lenses).

     "PBM" means any Person that engages in any of the following activities as a
significant line of business of such Person:  contracting with a Health Plan to
provide prescription drug benefits via mail order, point-of-sale electronic
processing of pharmacy claims, formulary development and administration, or
developing and/or maintaining retail pharmacy networks for fulfillment of
consumer orders for Pharmaceutical Products for members of a prescription drug
benefit plan; provided, however, that a Health Plan whose principal business
involves offering policies or plans of comprehensive health care and which
engages in such activities solely for the benefit of its policyholders or

                                       3

 
members of its comprehensive health plans shall not be deemed to be a PBM for
purposes of this Agreement.

     "Person" means any individual, corporation, partnership, limited liability
company, trust, association or other entity or organization, including any
governmental or political subdivision or any agency or instrumentality thereof.

     "Pharmaceutical Products" means any product that under law may not be
dispensed except pursuant to a prescription order written by a licensed medical
professional and dispensed by a licensed pharmacy.

     "Pharmacy Provider Agreement" means the agreement entered into by and
between WellPoint and DS Pharmacy in substantially the form attached hereto as
Exhibit A.
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     "Term" means the period commencing on the Effective Date and ending on the
fifth anniversary of such date, subject to extension in accordance with Section
14.4.

     "Third Party" means any Person that is not a party hereto or an Affiliate
of a party hereto.

     "Site" means a location accessible on the Internet through the World Wide
Web and which provides multimedia content via a graphical user interface.

     "Trademark(s)" means all common law or registered trademarks, logos,
service marks, trade names, Internet domain names and trade dress rights and
similar or related rights arising under any of the laws of the United States or
any other country or jurisdiction, whether now existing or hereafter adopted or
acquired.

     "WellPoint Member" means any individual who is entitled to benefits under a
prescription drug plan provided by WellPoint or any Affiliates of WellPoint or
who is given the benefit of this Agreement as part of  an agreement or
arrangement entered into between any Person and WellPoint or any Affiliate of
WellPoint pursuant to which WellPoint or its Affiliate agrees to provide health
or pharmacy benefits to such Person.

     "WellPoint Networks" means all of the networks of retail pharmacies
contracted with WellPoint or any Affiliate of WellPoint, including without
limitation Blue Cross of California, BC Life & Health Insurance Company and
UNICARE Life & Health Insurance Company, and  all entities under contract with
WellPoint to dispense Pharmaceutical Products to WellPoint Members.  A pharmacy
network that is contracted by a WellPoint Plan Sponsor and merely administered
by WellPoint for such WellPoint Plan Sponsor shall not be deemed to be a
WellPoint Network for purposes of this Agreement.

     "WellPoint Plan Sponsor" means a Health Plan, an employer, a Taft-Hartley
plan, a PBM , or any other Person acting on behalf of a WellPoint plan sponsor
who contracts with WellPoint or one of its Affiliates to provide a prescription
drug benefit or beneficial arrangement (such as discount cards) to members or
eligible persons of such health plan.

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     "WellPoint Sites" means the Site currently located at www.wellpoint.com,
                                                           ----------------- 
the Site currently located at www.wellpointrx.com and the Sites of any Health
Plan or PBM Controlled by WellPoint (and, with respect to each of such Sites,
any successor Site or Mirror Site).

     "World Wide Web" means a method of representing and obtaining graphical
data and linking data items used by Internet users.

Section 2. Affiliation Grants

     2.1   WellPoint Grant.

     (a)   Subject to the terms and conditions of this Agreement and the
conditions described below, WellPoint agrees that drugstore.com shall be
WellPoint and its Affiliates' preferred Internet Pharmacy and shall be the
exclusive Internet Pharmacy which WellPoint and/or its Affiliates actively
promotes to WellPoint Members (except as otherwise provided in Section 2.1 or
Section 3.1 of this Agreement), it being understood that other Internet
Pharmacies may be listed in the network directories and/or pharmacy locators of
WellPoint and its Affiliates, and, provided further, that drugstore.com's status
as WellPoint and its Affiliates' preferred Internet Pharmacy and the provisions
of this Section 2.1 shall not apply to mail service pharmacy activities (i.e.,
those involving a greater than 34 day supply of Pharmaceutical Products).
Nothing in this Section 2.1(a) shall preclude the listing of other Internet
Pharmacies in a WellPoint Plan Sponsor's provider directory or pharmacy locator.
The right of WellPoint, its Affiliates and WellPoint Plan Sponsors to list other
pharmacies on a list that is accessible via the Internet or other electronic
media (as opposed to tangible printed lists as to which such conditions shall
not apply) is conditioned upon the absence of promotions of the Sites of such
pharmacies, and, to the extent possible given the nature and structure of such
list, the listing of drugstore.com first in any list of Internet Pharmacies, the
significantly larger display of the drugstore.com name and logo than the name of
any other Internet Pharmacy, and the absence of logos of any Internet Pharmacy
other than that of drugstore.com. WellPoint (i), unless specifically requested
not to do so by a WellPoint Plan Sponsor, shall include drugstore.com in all the
WellPoint Networks and (ii) with respect to each pharmacy network that is
contracted by a WellPoint Plan Sponsor and merely administered by WellPoint for
such WellPoint Plan Sponsor and therefore is not deemed to be a WellPoint
Network for purposes of this Agreement, shall use reasonable best efforts to
include drugstore.com in such pharmacy network but does not guarantee that
drugstore.com shall be included in such network. Notwithstanding the foregoing
sentence, drugstore.com acknowledges that a WellPoint Plan Sponsor may require
that one or more other Internet Pharmacies be included in the network for that
WellPoint Plan Sponsor, or that one or more Internet Pharmacies (which might
include drugstore.com) be excluded from the network for that WellPoint Plan
Sponsor.

     (b)   The terms and conditions upon which DS Pharmacy will fulfill orders
for Pharmaceutical Products shall be governed by the Pharmacy Provider
Agreement.  The terms of the Pharmacy Provider Agreement shall govern over any
inconsistent term in the body of this Agreement or in any other agreement
between the parties executed prior to 

                                       5

 
the execution of the Pharmacy Provider Agreement with respect to the matters
addressed therein.

     2.2  drugstore.com Grant.  drugstore.com agrees that WellPoint shall be
designated as drugstore.com's preferred Health Plan.  drugstore.com shall
promote WellPoint as its preferred Health Plan in accordance with Section 4.2 of
this Agreement.  If drugstore.com enters into an agreement with another Health
Plan or PBM that provides the other Health Plan or PBM with a lower
reimbursement rate (AWP discount and fill fee together) for the same days'
supply that drugstore.com is permitted to fill under the Pharmacy Provider
Agreement, or commits drugstore.com to offer through the Health Plan or PBM a
program that offers a superior discount program to the Health Plan's or PBM's
members, drugstore.com shall notify WellPoint of such agreement ("Third Party
Agreement") within ten (10) days of entering into the Third Party Agreement.
Following receipt of such notice, WellPoint may unilaterally amend the Pharmacy
Provider Agreement to match the reimbursement rate (in total) or amend the then
current WellPoint Member discount program to match the program provided for in
the Third Party Agreement.  Short-term promotions and discount program that are
put in place for less than 120 continuous days shall not be covered under this
Section 2.2.  In addition,  the provisions of this Section 2.2 shall not apply
to guaranteed or minimum fees offered under a Third Party Agreement with a
Health Plan or PBM offering drugstore.com access to a Health Plan membership
base that is substantially larger (i.e., larger by 25% or more members) than the
membership that drugstore.com may access pursuant to this Agreement.

     2.3  Member Identification.

     (a)  Both parties agree to develop appropriate technology and web
interfaces to identify and track Member Data necessary for calculating all
payments hereunder. The parties shall work together to enable drugstore.com to
identify WellPoint Members coming from WellPoint or Affiliate sites to the
drugstore.com Site, including without limitation enabling WellPoint Members to
provide drugstore.com with identifying, verifiable membership numbers related to
their Health Plans.

     (b)  drugstore.com shall provide WellPoint with Member Data necessary to
calculate fees owed WellPoint pursuant to Section 6 of this Agreement only in
aggregate form.  WellPoint understands that drugstore.com shall not provide any
individual Member Data to WellPoint in order to maintain WellPoint Member
confidentiality.  drugstore.com shall provide to WellPoint summary reports
indicating the number of Identified Members visiting and/or making purchases at
the drugstore.com Site and the aggregate amount of such purchases.    There
shall be ordinary data exchange between DS Pharmacy as a contracting pharmacy
and WellPoint and its Affiliates in conformity with the Pharmacy Provider
Agreement and in conformity with applicable laws and regulations.

     (c)  drugstore.com shall not disclose any individually identifiable Member
Data to any Third Party in violation of any applicable law or regulation or
generally applicable policy of WellPoint that WellPoint provides in writing to
drugstore.com.

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Section 3.  Exclusivity and Non-competition

     3.1    WellPoint shall not, and shall not permit any entity that it
Controls to contravene the terms of Section 2.1(a) hereof by actively promoting
any Person that is a drugstore.com Competitor to WellPoint Members or WellPoint
Plan Sponsors during the term of this Agreement (except as otherwise provided in
Section 2.1 or Section 3.1 of this Agreement); provided, however, that the
foregoing shall not preclude WellPoint from (1) holding an ownership interest in
drugstore.com, or (2) conducting activities relating to the drugstore.com Site
and the WellPoint Sites as set forth in Section 4.1 of this Agreement, (3)
listing Internet Pharmacies in the provider directories or pharmacy finders of
WellPoint or a WellPoint Plan Sponsor subject to the terms and conditions of
Section 2.1(a) of this Agreement, or (4) honoring existing contractual
obligations of a business or entity acquired by WellPoint under agreements
existing at the time of execution of the definitive agreement for such or (5)
continuing WellPoint's relationship and arrangements with companies that are
participating in WellPoint's Healthy Extensions program.

     3.2    Each party agrees that neither it nor any entity that it Controls
will at any time from the date of this Agreement until the date upon which the
Term of this Agreement expires, solicit for employment any employee of the other
party, except with the consent of the other party. Advertisements in the media
shall not constitute solicitation for purposes of this Section.

     3.3    Nothing herein shall restrict drugstore.com from entering into any
relationship with any other PBM or health care or managed care entity that does
not contravene the terms of this Agreement.

     3.4    drugstore.com will not permit any entity that it Controls to (i)
take any action to attempt to convert WellPoint Members ordering a greater than
34 days supply of a Pharmaceutical Product to a 34 or fewer days supply or (ii)
initiate contact with any WellPoint Plan Sponsors without WellPoint's prior
written consent; provided, however, that general solicitations or promotions
targeted at the general population or drugstore.com's general member base,
whether on the drugstore.com Site or otherwise, shall not be deemed to violate
this Section 3.4.

Section 4.  Promotion/ Co-Branded Effort

     4.1    WellPoint Promotion.  WellPoint shall promote drugstore.com and its
relationship with drugstore.com as follows:

     (a)    WellPoint shall designate drugstore.com as WellPoint's preferred
Internet Pharmacy partner.

     (b)    WellPoint shall promote drugstore.com on the WellPoint Sites and
shall provide a Link to the drugstore.com Site from the WellPointRx.com Site,
the Sites of WellPoint's Affiliates that are Health Plans and such other of the
WellPoint Sites as are mutually agreed upon by the parties. The placement of
such Links shall be mutually agreed upon by the parties and shall conform with
the rules of the Blue Cross and Blue

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Shield Association as applicable provided that the Link to DS shall be
                                 -------------
prominently displayed Above-the-Fold on the pharmacy fulfillment-related pages
of such WellPoint Sites or as otherwise mutually agreed by the parties.
WellPoint agrees to work with drugstore.com in testing the effectiveness of
Links to the drugstore.com Site from various WellPoint Sites and to the various
pages on the drugstore.com Site, including without limitation the drugstore.com
Home Page and the drugstore.com pharmacy page.

     (c)  WellPoint shall market drugstore.com and its internet pharmacy
services to WellPoint Members and to WellPoint Plan Sponsors, including without
limitation offering WellPoint customers a direct Link to drugstore.com from
WellPoint Plan Sponsors' intranets and by promoting drugstore.com through all
reasonably available channels, including among other things (i) the inclusion of
information and mutually agreed upon promotions in fifty percent (50%),of all
regular mailings to WellPoint Members that reference pharmacy and an agreed-upon
portion of all other regular mailings; (ii) physical and E-mail mailings on
behalf of drugstore.com to all Members (costs of preparing the drugstore.com-
specific inserts to be borne by drugstore.com in accordance with Section 4.4 of
this Agreement) so as to provide drugstore.com with a minimum of twenty million
(20,000,000) messages to WellPoint Members about drugstore.com or drugstore.com
promotions per year of the Term with uniform distribution of such "impressions"
if reasonably practical through the Term (drugstore.com acknowledging that a
large number of mail impressions are during plan enrollment periods) (iii)
reference to drugstore.com on telephone hold messages as appropriate, including
associated with prescription ordering; and (iv) reference to the drugstore.com
URL on prescription benefit cards. In addition, drugstore.com , provided it
enters into the standard agreement for participation therein ("HE Agreement")
will be included in the WellPoint Healthy Extensions program and throughout the
term of this Agreement will be promoted in such program on a basis no less
favorable than that afforded to any other party to an HE Agreement. With respect
to WellPoint Plan Sponsors that are not WellPoint Affiliates, drugstore.com
acknowledges that WellPoint may need to obtain such WellPoint Plan Sponsor's
consent before engaging in certain of these activities that relate specifically
to the WellPoint Plan Sponsor or its members. WellPoint agrees that it shall
exercise commercial best efforts to obtain any such consents as soon as
possible.

     (d)  All WellPoint Member materials as may be designated by WellPoint as
furthering the purposes of this Agreement shall indicate that drugstore.com is
WellPoint's Internet Pharmacy provider, subject to client/Plan Sponsor review
and approval of the form and content of such materials where applicable.

     (e)  WellPoint shall make commercially reasonable efforts to obtain and
provide to drugstore.com WellPoint Plan Sponsor e-mail addresses and, in
WellPoint's reasonable judgment (with respect to Plan Sponsor's that are not
Affiliates of WellPoint), introduce drugstore.com personnel to appropriate
WellPoint Plan Sponsor contact persons so that the parties may announce their
relationship and explain its benefits to WellPoint Plan Sponsors.

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     (f)  WellPoint, where commercially appropriate, shall include drugstore.com
product and service information in responding to requests for proposals and in
presentations that WellPoint prepares for clients or potential clients.

     (g)  WellPoint shall invite drugstore.com to participate jointly in
exhibits at key healthcare conferences as appropriate.

     4.2  drugstore.com Promotion. drugstore.com shall promote WellPoint and its
relationship with WellPoint as follows:

     (a)  drugstore.com shall designate WellPoint as drugstore.com's preferred
Health Plan.  drugstore.com shall use all commercially reasonable efforts to
provide, within ninety (90) days of the Effective Date, visitors to the
drugstore.com Site with access to a list of Health Plans from one or more Links
on the drugstore.com Site and shall provide preferential placement on such list
to Health Plans that are Affiliates of WellPoint or, as specified by WellPoint,
WellPoint Plan Sponsors.  drugstore.com shall test the effectiveness of the
placement of the Links to such list, including by means of a Link from, among
other pages, the drugstore.com Home Page, pharmacy page and insurance-related
pages.  drugstore.com will test the effectiveness of a Link from the
drugstore.com Home Page to such list of entities for a minimum of ninety (90)
days.  If the Home Page  placement is less effective than alternative
placements, drugstore.com may elect not to continue such placement in favor of
an alternative placement, which will include at least the main drugstore.com
insurance-related page; provided, however, that at all times drugstore.com shall
list WellPoint, WellPoint Pharmacy Management, the Affiliates of WellPoint that
are Health Plans and WellPoint Plan Sponsors (but only those WellPoint Plan
Sponsors that promote drugstore.com in a manner consistent with this Agreement)
first among all other listings on the list directly available from the
drugstore.com Home Page for so long as such list is linked from the Home Page.
Upon WellPoint's request and reasonable notice, drugstore.com will provide
information to WellPoint Members regarding certain benefits provided by their
respective Health Plans.

     (b)  drugstore.com shall provide resources and capabilities to establish
Links to the drugstore.com Site from WellPoint Plan Sponsors' home pages and
other pages as mutually agreed by WellPoint, the WellPoint Plan Sponsors, as
applicable, and drugstore.com.

     (c)  To the extent permissible under law and by other agreements of
drugstore.com, drugstore.com shall use commercially reasonable efforts to work
with retail pharmacies in WellPoint's pharmacy network that are not Internet
Pharmacies to allow WellPoint Members to pick up prescription items ordered on
the drugstore.com Site at such pharmacy locations, upon agreement between such
pharmacies and drugstore.com on fees to be paid to drugstore.com for such
efforts and provided that this obligation shall apply only to such pharmacies
that can communicate electronically with drugstore.com.

     (d)  Subject to WellPoint's reasonable approval, drugstore.com shall
provide to WellPoint Members medical and pharmacy information on-line on the Co-
branded

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Websites provided for in Section 4.3 but only to the extent that drugstore.com
has access to such information.

     (e)  drugstore.com agrees to develop and implement a frequent buyer program
or discount program for WellPoint Members for purchases of OTC Products. That
program, whose features will be mutually agreed upon by the parties, will be
subject to the "most favored nation" provisions of Section 2.2 with respect to
the financial value provided by the program to WellPoint Members.

     4.3  Co-branded Websites.

     (a)  drugstore.com shall use all commercially reasonable efforts to cause,
within ninety (90) days of the Effective Date, Identified Members to be
presented with a co-branded drugstore.com Home Page and such other pages on the
drugstore.com Site as mutually agreed by the parties, including without
limitation the drugstore.com pharmacy page, that at a minimum prominently
features the Trademark of WellPoint Pharmacy Management or of the relevant
Affiliate of WellPoint.  Such co-branding will contain a Link to a landing page
that is intended to explain to WellPoint Members the nature of the
drugstore.com-WellPoint (or Affiliate of WellPoint) relationship and facilitate
the conversion of WellPoint Members to drugstore.com purchasers (the "Landing
Page").  drugstore.com will also provide a persistent "button" on its website's
pages for WellPoint Members that "linked" to the drugstore.com Site from a
WellPoint Site or a WellPoint Affiliate's Site or, in the case of a WellPoint
Member that has already identified himself to drugstore.com as a WellPoint
Member and has made a purchase from drugstore.com, by means of such WellPoint
Member's identifying "member profile" that allows drugstore.com to identify any
person based upon his or her user identification and password.  Identified
Members shall be presented on the Landing Page with a Link to the provider of
WellPoint's mail order services for Pharmaceutical Products provided that such
                                                            -------------     
service provider cooperates with drugstore.com in establishing such
relationship, including without limitation the payment to drugstore.com of a fee
to cover the cost of designing and creating such Link, not to exceed $5000,
integrating the offering by drugstore.com and such service provider and an
agreement by such service provider not to promote DS Competitors to such
Identified Members with respect to the purchase of OTC Products.  The mock-ups
attached as Exhibit B indicates the parties' current thinking with respect to
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the co-branding contemplated by this Section 4.3 but WellPoint acknowledges and
agrees that such co-branding shall be subject to changes in drugstore.com's
discretion in light of possible re-designs of the drugstore.com Home Page and
other co-branded pages.

     (b)  The co-branded website content, sponsorship and advertising available
above to Identified WellPoint Members may be different from that which is
available to non-WellPoint Members.

     (c)  drugstore.com shall work with WellPoint to develop ways to
appropriately demonstrate to WellPoint Plan Sponsors WellPoint's benefits in
connection with the drugstore.com relationship.

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     (d)  drugstore.com does not currently sell banner advertising on the
drugstore.com Site.  In the event that drugstore.com changes such policy,
drugstore.com agrees that all revenue from such advertising placed on the
drugstore.com Site which was brought to the Site by reason of the efforts of
WellPoint in securing such advertising shall be shared by WellPoint and
drugstore.com as mutually agreed by the parties following good faith
negotiations.  All advertising revenue derived from advertising on the WellPoint
Sites shall be retained solely by WellPoint.  With respect to advertising on the
Landing Page, as defined in Section 4.3, drugstore.com and WellPoint will share
equally in such revenues unless otherwise mutually agreed by the parties.

     4.4  Promotional Materials.  The parties shall work together to create
collateral materials to market drugstore.com, such as package inserts for
WellPoint, WellPoint Affiliates, WellPoint Plan Sponsors and WellPoint Members
in a mutually agreeable format.  Any form of branded communication and
documentation must be agreed in writing by the parties before it is issued,
published or otherwise made available (in any form or medium).  WellPoint will
use commercially reasonable efforts to approve documentation and promotions
provided by drugstore.com and in any event will provide comments, if any, or
approval within five (5) working days of receipt of each draft copy.
drugstore.com shall be responsible for the cost of producing (e.g. printing
costs) stand-alone promotional materials where such materials only include
drugstore.com promotions.  The costs of other materials shall be paid by
WellPoint.  All communications from drugstore.com targeted specifically to
WellPoint Members and WellPoint Plan Sponsors (unless the WellPoint Plan Sponsor
initiated contact with drugstore.com) shall require WellPoint's prior written
approval, except to any party who is a drugstore.com customer.

     4.5  drugstore.com Home Page.

     (a)  With respect to Identified Members, drugstore.com will, in accordance
with Section 4.3(a), place the logo of WellPoint Pharmacy Management and/or the
Identified Member's Health Plan on the Home Page of the drugstore.com Site.

     (b)  WellPoint shall provide drugstore.com with samples of WellPoint
Trademarks for use in advertising and on the drugstore.com Site. Without
WellPoint's prior written approval, which shall not be unreasonably withheld,
drugstore.com may not use Trademarks owned by WellPoint.

     4.6  WellPoint Home Pages.

     (a)  One of the drugstore.com Trademarks designated by drugstore.com and
acceptable to WellPoint, which acceptance shall not be unreasonably withheld,
shall be featured on the Home Page of WellPointRx.com and such pages of
WellPoint.com as mutually agreed by the parties consistent with the goals of
this Agreement, and on the Home Pages of WellPoint's Affiliates that are Health
Plans.

     (b)  drugstore.com shall provide WellPoint with samples of drugstore.com
Trademarks for use in advertising and on the WellPoint Sites.  Without
drugstore.com's 

                                       11

 
written approval, which shall not be unreasonably withheld, WellPoint may not
use Trademarks owned by drugstore.com.

     4.7  Clinical Content.

     (a)  WellPoint shall provide clinical content to drugstore.com pursuant to
its obligations contained in this Agreement. WellPoint shall not provide any
clinical content to any other Internet Pharmacy or allow any other Internet
Pharmacy to use or display any WellPoint clinical content during the term of
this Agreement. All clinical content made available only to WellPoint Members
under the terms of this Agreement shall be subject to WellPoint's prior approval
and its peer review procedures.

     (b)  WellPoint shall not knowingly publish on the WellPoint Site, and
drugstore.com shall not knowingly publish on the drugstore.com Site, any
content, including Links, that is contrary to law or false or misleading in any
material respect, that promotes products generally acknowledged to be injurious
to good health (e.g., cigarettes and other smoking products, alcoholic
beverages) or that would reasonably be expected to be offensive to a reasonable
person.  Any content that either party reasonably determines to be contrary to
law or false or misleading in any material respect shall be removed, upon notice
from the determining party, as soon as practicable by the offending party.
After such removal, the parties may bring the dispute for immediate resolution
pursuant to Section 13 of this Agreement.

     (c)  WellPoint shall have final approval regarding any representations made
relating to the quality of WellPoint services.  drugstore.com shall have final
approval regarding any representations made relating to the quality of
drugstore.com services.

     4.8  Additional Obligations. With respect to Identified Members, at no time
during the Term of this Agreement shall drugstore.com engage in prescribing
medicine or referring consumers to physicians or other medical, dental or other
professionals to obtain prescriptions for Pharmaceutical Products in violation
of federal, state or local laws or regulations and/or VIPPS rules or create any
Links available to Identified Members to any sites on the Internet which it
knows or should reasonably have known are engaged in such practices.

Section 5.   License

     5.1  License to Trademarks.

     (a)  Subject to Section 4, drugstore.com hereby grants to WellPoint and any
of its wholly owned entities a non-exclusive, royalty-free, non-transferable
(except as provided in Section 15.2), non-sublicensable worldwide license in all
jurisdictions in which drugstore.com has any rights, to use, reproduce,
distribute and display the drugstore.com Trademarks in connection with the
agreements among the parties with respect to advertising and promotions and the
performance of its obligations hereunder.

     (b)  Subject to Section 4, WellPoint hereby grants to drugstore.com and any
of its wholly owned entities a non-exclusive, royalty-free, non-transferable
(except as provided

                                       12

 
in Section 15.2), non-sublicensable worldwide license in all jurisdictions in
which WellPoint has any rights, to use, reproduce, distribute and display the
WellPoint Trademarks in connection with the agreements among the parties with
respect to advertising and promotions and the performance of its obligations
hereunder.

     (c)  Each party shall have the right to exercise quality control over the
use of its Trademarks by the other party to the degree necessary, in the sole
opinion of the owner of such Trademarks, to maintain the validity and
enforceability of such Trademarks and to protect the goodwill associated
therewith. Each party shall, in its use of the other's Trademarks, adhere to a
level of quality required by the Trademark owner. If the owner of a Trademark,
in its reasonable opinion, finds that use of such Trademark by the other party
materially threatens the goodwill of such Trademark, the user of such Trademark
shall, upon notice from the owner, immediately, and no later than ten (10) days
after receipt of such owner's notice, take all measures reasonably necessary to
correct the deviation(s) or misrepresentation(s) in, or misuse of, the
applicable Trademark. All goodwill associated with the use of the other's
trademarks hereunder shall inure to the benefit of the owner of such Trademark.

     (d)  Each party shall use the other's Trademarks in accordance with sound
trademark and trade name usage principles and in compliance with all applicable
laws and regulations of the United States (including all laws and regulations
relating to the maintenance of the validity and enforceability of such
Trademarks) and shall not use the Trademarks in any manner that might tarnish,
disparage, or reflect adversely on the Trademarks or the owner of such
Trademarks. Each party shall use, in connection with the other's Trademarks, all
legends, notices and markings required by law. No party may materially alter the
appearance of another's Trademarks in any advertising, marketing, distribution,
or sales materials, or any other publicly distributed materials without the
prior written consent of the other party.

Section 6.  Compensation

     6.1  In consideration of the rights granted to drugstore.com and the
obligations performed by WellPoint under this Agreement, drugstore.com shall pay
WellPoint fees based on the schedule attached hereto as Exhibit C.

     6.2  WellPoint shall be entitled  to have a national public accounting firm
reasonably agreeable to the parties audit no more frequently than once per year
drugstore.com's applicable books and records in order to monitor drugstore.com's
compliance with its payment obligations described in this Agreement, subject to
such accounting firm's execution of drugstore.com's confidentiality agreement.
WellPoint will provide drugstore.com with at least fifteen (15) business days'
notice and such audit shall take place at such location where drugstore.com
maintains its books and records and during reasonable business hours. All audits
shall be at the expense of WellPoint; provided, however, that if any annual
audit reveals an underpayment by drugstore.com of at least 5% of the amounts due
and payable to WellPoint, such audit shall be at the expense of drugstore.com.
In the event any annual audit reveals a shortfall in 

                                       13

 
drugstore.com's annual payment obligations under this Agreement, drugstore.com
shall immediately make payments to WellPoint in order to cover such shortfall.

     6.3  drugstore.com shall, within 30 days of the Effective Date, grant
WellPoint 750,000 shares of drugstore.com common stock (the "Shares") subject to
the following conditions:

               (i)   WellPoint acknowledges and agrees that the Shares have not
been registered under the Securities Act of 1933, as amended or applicable state
securities laws, and no interest may be sold, distributed, assigned, offered,
pledged or otherwise transferred unless (a) there is an effective registration
statement under such Act and applicable state securities laws covering any such
transaction involving said securities, (b) drugstore.com receives an opinion of
legal counsel for WellPoint satisfactory to drugstore.com stating that such
transaction is exempt from registration, or (c) drugstore.com otherwise
satisfies itself that such transaction is exempt from registration. A legend
setting forth or referring to the above restrictions shall be placed on any
certificate issued to WellPoint representing the Shares, and a stop transfer
order shall be placed on the books of drugstore.com and with any transfer agent
until such securities may be legally sold or otherwise transferred.

               (ii)  By accepting the Shares, WellPoint represents that it is
acquiring the Shares for investment and not with a view to, or for sale in
connection with, any distribution thereof.  In addition, in connection with the
issuance of the Shares, WellPoint specifically represents to drugstore.com those
representations set forth on Exhibit D  attached hereto.
                             ---------

               (iii) Notwithstanding anything herein to the contrary, if
requested by drugstore.com and an underwriter of common stock (or other
securities) of drugstore.com, WellPoint shall not sell or otherwise transfer or
dispose of the Shares then owned by WellPoint during the one hundred eighty
(180) day period (or such lesser period (a) as is permitted by the underwriter
generally or (b) as is permitted with respect to any holder of stock equal to or
greater than the number of the Shares or (c) as is permitted with respect to any
agreement reached with any of drugstore.com's stockholders that hold greater
than 1% of drugstore.com's common stock, or (d) as is permitted with respect to
any of drugstore.com's executive officers) following the effective date of such
underwritten public offering. The obligations described in this Section 6.3(iii)
shall not apply to a registration relating solely to employee benefit plans on
Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or
a registration relating solely to an SEC Rule 145 transaction on Form S-4 or
similar forms that may be promulgated in the future, and shall not apply to
registrations solely of securities held by stockholders of drugstore.com In
order to enforce the above covenant, drugstore.com shall have the right to place
restrictive legends on the certificates representing the Shares and to impose
stop-transfer instructions with respect to the securities subject to the
foregoing restriction until the end of such one hundred eighty (180) day (or
other applicable) period.

                                       14

 
            (iv) If during the period following the date of the issuance of the
shares, drugstore.com proposes to file a registration statement under the
Securities Act of 1933, as amended (other than a registration relating solely to
employee benefit plans on Form S-1 or Form S-8 or similar forms that may be
promulgated in the future, or a registration relating solely to an SEC Rule 145
transaction on Form S-4 or similar forms that may be promulgated in the future),
drugstore.com shall give written notice of such filing to WellPoint at least ten
(10) days prior to filing.  If WellPoint desires to include shares in such
offering, WellPoint shall reply in writing to drugstore.com within five (5) days
of receipt of notice, indicating the number of shares WellPoint would like to
include in the filing. drugstore.com  shall use reasonable commercial efforts to
include WellPoint's shares in the offering, provided that WellPoint's rights
under this Section are expressly subordinate in all respects to all registration
rights of stockholders of drugstore.com, including subject to rights of all
existing drugstore.com shareholders to first include their shares in any
offering, and is subject to the right of the lead underwriter to cutback
WellPoint's shares due to market or other conditions that could adversely effect
drugstore.com's offering.

            (v)  WellPoint shall not sell or otherwise dispose of, during any
ninety (90)-day period, more than 325,000 of the Shares. A legend setting forth
or referring to the above restrictions shall be placed on any certificate issued
to WellPoint representing the Shares, and a stop transfer order shall be placed
on the books of drugstore.com and with any transfer agent with respect thereto.

     6.4 In the event that, at the two-year anniversary of the Effective Date
(the "Determination Date"), the fair market value of the Shares is not equal to
or greater than $10 million, drugstore.com shall issue to WellPoint within
twenty (20) days of the Determination Date, at drugstore.com's discretion,
either (i) cash equal to the difference between $10 million and the aggregate
fair market value of the Shares or (ii) that number of additional shares of
common stock whose aggregate fair market value as of their issuance date equals
the difference between $10 million and the aggregate fair market value of the
Shares. However, with respect to the issuance of shares, if the additional
shares issued to WellPoint are not freely tradable within thirty (30) days of
the date of issue, WellPoint may require drugstore.com to buy back the
additional shares back from WellPoint for cash at the value of the shares on the
date of issuance. For the purposes of this Section, "fair market value" of the
shares of drugstore.com common stock shall be determined as follows: (i) if
traded on a securities exchange or the Nasdaq National Market, the fair market
value of the drugstore.com common stock shall be deemed to be the average of the
closing or last reported sale prices of the drugstore.com common stock on such
exchange or market over the ten (10) trading day period ending five business
days prior to the Determination Date; (ii) if otherwise traded in an over-the-
counter market, the fair market value of the drugstore.com common stock shall be
deemed to be the average of the closing ask prices of the drugstore.com common
stock over the ten (10) trading day period ending five business days prior to
the Determination Date; or (iii) if there is no public market for the
drugstore.com common stock, then fair market value shall be determined by mutual
agreement of drugstore.com and WellPoint, and if drugstore.com and WellPoint are
unable to so agree, at drugstore.com and WellPoint's 

                                       15

 
equally shared expense by an investment banker of national reputation selected
by drugstore.com and reasonably acceptable to WellPoint.

Section 7. IP Rights Ownership

     7.1   Ownership by WellPoint.  As between WellPoint and drugstore.com,
WellPoint shall own all WellPoint IP Rights and all IP rights in materials
created solely by WellPoint.  drugstore.com shall not distribute any such
materials to other than WellPoint Members without the approval of WellPoint.

     7.2   Ownership by drugstore.com.  As between WellPoint and drugstore.com,
drugstore.com shall own all drugstore.com IP Rights and all IP rights in
materials created solely by drugstore.com.

     7.3   Program Ownership.  Notwithstanding any other provision of this
Agreement, all content and tools that are jointly developed during the course of
the parties' relationship pursuant to this Agreement, such as guidelines and
therapeutic substitution programs, may be used by other parties with no duty of
accounting and may be available to Persons other than WellPoint Members;
provided, however, that such materials may not be made available to any
Competitor of WellPoint; and further provided, however, all content and tools
shall be presumed not to have been jointly developed by the parties absent a
written agreement by the parties reflecting such joint development.  All
clinical programs and guidelines developed by WellPoint independent of
drugstore.com will be solely owned by WellPoint and are to be made available to
WellPoint Members only, unless both parties agree to make such materials
available to Persons other than WellPoint Members.  All content and tools
independently developed by drugstore.com will be solely owned by drugstore.com
and will be made available to Persons at drugstore.com's sole discretion.

Section 8. Technical and Advertising Communications

     8.1   Advertising and Promotions.  drugstore.com shall appoint such account
managers, and sales and marketing personnel that shall be dedicated to working
with WellPoint Members and WellPoint Plan Sponsors as are reasonably necessary
to carry out drugstore.com's obligations under this Agreement.

     8.2   FTE Programmer. During the term of this Agreement, drugstore.com
shall provide to WellPoint one FTE web site designer/programmer to work on-site
on WellPoint premises if the parties deem it necessary to help make the
WellPoint Sites and drugstore.com Site complement each other as provided for in
this Agreement and to enhance the operational functionality of the WellPoint
Sites.

     8.3   Oversight.  Each party will appoint a project manager responsible, as
appropriate, to oversee the activities under this Agreement and to address any
issues that may arise under this Agreement.  Such project managers shall meet,
either in person or by telephone conference, at least once each calendar
quarter.

                                       16

 
Section 9. Representations and Warranties

     9.1   Representations and Warranties of drugstore.com. drugstore.com hereby
represents and warrants to WellPoint:

     (a)   Authorization. All corporate action on the part of drugstore.com, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement by and between drugstore.com and WellPoint, and
the performance of all obligations of drugstore.com hereunder has been taken,
and this Agreement, when executed and delivered by drugstore.com, will
constitute valid and legally binding obligations of drugstore.com, enforceable
against drugstore.com in accordance with its terms except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other laws of general application affecting enforcement of
creditors' rights generally, as limited by laws relating to the availability of
specific performance, injunctive relief, or other equitable remedies.

     (b)   Intellectual Property. To its knowledge, drugstore.com owns or
possesses sufficient legal rights to all IP Rights necessary for its businesses
now conducted without conflict with, or infringement of the rights of others. To
its knowledge, drugstore.com technology or Trademarks do not violate any of the
IP Rights of any Third Party.

     (c)   Compliance with Other Instruments. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any violation of or be in conflict with
or constitute, with or without the passage of time and giving of notice, a
default under any provision of drugstore.com's or any of its subsidiaries'
charter or bylaws or any instrument, judgment, order, writ, decree or contract
to which drugstore.com or any of its subsidiaries is a party or by which
drugstore.com or any of its subsidiaries is bound, or any provision of any
federal or state statute, rule or regulation applicable to drugstore.com or any
of its subsidiaries, the effect of which would have a material adverse effect on
the ability of drugstore.com or any of its subsidiaries to perform its
obligations under this Agreement or result in the creation of any lien, charge
or encumbrance upon any assets of drugstore.com or any of its subsidiaries.

     (d)   NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, DRUG
STORE.COM MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER,
DIRECTLY OR INDIRECTLY, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO,
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WITH
RESPECT TO ANY GOODS OR SERVICES TO BE PROVIDED UNDER THIS AGREEMENT, OTHER THAN
THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT.

     9.2   Representations and Warranties of WellPoint. WellPoint hereby
represents and warrants to drugstore.com:

                                       17

 
     (a)  Authorization.  All corporate action on the part of WellPoint, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement by and between WellPoint and drugstore.com, and
the performance of all obligations of WellPoint hereunder has been taken, and
this Agreement, when executed and delivered by WellPoint, will constitute valid
and legally binding obligations of WellPoint, enforceable against WellPoint in
accordance with its terms except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other laws of
general application affecting enforcement of creditors' rights generally, as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.

     (b)  Intellectual Property.  To its knowledge, WellPoint owns or possesses
sufficient legal rights to all IP Rights necessary for its businesses now
conducted without conflict with, or infringement of the rights of others.  To
its knowledge, WellPoint technology or Trademarks do not violate any of the IP
Rights of any Third Party

     (c)  Compliance with Other Instruments. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any violation of or be in conflict with
or constitute, with or without the passage of time and giving of notice, a
default under any provision of WellPoint's or any of its subsidiaries' charter
or bylaws or any instrument, judgment, order, writ, decree or contract to which
WellPoint or any of its subsidiaries is a party or by which WellPoint or any of
its subsidiaries is bound, or any provision of any federal or state statute,
rule or regulation applicable to WellPoint or any of its subsidiaries, the
effect of which would have a material adverse effect on the ability of WellPoint
or any of its subsidiaries to perform its obligations under this Agreement or
result in the creation of any lien, charge or encumbrance upon any assets of
WellPoint or any of its subsidiaries.

     (d)  NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, WELLPOINT
MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, DIRECTLY OR
INDIRECTLY, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT
TO ANY GOODS OR SERVICES TO BE PROVIDED UNDER THIS AGREEMENT, OTHER THAN THOSE
EXPRESSLY SET FORTH IN THIS AGREEMENT.

Section 10.  Indemnification

     10.1 Indemnification.  Subject to section 10.2, WellPoint and drugstore.com
each shall indemnify and hold harmless the other and its divisions, its
Affiliates and its officers, directors, employees, representatives and agents
(the "Indemnified Parties") from and against (i) any and all liabilities, suits,
costs, judgments, penalties, expenses, and obligations arising from or related
to claims or actions made by a Third Party, including any obligation or
liability which may be imposed upon any of the Indemnified Parties as a matter
of law, and constituting, or in any way based upon, resulting from or arising
out of any breach or alleged breach by WellPoint or drugstore.com, as
applicable, 

                                       18

 
of any representation, warranty, agreement or covenant made by such party in
this Agreement, and (ii) any cost or expense (including legal fees and out-of-
pocket expenses) reasonably incurred by any of the Indemnified Parties (and
their counsel) in investigating, preparing for, defending against or otherwise
taking any action in connection with any of the foregoing (collectively
"Damages"). A party's Damages shall be calculated net of any tax benefit such
party would be entitled to in respect of such Damages.

     10.2 Procedure. If any claim, demand, assessment or liability or cost
incidental thereto (collectively, an "Indemnified Claim"), is asserted against
an Indemnified Party in respect of which the Indemnified Party proposes to
demand indemnification from the other party (the "Indemnifying Party") pursuant
to Section 10.1, such Indemnified Party will promptly notify the Indemnifying
Party in writing. No failure of an Indemnified Party to so notify the
Indemnifying Party shall relieve the Indemnifying Party from the obligation to
indemnify the Indemnified Party unless and to the extent the Indemnifying Party
is actually prejudiced by such failure. Such Indemnified Party will accord the
Indemnifying Party the opportunity to assume entire control for the defense,
compromise or settlement of any such Indemnified Claim through its own counsel
and at its own expense; provided that no such compromise or settlement shall
include any non-monetary terms and conditions applicable to such Indemnified
Party without the consent of the Indemnified Party, which consent shall not be
unreasonably withheld or delayed. Notwithstanding the forgoing, Indemnified
Party may retain its own counsel at its own expense (the Indemnifying Party
shall only be liable for the reasonable cost of one such counsel for all
Indemnified Parties) if (i) the Indemnifying Party, within thirty (30) days
after notice of any Indemnified Claim, fails to assume the defense of such
Indemnified Claim or (ii) the representation of both the Indemnifying Party and
the Indemnified Party would, in the reasonable judgment of the parties, be
inappropriate due to actual or potential conflicting interests between them. If
the Indemnifying Party does not assume entire control of the defense, compromise
or settlement of such Indemnified Claim, the Indemnified Party may compromise or
settle any such Indemnified Claim. drugstore.com and WellPoint each agree to
reasonably cooperate with respect to the defense of any Indemnified Claim, at
the indemnifying party's expense.

Section 11.  Infringement Claims

     11.1 Legal Action for Infringement of IP Rights.

     (a)  WellPoint reserves any and all rights to commence, prosecute,
compromise and settle any claim, action or proceeding for infringement, unfair
competition, unauthorized use, misappropriation or violation of any of the
WellPoint IP Rights by any Third Party. WellPoint may commence, prosecute,
compromise or settle any such claim, action or proceeding, as well as any claim,
action or proceeding to defend any of the WellPoint IP Rights, in its sole
discretion, but shall not have any obligation to do so.

     (b)  drugstore.com reserves any and all rights to commence, prosecute,
compromise and settle any claim, action or proceeding for infringement, unfair
competition, unauthorized use, misappropriation or violation of any of the
drugstore.com IP Rights by any Third Party. drugstore.com may commence,
prosecute, compromise or 

                                       19

 
settle any such claim, action or proceeding, as well as any claim, action or
proceeding to defend any of the drugstore.com IP Rights, in its sole discretion,
but shall not have any obligation to do so.

     (c)  No party shall have the right to commence or prosecute any legal
action with regard to the IP Rights of the other party, without such other
party's prior written consent in such other party's sole discretion.

     (d)  If either party becomes the subject of a claim, action or proceeding
for infringement, unfair competition, unauthorized use, misappropriation or
violation of any IP Rights of a Third Party as a result of its use of the other
party's IP Rights pursuant to this Agreement, then the party owning such IP
Rights shall upon the request of such other party defend and indemnify the
requesting party from and against such Third Party claim, action or proceeding
("IP Claim") and shall pay any and all damages, liabilities, costs and attorneys
fees awarded against a party arising out of such IP Claim ; provided that: the
party owning such IP Rights has sole control over the defense or settlement of
such IP Claim, the requesting party shall provide the party owning such IP
Rights prompt notice of the IP Claim, and such assistance in defense of the
claim, action or proceeding as the owning party may reasonably request and shall
comply with any settlement or court order made in connection with the claim,
action or proceeding (e.g., relating to the future use of any infringing IP
Rights). In any case, the requesting party shall be entitled to participate in
the defense of any such claim, action or proceeding, at its own cost, with
counsel of its choice.

     (e)  In the event either party should have a claim against the other party
for infringement, unfair competition, unauthorized use, misappropriation or
violation of any of its IP Rights as a result of the use of its IP Rights by the
other party pursuant to this Agreement, the parties shall resort to the dispute
resolution provisions set forth in Section 13.

Section 12.  Additional Obligations of the Parties

     12.1 Nondisclosure.

     (a)  A party (the "Receiving party") receiving any Confidential Information
of the other party (the "Disclosing party") will exercise a reasonable degree of
care, but in no event less than the same degree of care that it uses to protect
its own confidential information of a like nature, to keep confidential and not
disclose such Confidential Information. Without limiting the generality of the
foregoing, the Receiving Party shall disclose the Confidential Information of
the other party only to those of its employees and contractors (a) who have a
need to know the Confidential Information in order to exercise its license to
such Confidential Information, and (b) who are contractually obligated to
maintain the confidentiality of the Confidential Information.

     (b)  The obligations set forth in Section 12.1(a) above shall not apply to
any Confidential Information to the extent it: (a) is approved by prior written
authorization of the Disclosing party for release by the Receiving Party; (b) is
disclosed in order to 

                                       20

 
comply with a judicial order issued by a court of competent jurisdiction, in
which event the Receiving Party shall give prior written notice to the
Disclosing Party of such disclosure as soon as practicable and shall cooperate
with the Disclosing party in using all reasonable efforts to obtain an
appropriate protective order or equivalent, provided that the information shall
continue to be Confidential Information to the extent it is covered by such
protective order or equivalent; (c) becomes generally available to the public
through any means other than a breach by the Receiving party of its obligations
under this Agreement; (d) was in the possession of the Receiving party without
obligation of confidentiality prior to receipt or disclosure under this
Agreement as evidenced by written records made prior to such receipt or
disclosure; (e) is developed independently by the Receiving party without the
use of or benefit from any of the Confidential Information of the other party or
without breach of this Agreement, as evidenced by records of the Receiving 
party; or (f) is required to be disclosed by any national securities exchange,
by government rule or regulation (e.g., in connection with a securities filing)
or by any other provisions of applicable law, provided that the Receiving party
gives the Disclosing party advance written notice (to the extent practicable) of
the disclosure and cooperates with the Disclosing party in any reasonable
attempt to limit the scope of the required disclosure. In any dispute over
whether information is Confidential Information under this Agreement, it will be
the burden of the Receiving party to show that such contested information falls
within the exceptions set forth in this Section 12.1(b).

     12.2 No Contest of WellPoint IP Rights.  drugstore.com shall not contest or
otherwise challenge (e.g., in any legal action or otherwise), or assist or
encourage any other Person to contest or challenge, the validity of any
WellPoint IP Rights; provided that the foregoing shall not preclude
drugstore.com from claiming that the IP Rights in question are drugstore.com IP
Rights.

     12.3 No Contest of drugstore.com IP Rights.  WellPoint shall not contest or
otherwise challenge (e.g., in any legal action or otherwise), or assist or
encourage any other Person to contest or challenge, the validity of any
drugstore.com IP Rights; provided that the foregoing shall not preclude
WellPoint from claiming that the IP Rights in question are WellPoint IP Rights.

Section 13.  Resolution of Disputes

     13.1 General.  If any dispute arises between the parties relating to this
Agreement, each party will follow the dispute resolution procedures set forth in
this Section 13 prior to initiating any litigation or pursuing other available
remedies unless otherwise agreed in writing by the parties at the time the
dispute arises.  Notwithstanding the foregoing, any party may commence
litigation without having first complied with the provisions of this Section 13
if such commencement occurs within thirty (30) days prior to the date after
which the commencement of litigation would be barred by any statute of
limitations, statute of repose or other law, rule, regulation, or order of
similar import or in order to request injunctive or other equitable relief
necessary to prevent irreparable harm.  In such event, the parties will (except
as may be prohibited by judicial order) nevertheless continue thereafter to
follow the procedures set forth in this Section 13.

                                       21

 
     13.2 Initiation of Procedures.  If a party seeks to initiate the procedures
under this Section 13, such party will give written notice thereof to the other
party.  Such notice will (i) state that it is a notice initiating the procedures
under this section, (ii) describe briefly the nature of the dispute and the
initiating party's claim or position in connection with the dispute, and (iii)
identify an individual with authority to settle the dispute on such party's
behalf.  Within ten (10) days after receipt of any notice under this Section
13.2, the receiving party will give the initiating party written notice that
describes briefly the receiving party's claims and positions in connection with
the dispute and identifies an individual with the authority to settle the
dispute on behalf of the receiving party.

     13.3 Pre-Litigation Discussion.  The parties will cause the individuals
identified in their respective notices under Section 13.2 to promptly make such
investigation of the dispute as such individuals deem appropriate.  Promptly and
in no event later than ten (10) days after the date of the initiating party's
notice under Section 13.2, such individuals will commence discussions concerning
resolution of the dispute.  If the dispute has not been resolved within 30 days
after commencement of such discussions, then the parties shall submit the
dispute for non-binding mediation to a mutually agreed upon mediator or
mediation firm.  The parties will use their best efforts to cause the mediator
to resolve the dispute within 15 days of its submission thereto. If the mediator
is unable to resolve the dispute within such time period, any party may submit
the dispute to litigation.

Section 14.  Termination; Extension

     14.1 The following shall be Events of Default under this Agreement:

     (a)  WellPoint is in material breach of any of its material obligations
under this Agreement (including any material breach or inaccuracy of its
representations or warranties that has a material adverse effect on the ability
of WellPoint to perform its obligations under this Agreement ), which breach
WellPoint does not cure within thirty (30) days after drugstore.com gives
WellPoint written notice thereof;

     (b)  drugstore.com is in material breach by of any of its material
obligations under this Agreement (including any material breach or inaccuracy of
its representations or warranties that has a material adverse effect on the
ability of drugstore.com to perform its obligations under this Agreement ),
which breach drugstore.com does not cure within thirty (30) days after WellPoint
gives drugstore.com written notice thereof;

     (c)  drugstore.com fails to pay any payments due hereunder to WellPoint
when due, and such failure is not cured within ten (10) business days after the
receipt of the notice of such failure.

     (d)  drugstore.com is in material breach of any material obligation under
Section 4.8 of this Agreement or fails to maintain its privacy structure in
accordance with state and federal regulatory requirements and industry standards
as may be reflected in certification standards of organizations such as Trust e,
BBB, VIPPS, the NABP or similar organizations and at a level comparable to that
maintained by other Internet 

                                       22

 
Pharmacies, and such breach or failure is not corrected within thirty (30) days
of drugstore.com's receipt of written notice from WellPoint of such failure.

     14.2 Termination

     (a)  If an Event of Default occurs under Section 14.1 and such default is
not cured within the prescribed notice period, the non-defaulting party may
immediately terminate this Agreement.

     (b)  If either party (i) ceases to do business, or otherwise terminates its
business operation or (ii) is declared insolvent or seeks protection under any
bankruptcy, receivership, trust deed, creditors arrangement, composition or
comparable proceeding., the other party may immediately terminate this
Agreement.

     (c)  In the event that drugstore.com is, following a Change in Control of
drugstore.com, subject to the Control of a Competitor of WellPoint, WellPoint
may terminate this Agreement on sixty (60) days' prior written notice to
drugstore.com, so long as such notice of termination is given no later than
three (3) months after such Change in Control.  It shall be considered a Change
in Control of drugstore.com to a Competitor if drugstore.com is, following a
Change in Control of drugstore.com, subject to the Control of a Third Party that
is either (a) a PBM or (b) a Health Plan or (c) is an organization that owns,
controls or operates either (i) a PBM that services 1 million or more persons or
(ii) a Health Plan that has annual premiums and premium equivalents in excess of
$500 million.

     14.3 Survival and Continuing Obligations

     (a) Sections 6.2 (but only for a period of one year following the date of
termination of this Agreement), 7, 10, 11, 12, 13, 14.3 and 15 (but not Section
15.2) and the third sentence of the first paragraph of Exhibit C (with respect
to Repeat Customer Fees as set forth in such paragraph) shall survive
termination of this Agreement.

     14.4 Extension. This Agreement shall continue throughout the Term.. Upon
the expiration of the Term, this Agreement shall automatically renew for
additional one (1) year terms at each anniversary of the Effective Date, unless
(i) either party gives written notice of its intent not to renew no later than
ninety (90) days prior to the expiration of the Term or any renewal term, or
(ii) this Agreement is terminated pursuant to its terms.

Section 15.  Miscellaneous

     15.1 Relationship.  The parties are independent contractors under this
Agreement.  Each party acknowledges and agrees that it is not and will not be
during the Term an employee or an agent of the other party.  Nothing in this
Agreement will be deemed to constitute, create, give effect to or otherwise
recognize a joint venture, partnership, franchise or business entity of any
kind.

                                       23

 
     15.2 Assignment; Sale of Assets or Capital Stock.  This Agreement shall be
binding upon and inure to the benefit of the parties hereto, and the legal
representatives, successors in interest and permitted assigns, respectively, of
each such party.  This Agreement shall not be assigned in whole or in part by
any party without the prior written consent of the other party, which shall not
be unreasonably withheld. It shall be considered an assignment of this Agreement
by drugstore.com  which requires WellPoint's prior written consent if
drugstore.com is, following a Change in Control of drugstore.com, subject to the
control of a Competitor of WellPoint as described in Section 14.2 (c).

     15.3 Contract Modifications for Prospective Legal Events. Nothing contained
in this Agreement shall be construed to require the commission of an act
contrary to law, and whenever there is any conflict between any provision of
this Agreement and any statute, law, ordinance or regulation, the latter shall
prevail. In such event, and in any case in which any provision of this Agreement
is determined to be in violation of a statute, law, ordinance or regulation, the
affected provision(s) shall be limited only to the extent necessary to bring it
within the requirements of the law and, insofar as possible under the
circumstances, to carry out the purposes of this Agreement. The other provisions
of this Agreement shall remain in full force and effect, and the invalidity or
unenforceability of any provision hereof shall not affect the validity and
enforceability of the other provisions of this Agreement, nor the availability
of all remedies in law or equity to the parties with respect to such other
provisions.

     In the event any state or federal laws or regulations, now existing or
enacted or promulgated after the Effective Date of this Agreement, are
interpreted by judicial decision, a regulatory agency or legal counsel of both
parties in such a manner as to indicate that the structure of this Agreement may
be in violation of such laws or regulations, WellPoint and drugstore.com shall
amend this Agreement, to the maximum extent possible, to preserve the underlying
economic and financial arrangements between WellPoint and drugstore.com.

     15.4 Notices.  All notices, requests, demands, applications, services of
process, and other communications that are required to be or may be given under
this Agreement shall be in writing and shall be deemed to have been duly given
if sent by telecopy or facsimile transmission, answer back requested, or
delivered by courier or mailed, certified first class mail, postage prepaid,
return receipt requested, to the parties to this Agreement at the following
addresses:

     If to WellPoint:    WellPoint Health Networks, Inc.
                         1 WellPoint Way
                         Thousand Oaks, CA 91362
                         Attention: President, Senior and Specialty Businesses
                         Division
                         Fax:  (808) 557-6823

     With a copy to:     WellPoint Health Networks, Inc.
                         1 WellPoint Way

                                       24

 
                         Thousand Oaks, CA 91362
                         Attention: General Counsel
                         Fax:  (805) 557-6820

     If to drugstore.com:
     
     drugstore.com, inc.

                         13920 SE Eastgate Way, Suite 300
                         Bellevue, WA 98005
                         Attention: General Counsel
                         Fax:  (425) 372-3808

or to such other address as the party shall have furnished to the other party by
notice given in accordance with this Section 15.4.  Such notice shall be
effective (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, or (ii) if sent by telecopy or facsimile transmission, on
the date of transmission unless transmitted after normal business hours, in
which case on the following date, or (iii) if mailed, upon the date of first
attempted delivery.

     15.5 Waiver. No provision of this Agreement shall be deemed to be waived
and no breach excused unless such waiver or consent shall be in writing and
signed by the party that is claimed to have waived or consented. The failure of
a party at any time, or from time to time, to require performance by the other
party of any provision hereof shall in no way affect the rights of such party
thereafter to enforce the same nor shall the waiver by a party of any breach of
any provision hereof by the other party constitute a waiver of any succeeding
breach of such provision, or a waiver of any provision itself, or a waiver of
any other provisions hereof.

     15.6 Severability.  This Agreement will be enforced to the fullest extent
permitted by applicable law.  If for any reason any provision of this Agreement
is held to be invalid or unenforceable to any extent, then: (a) such provision
will be interpreted, construed or reformed to the extent reasonably required to
render the same valid, enforceable and consistent with the original intent
underlying such provision; (b) such provision will be void to the extent it is
held to be invalid or unenforceable; (c) such provision will remain in effect to
the extent that it is not invalid or unenforceable; and (d) such invalidity or
unenforceability will not affect any other provision of this Agreement or any
other agreement between the parties.

     15.7 Remedies. Except as otherwise expressly provided in this Agreement,
each and all of the rights and remedies provided in this Agreement, and each and
all of the remedies allowed at law and in equity, will be cumulative, and the
exercise of one right or remedy will not be exclusive of the right to exercise
or resort to any and all other rights or remedies provided in this Agreement or
at law or in equity.

     15.8 Injunctive Relief.  The parties acknowledge that a material breach of
Sections 7 or 12 of this Agreement would cause irreparable harm, the extent of,
which 

                                       25

 
would be difficult to ascertain. Accordingly, they agree that, in addition to
any other legal remedies to which the non-breaching party may be entitled, such
party will be entitled to obtain immediate injunctive relief in the event of a
material breach of this Agreement.

     15.9  Governing Law.  This Agreement will be governed by and construed
according to the laws of the State of California without regard to its choice of
law provisions.  The parties consent to the jurisdiction of such courts and
waive any right to assert that any such court constitutes an inconvenient or
improper forum.

     15.10 Publicity.  Neither party shall, without the approval of the other,
make any press release or other public announcement concerning the transactions
contemplated by the Agreements, except as and to the extent that any such party
shall be so obligated by law or by the rules, regulations or policies of any
national securities exchange or association or governmental entity, in which
case the other party shall be advised and the parties shall use reasonable
efforts to cause a mutually agreeable release or announcement to be issued;
provided, however, that the parties hereby acknowledge and agree that
communications among employees of the parties and their attorneys,
representatives and agents necessary to consummate the transactions contemplated
hereby shall not be deemed a public announcement for purposes of this Section
15.10.  Upon the execution and delivery of this Agreement, the parties hereto
will cooperate in respect of the immediate issuance of a mutually acceptable
press release relating to the transactions contemplated by the Agreements.

     15.11 Entire Agreement.  All Exhibits and Schedules to this Agreement are
incorporated in and constitute a part of this Agreement.  This Agreement,
including the Exhibits and Schedules hereto, each as amended from time to time,
constitute the entire understanding between the parties in relation to the
subject matter hereof and supersede all prior discussions, agreements and
representations related to this subject matter, whether oral or written and
whether or not executed by a party.  Unless otherwise provided in this
Agreement, no modification, amendment or other change may be made to this
Agreement or any part thereof unless reduced to writing and executed by
authorized representatives of all parties.

     15.12 Counterparts.  This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.

     15.13 Titles and Subtitles. The titles and subtitles used in this Agreement
and in the Exhibits and Schedules hereto are used for convenience only and are
not to be considered in construing or interpreting this Agreement.

     15.14 Force Majeure.  Neither party shall be responsible for a failure to
meet its obligations under this Agreement to the extent caused by the following:
(i) materially inaccurate data submitted by the other party; (ii) any material
failure of equipment, facilities or services not controlled or supplied by such
party; or (iii) failure(s) caused by acts of God, acts of nature, riots and
other major civil disturbances, strike by such party's personnel, sabotage,
injunctions or applicable laws or regulations, in each case without 

                                       26

 
breach by such party of any obligations under this Agreement with regard to
either such event or such failure. WellPoint or drugstore.com, as applicable,
agrees to use its commercially reasonable efforts to restore performance of its
obligations under this Agreement as soon as reasonably practicable following any
such event.

     15.15 Effective Date. This Agreement shall become effective at the
Effective Date.

                           [Signature Page Follows]

                                       27

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

WellPoint:                                   drugstore.com:

WELLPOINT HEALTH NETWORKS INC.               DRUGSTORE.COM, INC.

By: /s/ Joan Herman                          By: /s/ Mark Silverman

Name:   Joan Herman                          Name:   Mark Silverman

Title:  Executive Vice President             Title:  Vice President, Business
                                             Development

                                       28

 
                                   Exhibit A

                          Pharmacy Provider Agreement
                          ---------------------------

                                (see attached)

                                       29

 
                                   Exhibit B

                           Mock-Ups for Section 4.3
                           ------------------------

                                       30

 
                                   Exhibit C

                     Compensation to Be Paid to WellPoint

For each New Customer acquired by drugstore.com during the Term, drugstore.com
shall pay WellPoint $10.00 during the year of such acquisition (the "New
Customer Fees"). In addition, drugstore.com shall pay WellPoint $2.50 in each
subsequent year that a New Customer purchases an OTC Product from drugstore.com,
through the fourth year after the year in which the New Customer first purchased
from drugstore.com (the "Repeat Customer Fees"). The Repeat Customer Fees will
continue to be paid beyond termination of this Agreement (other than by
drugstore.com under Sections 14.2(a) for so long as the Pharmacy Provider
Agreement remains in effect and drugstore.com is reimbursed for prescriptions it
fills for WellPoint Members. Collectively, the New Customer Fees and the Repeat
Customer Fees are the "Customer Fees". A "New Customer" is an Identified Member
that purchases an OTC Product from drugstore.com and has not made a prior
purchase from drugstore.com.

drugstore.com shall pay WellPoint minimum Customer Fees ("Minimum Fees")
according to the following schedule:

     Year 1 of the Term:  $1.0 million

     Year 2 of the Term:  $1.5 million

     Year 3 of the Term:  $2.0 million

     Year 4 of the Term:  $2.5 million

     Year 5 of the Term:  $3.0 million

For the purpose of this Exhibit C, "Year 1 of the Term" means the initial 12-
month period following the Effective Date, and each successive 12-month period
during the Term is noted Year 2 of the Term and so forth.

With respect to each Year of the Term, Minimum Fees shall be due and payable
quarterly in advance, the first payment being due at signing and the remaining
payments due by the fifth day of the following quarter.  All Customer Fees due
and payable shall be offset by the Minimum Fees paid by drugstore.com.  During
each Year of the Term, when Customer Fees exceed the Minimum Fees, such excess
Customer Fees shall be due and payable within 30 days following the end of each
Year of the Term.

In addition to the Customer Fees, drugstore.com shall pay WellPoint bonus
Customer Fees ("Bonus Fees"), if any, according to the following schedule:

     Upon reaching 50,000 New Customers within Year 1 of the Term, drugstore.com
shall pay to WellPoint a one-time Bonus Fee of $100,000 and upon reaching
100,000 

                                       31

 
cumulative New Customers within Year 1 of the Term, drugstore.com shall pay to
WellPoint an additional one-time Bonus Fee of $250,000.

     Upon reaching 250,000 cumulative New Customers by the last day of Year 2 of
the Term, drugstore.com shall pay to WellPoint a one-time Bonus Fee of $400,000.

     Upon reaching 500,000 cumulative New Customers by the last day of Year 3 of
the Term, drugstore.com shall pay to WellPoint a one-time Bonus Fee of $500,000.

     Upon reaching 800,000 cumulative New Customers by the last day of Year 4 of
the Term, drugstore.com shall pay to WellPoint a one-time Bonus Fee of $750,000.

     Upon reaching 1,000,000 cumulative New Customers by the last day of Year 5
of the Term , drugstore.com shall pay to WellPoint a one-time Bonus Fee of
$1,000,000.


Notwithstanding anything to the contrary in this Agreement, in the event that
drugstore.com has acquired fewer than 100,000 New Customers in the aggregate by
the thirtieth (30/th/) month after the Effective Date, the schedule of Minimum
Fees shall be adjusted to the following:

     Year 4 of the Term:  $2.0 million

     Year 5 of the Term:  $2.0 million

Notwithstanding anything to the contrary in this Agreement, in the event that
(i) WellPoint or any of its Affiliates actively promotes to WellPoint Members a
company that sells OTC Products (other than pursuant to the agreement described
in Section 3.1(5), AND (ii) drugstore.com has acquired fewer than 100,000 New
Customers in the aggregate by the 30/th/ month after the Effective Date, the
schedule of Minimum Fees shall be adjusted to the following:

     Year 4 of the Term:  $1.0 million

     Year 5 of the Term:  $1.0 million

If for any reason drugstore.com is at any time during the Term (1) excluded from
pharmacy networks that cover 25% or more of all WellPoint Members as of the
Effective Date or (2) precluded from placement on WellPoint Sites accessible by,
and/or from marketing (such as via mailings) pursuant to this Agreement to, 75%
of all WellPoint Members as of the Effective Date, the Minimum Fees shall be
reduced to $500,000 per year for each period following such event.  If for any
reason drugstore.com is at any time during the Term (1) excluded from pharmacy
networks that cover 50% or more of all WellPoint Members as of the Effective
Date, (2) if Blue Cross of California is sold or is no longer an Affiliate of
WellPoint (and it excludes drugstore.com from its networks), or (3) any two or
more PBMs or Health Plans that are Affiliates of WellPoint are sold or are no
longer Affiliates of WellPoint (and such Affiliates exclude drugstore.com from
their 

                                       32

 
networks), Minimum Fees shall no longer be payable to WellPoint for periods
following such event.

                                       33

 
                                   Exhibit D

                     WellPoint Investment Representations

          (i)    WellPoint is aware of drugstore.com's business affairs and
financial condition, and has acquired information about drugstore.com sufficient
to reach an informed and knowledgeable decision to acquire the Shares. WellPoint
is acquiring the Shares for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution" thereof
for purposes of the Securities Act. WellPoint hereby represents that WellPoint
is an "accredited investor" as defined in Rule 501 promulgated under the
Securities Act of 1933, as amended.

          (ii)   WellPoint understands that the Shares have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of WellPoint's
investment intent as expressed herein.  In this connection, WellPoint
understands that, in the view of the SEC, the statutory basis for such exemption
may be unavailable if WellPoint's representation was predicated solely upon a
present intention to hold the Shares for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Shares, or for a period of one year or any
other fixed period in the future.

          (iii)  WellPoint further understands that the Shares must be held
indefinitely unless subsequently registered under the Securities Act and any
applicable state securities laws, or unless exemptions from registration are
otherwise available.  Moreover, WellPoint understands that drugstore.com is
under no obligation to register the Shares.

          (iv)   WellPoint is aware of the provisions of Rule 144 and 144A,
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, if applicable, including,
among other things: the availability of certain public information about
drugstore.com, the resale occurring not less than one year after the party has
purchased and paid for the securities to be sold; the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934, as amended) and the amount of securities being sold during any three-month
period not exceeding the specified limitations stated therein.

          (v)    WellPoint further understands that at the time it wishes to
sell the Shares there may be no public market upon which to make such a sale,
and that, even if such a public market then exists, drugstore.com may not be
satisfying the current public information requirements of Rule 144 and 144A, and
that, in such event, WellPoint may be precluded from selling the Shares under
Rule 144 and 144A even if the one-year minimum holding period had been
satisfied.

                                       34

 
          (vi)   WellPoint further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the
Securities Act or another registration exemption will be required; and that, not
withstanding the fact that Rule 144 and 144A are not exclusive, the Staff of the
SEC has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 and 144A will have a substantial burden of proof in establishing that
an exemption from registration is available for such offers or sales, and that
such persons and their respective brokers who participate in such transactions
do so at their own risk.

                                       35