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Exhibit
99.1
SEVERANCE AGREEMENT AND
GENERAL RELEASE
This Severance Agreement and
General Release (“Agreement”) is made and entered into
by and between David Hills (hereinafter referred to as
“Employee”) and LookSmart, Ltd., its successors,
subsidiaries, related companies, parent company and affiliates
(hereinafter sometimes referred to as the “Company” or
“LookSmart”).
The Company and the Employee
agree that the Employee’s employment may be terminated
without notice or cause;
The Company and the Employee
agree that the Employee’s employment terminated after the
close of business on August 1, 2007 (“Separation
Date”);
This Agreement may not be
executed by the Employee and will not be accepted by LookSmart
until AFTER the Employee’s Separation Date but within the
period provided for in this Agreement;
The Employee acknowledges
that the Employee has received all compensation due and owing,
including all wages, commissions, bonuses and compensation for
accrued and unused vacation through the Separation Date;
The Employee does not have
pending against the Company or any Employee, agent, official, or
director of the Company any claim, charge, or action in or with any
federal, state, or local court or administrative agency;
and
The Employee wishes to
receive the severance pay provided hereunder, receipt of which is
expressly conditioned upon the execution and effectiveness of this
Release.
NOW, THEREFORE, in
consideration of the mutual covenants and promises contained in
this document and the payment of the severance pay hereunder, which
shall be paid by the Company to the Employee in accordance with
this Agreement, and in an effort to avoid unnecessary lawsuits, it
is hereby agreed by and between the parties as follows:
FIRST:
A. Severance Payments
. (i) The Company will pay the Employee Severance Pay,
totaling $496,640, less required withholdings and authorized
deductions, representing one hundred percent (100%) of his
annual base salary and 100% of his actual, earned incentive bonus
for the 2006 fiscal year, which amount shall be payable as separate
sets of payments as follows: (a) $64,570, less required
withholdings and authorized deductions, will be paid in cash in one
lump sum within one business day following the Effective Date of
this Agreement, (b) $64,570, less required withholdings and
authorized deductions, will be paid in one lump sum on the 6-month
anniversary of the Separation Date; and (c) $367,500, less
required withholdings and authorized deductions, will be paid in
equal installments over the twelve (12) month period
commencing with the first regularly scheduled payroll date after
the Effective Date of this Agreement, pursuant to the
Company’s standard payroll policies and schedule,
(ii) provided that the Employee elects to continue his health
insurance under COBRA in a timely manner, the Company will pay the
monthly premiums for the Employee’s COBRA coverage as they
become due covering the period from August 1, 2007 until the
earlier of the date the Employee accepts
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other employment or July 30, 2008,
(iii) the Employee shall be provided access to mutually agreed
upon outplacement services for up to six (6) months following
the Separation Date, and (iv) the Company will reimburse the
Employee for legal expenses he incurred in connection with the
review and execution of this Agreement up to a maximum of $2,000.
The foregoing is subject to the provisions that (i) the
Employee returns all Company materials and equipment within five
(5) days after the Separation Date, provided that the Employee
may retain his laptop computer following submission of such
computer to the Company for removal of proprietary data,
(ii) the Employee tenders his resignation from the
Company’s board of directors, effective as of the Separation
Date; (iii) the Employee satisfies all payment obligations to
the Company, and (iv) the Employee signs and returns this
Agreement, without revocation, AFTER the Employee’s
Separation Date, but no later than 21 days after receipt of this
Agreement or 10 days after the Employee’s Separation Date,
whichever is later.
The Employee agrees that the
foregoing payment constitutes the entire amount of monetary
consideration provided to the Employee under this Agreement and in
full satisfaction of the Company’s obligations to the
Employee under the terms of Employee’s employment offer
letter with the Company, dated September 24, 2004 (the
“Offer Letter”), and that the Employee will not seek
any further compensation for any other claimed damage, costs, or
attorneys’ fees in connection with the matters encompassed in
this Agreement.
B. Consulting
Arrangement . The Employee will provide consulting services to
the Company, to identify, bring to the Company and assist in
closing sales transactions with mutually agreed upon qualifying
entities, for a period of twelve (12) months following the
Separation Date, subject to the Company’s right to terminate
the Consulting Period if the Employee breaches this Agreement and
(if such breach is curable) does not cure such breach following
written notice from the Company and a ten day cure period or the
Company and the Employee do not reach mutual agreement on the
topics requiring such agreement hereunder (the “Consulting
Period”). The Company will pay the Employee as follows for
such consulting services: (a) a monthly retainer of $10,000,
following presentation of an invoice by the Employee, (b) a
$5,000 per-transaction-closed fee for mutually agreed upon deals in
each quarter of the Consulting Period beginning with the third
mutually agreed upon deal in each quarter, and (c) for the
first six months of the Consulting Period, a transaction fee equal
to 2.5% of the Company’s net revenues realized in the initial
term of those transactions that the Employee provides substantial
assistance to the Company in identifying, bringing to the Company
and closing; for the second six months of the Consulting Period,
the 2.5% transaction fee referenced in the prior portion of this
subpart (c) will be modified based on mutual agreement, to an
amount between 1% and 2%. The fee payable in subpart (c) above
shall be paid based on net revenues realized by the Company over
the initial term of the applicable transaction agreement,
regardless of whether the Consulting Period has ended prior to the
expiration of the initial term of the transaction agreement on
which the fee is based. The Company and the Employee acknowledge
and agree that it is the mutual expectation of the parties that the
consulting services to be rendered by the Employee during the
Consulting Period shall be not less than 15% and not more than 20%
of the level of services provided by the Employee for the Company
during the period of his employment. Without the Company’s
consent, the Employee will not provides services that amount to
less than 15% of regular full-time work hours in any given month
during the Consulting Period.
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SECOND: During the
period of his employment, the Company granted certain stock options
to the Employee, which options are listed on the Options and Awards
Summary attached as Exhibit A to this Agreement (the
“Options”). Pursuant to the terms of the existing stock
option agreements (the “Option Agreements”) for the
Options and the provisions of the stock plan to which the Options
are subject, the Options shall continue to vest through the
Consulting Period. In the event there is a Change of Control of the
Company (as defined in the Offer Letter) during the Consulting
Period, and within twelve (12) months thereafter the
Employee’s consulting arrangement is terminated by the
Company or a successor, the Employee shall be entitled to receive
the accelerated vesting of the Options as set forth in the Offer
Letter. Notwithstanding the foregoing, for the avoidance of doubt,
upon any expiration of the Consulting Period without the
Company’s (or its successor’s) termination thereof,
and/or the expiration or termination of the Options by their terms,
the Employee shall not receive any acceleration
hereunder.
Except as set forth in this
Agreement and the Option Agreements, the Employee acknowledges that
he has no right, title or interest in or to any shares of the
Company’s capital stock under the Offer Letter, the Option
Agreements, or any other agreement (oral or written) with the
Company.
THIRD: This Agreement
and compliance with this Agreement shall not be construed as an
admission by the Company of any liability whatsoever, or as an
admission by the Company of any violation of the rights of the
Employee or any person, violation of any order, law, statute, duty,
or contract whatsoever against the Employee or any person. The
Company specifically disclaims any liability to the Employee or any
other person for any alleged violation of the rights of the
Employee or any person, or for any alleged violation of any order,
law, statute, duty, or contract on the part of the Company, its
employees or agents or related companies or their employees or
agents.
FOURTH: The Employee
represents that he has not filed or otherwise pursued any charges,
complaints or claims of any nature which are in any way pending
against the Company or any of the Releasees with any court with
respect to any matter covered by this Agreement and agrees, to the
extent permitted by law, that he will not do so in the future. The
Employee further represents that, with respect to any charge,
complaint or claim he has filed or otherwise pursued or will file
or otherwise pursue in the future with any state or federal agency
against the Company or any of the Released Parties, he will forgo
any monetary damages, including but not limited to compensatory
damages, punitive damages, and attorneys’ fees, to which he
may otherwise be entitled in connection with said charge, complaint
or claim. Nothing in this Agreement shall limit the
Employee’s right to file a charge, complaint or claim with
any state or federal agency or to participate or cooperate in such
matters.
FIFTH: If requested by
the Company, and upon reasonable notice, the Employee will act or
appear as a witness, deponent or in any other reasonable capacity
to assist the Company or any affiliate in any civil or criminal
action, clai
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