Exhibit 10.26

 

AMENDMENT NUMBER FOUR
TO THE LICENSE & UPDATE AGREEMENT
BETWEEN LOOKSMART, LTD. AND MICROSOFT CORPORATION

This Amendment Number Four (“Amendment Number Four”) to the License & Update
Agreement (the “Agreement”) is made and entered into effective as of April 9,
2002 by and between Microsoft Corporation, a Washington corporation with its
principal place of business located at One Microsoft Way, Redmond, Washington
98052 (“Microsoft”) and LookSmart, Ltd., a Delaware corporation located at 625
Second Street, San Francisco, California 94107 (“LookSmart”).

Recitals

         WHEREAS, the parties have entered into that certain License & Update
Agreement, dated October 28, 1999, Amendment Number One dated July 27, 2000
(“Amendment Number One”), Amendment Number Two dated June 20, 2000 (“Amendment
Number Two”) and Amendment Number Three dated November 1, 2000 (“Amendment
Number Three”), (collectively the “Agreement”); and;

         WHEREAS, the parties wish to amend the Agreement to provide that
Microsoft will offer links to the Subsite Program, Small Business Listing
Program (SBL) and Standard Submit Program, all as set forth herein.

         NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for such other good and valuable consideration, the sufficiency of
which is hereby acknowledged by the parties, Microsoft and LookSmart desire to
amend the Agreement as follows

Amendment

1.      Section 1 of the Agreement shall be amended to add:

         1.     DEFINITIONS. Except as otherwise defined herein, capitalized
terms used herein have the meanings set forth in the Agreement.               
“Bad Debt” shall mean the revenue due from Customer to Looksmart but not
collected due to inability to collect from Customer.         “Click Through”
shall mean the event when a third party Internet user successfully navigates to
a Customer’s site from a Paid Listing within search results displayed on the MSN
Search Site.         “Click Through Revenues” shall mean the revenue generated
from a Customer to Looksmart from a Click Through.         “Cost Per Click” or
“CPC” shall mean the fee charged to a Customer for each Click Through.        
“Customer” shall mean that person or entity who or which has purchased the Paid
Listing(s).

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    “MSN’s Search Site” shall mean MSN’s Internet search service, and sites
powered by MSN Search. An example of an MSN Search Site is located at
search.msn.com. The parties agree that this Amendment shall apply to versions of
the MSN Search Site marketed to and intended for the U.S. and international
markets, as directed by Microsoft.           “Paid Listing” shall mean Subsite
Listings or SBL Listings.           “Paid Submit Services” shall mean the
Subsite Program and SBL Program.          

“Recognized Revenue” shall mean the ***.

         

“Small Business Listing” or “SBL” shall mean web site listings included in
LookSmart’s directory by Customers participating in the SBL Program.

         

“SBL Progam” shall mean LookSmart’s web site submission program for small
businesses, as such program may evolve during the Term hereof. This is replacing
the Addurl/Submit a Site program.

          “SBL Review Fee” shall mean the fee LookSmart charges the SBL Customer
for review of the Customer’s website for those SBL Customers acquired through
the MSN search site.           “Standard Submit Program” shall mean the program
where Looksmart manages the non-paid links requested by website owners.        
  “Submit a Site Pages” shall mean the pages that Looksmart creates to market
the Subsite Program, SBL program and Standard Submit Program. These pages will
in turn lead to the appropriate program page(s) hosted and served by LookSmart.
          “Subsite Listing” shall mean the links in LookSmart’s directory that
are sold and marketed by Looksmart to Customers of the Subsite Program.        
 

“Subsite Program” shall mean the program that Looksmart markets to Customers for
inclusion in Looksmart’s directory where the Customer pays Looksmart for the
clicks or sales generated.

      2. Microsoft will create, host and post links to the Submit a Site Pages
on MSN’s Search Site in the United States and mutually agreed upon international
markets. LookSmart will create and host all Submit a Site Pages. The Submit a
Site Pages will bear Looksmart branding. Any changes made by LookSmart to the
Submit a Site Pages shall be approved in writing in advance by Microsoft.      

[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

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3.

LookSmart will offer the Standard Submit Program and one or more of the Paid
Submit Services in the United States and mutually agreed upon international
markets SBL Program. Customers will be required to maintain an account with
LookSmart that will act as a debit account for the fees owed to Looksmart.
LookSmart will be solely responsible for administering the Paid Submit Services
and Standard Submit Program, making changes to the applicable pricing and terms
of service, and performing all related Customer service. LookSmart editors will
review submissions to the Paid Submit Services, prepare site descriptions and
include the Customer’s listing(s) in its web directories. LookSmart will flag
all Paid Submit Service URLs that appear in the data supplied to Microsoft
hereunder, in a format acceptable to Microsoft. After completion of the
submission to either the SBL Program or the Standard Submit Program, the
Customer will be directed back to a Microsoft page which shall be specified by
Microsoft.

      4.

LookSmart will be responsible for the sale and marketing of all Paid Listings.

        LookSmart will not make available to the customers of the Paid Submit
Services any data specific to Microsoft or MSN Search, and will provide only
aggregate data for the entire LookSmart network, unless Microsoft gives prior
written consent to provide MSN Search specific data. Microsoft shall have the
right to review and approve, in advance, any LookSmart materials or data to the
extent such material or data incorporate Microsoft trademarks or logos.
LookSmart editors will review Paid Submit Services submissions, and for those
submissions acceptable to LookSmart, the LookSmart editors shall write site
reviews and post them to the appropriate database. Microsoft may request that
LookSmart remove certain client(s’) links or Microsoft could remove itself, from
the Paid Submit Services which LookSmart provides to Microsoft if Microsoft
determines that such client(s) links are being returned too frequently in any
MSN Search. LookSmart will use reasonable efforts to ensure that such client(s’)
links shall not be included in any future Paid Listings LookSmart provides to
Microsoft, beginning with the next data drop.        

LookSmart shall handle all tracking, record keeping, customer service,
invoicing, submissions and collections associated with Paid Listings. LookSmart
will forward a copy of Paid Listings to Microsoft in a format acceptable to
Microsoft, including but not limited to the real customer URL and the redirect
URL. In addition, LookSmart will flag all Paid Submit Services Listings URLs
that appear in the data supplied to Microsoft, in a format acceptable to
Microsoft.

        LookSmart grants to Microsoft the non-exclusive, worldwide, royalty-free
rights to include, display and publish, during the term of Amendment Number
Four, the Paid Listings as part of the LookSmart Database currently licensed to
Microsoft by LookSmart. Not withstanding the foregoing license, LookSmart may
withdraw certain Paid Listings, in the event that the relationship between
LookSmart and its customer expires or is terminated, modified, breached or
otherwise compromised, or under specific terms of the agreement between
Looksmart and its customer. In such cases, LookSmart shall give Microsoft notice
of its withdrawal of a Paid Listing and Microsoft will promptly remove such Paid
Listings from MSN Search. Microsoft has the right to require LookSmart to
maintain a link in the directory that is needed for user experience reasons.    
 

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5.

LookSmart represents and warrants that the Subsite Program and SBL Program are
compliant with all applicable laws, statutes and regulations. LookSmart makes no
other representations or warranties, express or implied, in connection with the
Paid Submit Services, including without limitation the warranty of fitness for
particular purpose. LookSmart shall indemnify Microsoft for any claim from and
against any loss, claim, liability, damage, action or cause of action (including
reasonable attorneys’ fees) brought against Microsoft by a third party arising
from any breach by LookSmart of the foregoing warranty.

    6.

Whereas the term of Amendment Number Three expired by its own terms on November
1, 2001, the parties hereby agree and acknowledge that the term of Amendment
Number Three and all obligations thereunder shall continue in full force and
effect through the Amendment Number Four effective date, unless changed in
Amendment Four. Effective as of the Amendment Four effective date, Amendment
Number One and Amendment Number Three are hereby terminated and replaced in
their entirety by this Amendment Number Four (other than any outstanding payment
obligations remaining as of that time unless modified in Section 7.4 of the
Amendment Number Four.) The initial term of Amendment Four shall extend through
December 3, 2003, the expiration of the Agreement.

    7.         Section 7 of the Agreement shall be amended to add the following
Sections 7.4-7.6:       7.4     Subsite Program.         LookSmart will pay
Microsoft for Click Through Revenues according to the applicable schedule below:
            1.    Up to and including June 30, 2002, LookSmart shall pay
Microsoft a portion of Subsite Click Through Revenue pursuant to the following
revenue share:           Amount Collected During
Quarter                                                                        %
Payable to Microsoft     ***           As an illustration, if quarterly revenues
are $***, then the amount payable to Microsoft would be***.             2.
Starting on July 1, 2002, LookSmart shall pay Microsoft a portion of Subsite
Click Through Revenue pursuant to the following revenue share.          
Recognized Revenue During Quarter,     Less Allowance For Bad Debt.          

[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

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        (Bad Debt allowance not to exceed ***%     of Recognized Revenue)
                                                                       % Payable
to Microsoft     ***           As an illustration, if quarterly Recognized
Revenues (less Bad Debt allowance) are $***, then the amount payable to
Microsoft would be ***.          

In an effort to smooth the cash flow impact of the transition of payment
policies, LookSmart will pay Microsoft the collected Subsite revenue generated
prior to March 31, 2002 on an installment basis. For each quarter, all Subsite
revenue that was generated prior to March 31, 2002 but collected after such date
will be paid in three quarterly installments.

         

As an illustration, if in the calendar quarter ending June 30, 2002 Microsoft’s
share of revenue collected was $ *** and was generated in the quarter ending
March 31, 2002, LookSmart shall pay Microsoft $ *** sixty (60) days followingthe
end of the quarter ending June 30, 2002 and $*** sixty (60) days following the
end of the next two consecutive qurters.

       

7.5     SBL Program.

        LookSmart will pay Microsoft *** of the Recognized Revenues generated
from:                ***                 ***         7.6     Standard Submit
Service.         The parties agree that LookSmart will bear any and all costs
related to the Standard Submit Service.       8. Publicity        

Neither party will make any public statement, press release or other
announcement relating to the terms or existence of this Amendment without the
prior written approval of the other and such approval will not be unreasonably
withheld.

      9. Miscellaneous.        

LookSmart shall pay Microsoft, on a quarterly basis, the revenue share set forth
above within sixty (60) days after the end of such quarter. LookSmart shall
deliver to Microsoft, along with its quarterly payments, a reporting of the
gross revenue generated via the Paid Listings on MSN’s Search Site. Microsoft
has the right to periodically audit

[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

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LookSmart records for the paid Submit Services associated with Microsoft to
verify the accuracy of payments made to Microsoft hereunder, provided that (i)
such right to audit shall not be exercised more than once in any six-month
period, (ii) Microsoft shall provide fifteen business days’ advance of its
intention to audit, (iii) the audit will be performed by a nationally recognized
auditing firm and during regular business hours. In the event that LookSmart has
underpaid Microsoft by more than 7.5% during the corresponding quarter,
LookSmart shall pay all reasonable costs of the audit.

       

LookSmart will be solely responsible for all Customer service, billing,
collection and processing of all transactions conducted on Submit a Site Pages
and represents and warrants that the Submit Services will at all times be
compliant with all applicable laws, statutes and regulations.

      10.    

All other provisions of the Agreement not specifically modified herein shall
remain in full force and effect.

     

IN WITNESS WHEREOF, the parties have executed this Amendment Number Four as of
the Amendment Effective Date.

 

MICROSOFT CORPORATION      

LOOKSMART, LTD.

          By: /s/ John Krass                                              By:
/s/ Jason Kellerman                                        Title: Product Unit
Manager
  Title: Chief Operating Officer       Date:  August 13,
2002                                     Date:  August 5,
2002                                          

Confidential

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