TERMINATION AND SETTLEMENT AGREEMENT
Purple Mountain Holding Ltd.
3rd Floor, Xingke Plaza B
Jiu Xian Qiao Middle Road
Chao Yang District
Beijing 100016, PRC
January 23, 2006
You have delivered to the Board of Directors of eLong, Inc. (eLong or theCompany) your voluntarily resignation from your position as the Chief Executive Officer and President of eLong which is effective as of January 23, 2006 (the Resignation Date). You have kindly offered to delay yourdeparture from the employ of the Company through February 17, 2006 (the Transition Date) in order to permit the Company to transition the Chief Executive Officer position to a suitable replacement. This letter (LetterAgreement) confirms the Companys agreement as to your resignation from employment with eLong and the terms and conditions of your agreement, at the request of eLongs Board of Directors, to remain a non-executive employee of eLongthrough the Transition Date. The benefits described below are available to you only if you execute this Letter Agreement, which includes a release of all claims and additional conditions as set forth below. For good and valuable consideration, wehave agreed as follows:
1. Resignation from Employment. eLongs Board of Directors has accepted your resignation as ChiefExecutive Officer and President effective as of the Resignation Date and your resignation from employment with eLong effective as of the Transition Date. You will not be paid any discretionary bonus with respect to the fiscal year endedDecember 31, 2005. You will continue to be paid your present annual base salary of US$200,000 per annum, pro rated, through the Transition Date, payable in accordance with the normal payroll policies of the Company. In addition, you willreceive through the Transition Date all other employee benefits set forth in Section 4 under your Employment Agreement, dated as of July 23, 2004, with the Company (the Employment Agreement). From the Resignation Date until theTransition Date, you will no longer be the Chief Executive Officer and President of the Company but will be a non-executive employee of the Company whose duties will consist solely of assisting the Company to accomplish an orderly transition of yourformer duties as the Chief Executive Officer to the newly appointed Chief Executive Officer. You will cooperate with the Company when, as and if requested by the Company, in connection with such transition. Effective as of the Transition Date, youwill no longer be entitled to access the eLong executive support services.
2. Director of the Company and Manager and NomineeShareholder of Subsidiaries and Affiliated Chinese Entities. As of the Transition Date, you will continue to serve
on the Board of Directors of the Company and will continue to serve as the Chairman of the Board of Directors until theearlier of your resignation from the Board of Directors or removal as a Director by the Board of Directors or shareholders of the Company. In addition, you will continue to serve as a manager or director of the Companys subsidiaries oraffiliates and as a nominee shareholder of the Companys subsidiaries or affiliated Chinese entities for which you are currently serving until the earlier of your resignation or removal by the Company. You will not receive any compensation foryour services described in this paragraph 2.
3. Resignation as Officers of Subsidiaries. Except as set forth in Section 2above, by signing below, you hereby confirm that you resign, effective as of the Transition Date, from all other positions you may currently hold as an officer or any other similar position of any of the Companys subsidiaries or affiliates andthat you will at such time cease having any rights to use any titles in such entities or with respect to any of the businesses operated thereby. You will sign and deliver to the Company such other documents as may be necessary to effect or reflectsuch resignations.
4. No Severance Obligation. The termination of your employment with the Company pursuant to this LetterAgreement shall be considered a Voluntary Termination by you pursuant to Section 6(b) of the Employment Agreement. As a result, you will not be entitled to receive any severance benefits pursuant to Section 6(d) of the EmploymentAgreement.
5. Termination of Employment Agreement. Except for Section 5(c) (Sale and Transfer Restrictions), Section 7(Option-Related Provisions), Section 8 (Employee Obligations Agreement), Section 9 (Governing Law; Arbitration), Section 10 (Notices) and Section 11(b)-(h) (Miscellaneous) of the Employment Agreement, which will survive asindicated in such provisions or, if no such period of time is indicated, indefinitely, you and eLong hereby agree that the Employment Agreement will be terminated effective as of the Transition Date. You agree that the Employee Non-Competition,Non-Solicitation, Confidential Information and Work Product Agreement (the Employee Obligations Agreements) you entered into with each of eLong and with eLongNet Information Technology (Beijing) Co. Ltd. will each survive the terminationof your employment in accordance with their terms.
You and eLong hereby agree that Section 5(c) of the Employment Agreement isamended so that in the event you cease to be a Board member of the Company as a result of being removed by the Board of Directors or the shareholders of the Company (and not as a result of your resignation), you and Purple Mountain Holding Ltd.,collectively, will be permitted to sell an additional number of Ordinary Shares of the Company which is equal to the difference between the number of Ordinary Shares of the Company necessary to effect a cashless option exercise of all or a portionof your and/ or Purple Mountain Holding Ltd.s outstanding vested Stock Options (as defined below) and the Remaining Amount (as defined below) as of January 1, 2006.
For purchases of clarity, you, Purple Mountain Holding Ltd. and eLong hereby agree that in calculating the 12% Restriction with respect to your totalshareholdings, your total shareholdings consists of all Ordinary Shares and Stock Options held by you and Purple Mountain Holdings Ltd. as of July 23, 2004, which you, Purple Mountain Holding Ltd. and the Company hereby agree is5,533,061.55 Ordinary Shares (on a fully-diluted basis). In addition, you, Purple Mountain Holding Ltd. and eLong hereby agree that (i) Purple
Mountain Holding Ltd. sold 7.13% its and your total shareholdings to the Company on August 4, 2004 and (ii) thetotal number of ordinary shares you and Purple Mountain Holding Ltd. are entitled to sell under Section 5(c) of the Employment Agreement as of January 1, 2006 (without taking into consideration the amendment above) is 269,653 OrdinaryShares of the Company (the Remaining Amount) which is equal to 4.87% of your and Purple Mountain Holding Ltd.s total shareholdings as of July 23, 2004.
6. History of Stock Option Grants. On April 18, 2001, the Company granted you a stock option (the Stock Option) to purchase TwoMillion Seven Hundred and Fifty Thousand (2,750,000) Ordinary Shares of the Company at an exercise price of US$0.50 per share (Grant 1) pursuant to the eLong, Inc. Stock Option Plan, as adopted by the Company on April 18, 2001and amended by the Company on April 23, 2004 (the 2001 Plan). On September 1, 2003, the Company granted to you a Stock Option to purchase Two Hundred Fifty Thousand (250,000) Ordinary Shares of the Company at an exerciseprice of US$1.5325 per share (Grant 2) pursuant to the 2001 Plan. On April 23, 2004 you transferred the above referenced Stock Options to Purple Mountain Holding Ltd. (the Transferee). Both transfers were approved by theCompany pursuant to the terms of Section 7(g) of the 2001 Plan. On July 23, 2004, the Company granted to you a Stock Option to purchase Seven Hundred Thousand (700,000) Ordinary Shares of the Company at an exercise price of US$5.25per share (Grant 3) pursuant to the eLong, Inc. Stock and Annual Incentive Plan, as adopted by the Company on July 23, 2004 (the 2004 Plan).
Both parties agree and acknowledge that the Stock Options are subject to the terms and conditions set forth in the 2001 Plan or the 2004 Plan, as indicated above, the Employment Agreement and the applicable StockOption Agreements entered into by you and the Company.
As of the Transition Date, pursuant to the terms of the appropriate Stock OptionAgreements, the Stock Options will have vested with respect to Three Million One Hundred Thirty Seven Thousand Five Hundred (3,137,500) Ordinary Shares of the Company as set forth below:
|||With respect to Grant 1, Two Million Seven Hundred and Fifty Thousand (2,750,000) Ordinary Shares will have vested as of the Transition Date;|
|||With respect to Grant 2, One Hundred Twenty Five Thousand (125,000) Ordinary Shares will have vested as of the Transition Date; and|
|||With respect to Grant 3, Two Hundred Sixty Two Thousand Five Hundred (262,500) Ordinary Shares will have vested as of the Transition Date.|
In addition, as of the Transition Date, and pursuant to the terms of the appropriate Stock Option Agreements and the 2001 Plan, with respect to Grant 1and Grant 2, you will have 60 days from the Transition Date to exercise the vested Stock Options under Grant 1 and Grant 2 (the Exercise Date).
7. Stock Option Vesting and Extension of Exercise Period.
As consideration for your Non-Competitionobligation to eLong and eLongNet Information Technology (Beijing) Co. Ltd. from the Transition Date until July 23, 2007 under Section 1 of each of the Employee Obligations Agreements, the Company agrees to provide you with the followingadditional benefits with respect to the Stock Options:
|||With respect to Grant 2, on the Transition Date, the Stock Option will vest with respect to an additional Thirty One Thousand Two Hundred Fifty (31,250) Ordinary Shares; and|
|||With respect to Grant 1 and Grant 2, the Exercise Date will be extended such that you and the Transferee will have until the date which is 60 days after you cease to be a Directorof the Company for any reason to exercise the outstanding vested Stock Options Granted under Grant 1 and Grant 2.|
Theparties agree that with respect to Grant 2, the Stock Options for the remaining Ninety Three Thousand Seven Hundred Fifty (93,750) Ordinary Shares of the Company are unvested, will cease vesting as of and will expire unexercised upon theTransition Date.
8. Amendment to Stock Option Grant 3.
With respect to Grant 3, you and the Company hereby agree that Grant 3 is amended such that on the Transition Date, the Stock Option will vest withrespect to an additional Forty Three Thousand Seven Hundred Fifty (43,750) Ordinary Shares and the Stock Options for the remaining Three Hundred Ninety Three Thousand Seven Hundred Fifty (393,750) Ordinary Shares of the Company areunvested, will cease vesting as of and will expire unexercised upon the Transition Date. In addition, you and the Company hereby agree that with respect to Grant 3, you may exercise the vested Stock Options on or before the date which is 60 daysafter you cease to be a Director of the Company for any reason. Any provision to the contrary in the Stock Option Agreement or the 2004 Plan shall be amended as set forth in this paragraph 8.
9. Summary of vested Stock Options. In light of the above paragraphs 7 and 8, the parties agree and acknowledge that you or the Transferee, as thecase may be, may collectively exercise Stock Options to purchase Three Million Two Hundred Twelve Thousand Five Hundred (3,212,500) Ordinary Shares of the Company on or before the date which is 60 after you cease to be a Director of the Companyfor any reason.
In the event that the Transferee exercises all or part of the applicable Stock Options, the shares purchased by theTransferee shall be deemed to be held by you for purposes of the sale and transfer restrictions set forth in Section 5(c) of the Employment Agreements and for purposes of the option-related provisions set forth in Section 7 of theEmployment Agreement.
10. Amendment and Acknowledgement. In consideration of the benefits provided to you under this LetterAgreement, you agree that the first section of Section 1 of the Employee Obligations Agreement dated July 23, 2004 between you and each of the Company and eLongNet Information Technology (Beijing) Co. Ltd. shall be amended as follows:
During my employment with eLong and continuing until July 23, 2007, I will not, on my own behalf, or as owner,manager, stockholder (other than as stockholder of less than 2% of the outstanding stock of a company that is publicly traded or listed on a stock exchange), consultant, director, officer or employee of or in any other manner connected with anybusiness entity, participate or be involved in any Competitor without the prior written authorization of eLong. Competitor means an entity or business that is engaged in the development, operation or marketing of any
travel business targeted in China. For each year or portion thereof following termination of myemployment during which the provisions of this Section 1 apply, I shall receive, as compensation for my obligations under this Section 1, the benefits set forth in that certain Termination and Settlement Agreement between me and eLongdated as of January 23, 2006 including but not limited to those benefits set forth in Section 7 of such Termination and Settlement Agreement, which benefits I acknowledge to be reasonable compensation for undertaking this non-competitionobligation.
You acknowledge and agree that the benefits provided to you under this Letter Agreement with respect to the Stock Options (inlieu of the cash payments that the Company was required to make to you under the Employee Obligations Agreement prior to its amendment by this Letter Agreement) are adequate consideration for your performance of the obligations under Section 1of the Employee Obligations Agreement. Except for the above amendment to Section 1, the Employee Obligations Agreement shall remain in full force and effect. You also agree that in order to receive the benefits set forth in thisAgreement, you will execute and deliver to eLongNet Information Technology (Beijing) Co. Ltd. an amended and restated Employee Non-Competition, Non-Solicitation, Confidential Information and Work Product Agreement in the form agreement attachedhereto as Annex 1 (the WFOE Obligations Agreement). The WFOE Obligations Agreement will be translated into Chinese and you agree to execute such translated agreement. In the event that there is any conflict between the English version ofthe WFOE Obligations Agreement and the translated version, the provisions of the English version of the WFOE Agreement shall be binding on all parties.
11. Return of eLong Property and Acknowledgement. Pursuant to the Employee Obligations Agreement, you are required to return all Work Product and Confidential Information (as each term is defined in theEmployee Obligations Agreement), and all notes, memoranda, records, customer lists, proposals, business plans or other documents and all computer software, materials, tools, equipment or other property (or copies of any of the foregoing) in yourpossession or under your control, relating to any work done for eLong, or otherwise belonging to the Company before the Termination Date. Pursuant to Section 7 of the Employee Obligations Agreement, you will sign and deliver to the Company thecertificate attached hereto as Annex A on or before the Termination Date.
12. Non-Disparagement. To the extent permitted bylaw, you shall not make, publish or state, or cause to be made, published or stated, any defamatory or disparaging statement, writing or communication pertaining to the character, reputation, business practices, competence or conduct of the Company,its subsidiaries, affiliates, shareholders, directors, officers, employees, agents, representatives or successors.
13. Release. Inexchange for eLongs promises and agreements contained herein, and subject in all events to the effectiveness of this Letter Agreement, you hereby agree, on your own behalf, and on behalf of your heirs, successors and assigns, that the terms ofthis Letter Agreement will be in complete and final settlement of any and all claims, rights, interests, demands, compensation and damages (Claims), whether known or unknown, of every name and nature, both in law and equity, you have ormay have, or have ever had from the beginning of your employment with the Company to the Transition Date, against eLong or any subsidiary or affiliated Chinese entity of eLong, together with each of those entities present and former directors,officers, employees, independent contractors, consultants,
shareholders, managers, members, partners, trustees, beneficiaries, agents or successors (collectively, theReleasees) through the Transition Date, in any way relating to or arising out of your employment with eLong, and the termination of such employment. This release does not release eLong from any of its obligations under this LetterAgreement. You further represent that you have not filed against the Company or any of the other Releasees, any complaints, charges or lawsuits with any governmental agency or any court prior to the date hereof.
You acknowledge that prior to your execution of this release: you have been provided with the option and opportunity of reviewing this release withindependent counsel of your own choosing and have, in fact, consulted with your attorney concerning this Agreement; you are competent to exercise this release; the only consideration for this release are the benefits described herein and no otherpromise or agreement has been made; your agreement to execute this release has not been obtained by any duress; and you fully understand that this document is intended to be a complete and legally binding general release. You further acknowledgethat the drafters of this Letter Agreement, attorneys at Goulston & Storrs, P.C., represent the Company and not you.
14.Obligation to Cooperate. You agree to make yourself reasonably available to the Company to respond to reasonable requests by the Company for information concerning matters involving facts or events, relating to the Company or any of theCompanys subsidiaries or affiliated Chinese entities, that may be within your knowledge, and to cooperate with and assist the Company and any subsidiary or affiliated Chinese entity as reasonably requested with respect to any pending andfuture litigation, arbitration or other dispute resolution relating to any matter in which you were involved during your employment with the Company.
15. Representation and Warranty and Indemnification.
(a) You and the Transferee hereby represent andwarrant to eLong, its subsidiaries and affiliated Chinese entities that eLong, its subsidiaries and its affiliated Chinese entities (i) had no obligation to withhold any amounts to satisfy any individual income tax obligations under PRC law orany other applicable law which you or the Transferee may have had with respect to your transfer of the Grant 1 and Grant 2 Stock Options to the Transferee (the Option 1 and Option 2 Transfer) and (ii) will have no obligationto withhold any amounts to satisfy any individual income tax obligations under PRC law or any other applicable law which you or the Transferee may have with respect to any subsequent exercises by the Transferee of any of the Grant 1 and Grant 2Stock Options (the Option 1 and Option 2 Exercises).
(b) You and the Transferee each hereby jointly and severally agreeto defend, hold harmless and indemnify eLong, its subsidiaries and its affiliated Chinese entities from and against any losses, assessments, liabilities, claims, damages, costs and expenses (including without limitation reasonable attorneysfees and disbursements) which arise out of or result from (i) any misrepresentation in or breach of any of the representations and warranties of you and the Transferee set for in this Section 15 and (ii) any and all taxes attributableto or owing by eLong, its subsidiaries and its affiliated Chinese entities with respect to the Option 1 and Option 2 Transfer and the Option 1 and Option 2 Exercises.
(c) Notwithstanding anything herein to the contrary, eLong, its subsidiaries or its affiliated Chineseentities will be entitled to offset, against any amounts due to you or the Transferee or otherwise payable to your or the Transferee from eLong, its subsidiaries or its affiliated Chinese entities including without limitation from any OrdinaryShares due to you or the Transferee upon exercise of any Stock Options, any amount which you or the Transferee may owe to eLong, its subsidiaries or its affiliated Chinese entities pursuant to Section 15(b) above.
16. Governing Law. This Agreement, together with the Employment Agreement, shall be governed by and construed in accordance with the laws of theState of New York as applied to agreements among residents of the State of New York entered into and to be performed entirely within the State of New York. This governing law provision hereby amends the governing law provision set forth in theEmployment Agreement.
Any controversy or claim arising out of or relating to this Agreement shall be settled in accordance withSection 9(b) and (c) of the Employment Agreement. Any controversy or claim arising out of or relating to the Employee Obligations Agreements shall be settled in accordance with Section 8(b) of the Employee Obligations Agreements.
You agree that should any of the provisions of this Agreement be declared or determined by any court to be illegal or invalid, thevalidity of the remaining parts, terms or provisions shall not be affected thereby.
If, after review, you agree to and accept the terms and conditions of this Letter Agreement, please signand return the enclosed copy of this letter by no later than January 23, 2006.
3150 139th Avenue SE
Bellevue, WA 98005, USA,
Attention: ChiefFinancial Officer, Expedia Asia Pacific
AGREED AND ACCEPTED:
We hereby accept and agree to all of the terms and provisions of this Agreement.
|PURPLE MOUNTAIN HOLDING LTD.|
|Date: January 23, 2006||Printed Name:||Justin Tang|
|Date: January 23, 2006|
/s/ Barney Harford
|Title:||President, Expedia Asia Pacific|
|Date: January 23, 2006|
This is to certify that I do not have in my possession or custody, nor have I failed toreturn, any Work Product (as defined in the Employee Non-competition, Non-solicitation, Confidential Information and Work Product Agreement between me and eLong, Inc. (eLong)) or any notes, memoranda, records, customer lists, proposals,business plans or other documents or any computer software, materials, tools, equipment or other property (or copies of any of the foregoing) belonging to eLong.