Cooperation Agreement - Sohu ITC Information Technology (Beijing) Co. Ltd. and Beijing Sohu Online Network Information Services Co. Ltd.

                                                                  Execution Copy


                                        

                                        
                           -------------------------

                             Cooperation Agreement

                           -------------------------

                                    between



              Sohu ITC Information Technology (Beijing) Co., Ltd.
                                        


                                      and



           Beijing Sohu Online Network Information Services Co., Ltd.
                                        



                                        
                               TransAsia Lawyer
                                  June , 2000

 
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THIS COOPERATION AGREEMENT (this "Agreement") is made on this day of June 2000
in Beijing, People's Republic of China ("PRC")

by and between

(1)  Sohu ITC Information Technology (Beijing) Co., Ltd., a wholly foreign-owned
     company, duly established and registered under the laws of the PRC with its
     registered address at Suite 1519, Tower 2 Bright China Chang An Building, 7
     Jianguomen Nei Avenue, Beijing 100005, PRC ("Party A")

and

(2)  Beijing Sohu Online Network Information Services Co., Ltd., a limited
     liability company duly established and registered under the laws of the PRC
     with its registered address at No 7, Beibingmasi Hutong, Dongcheng
     District, Beijing 100027, PRC ("Party B")

(individually a "Party" and collectively the "Parties").

WHEREAS
-------

A.   Party A is engaged in the development of technology and provision of
     services relating to Internet portals, e-commerce and online advertising,
     as well as the development and application of Internet software and on-line
     databases. Party A has accumulated operational and managerial expertise in
     these areas and has acquired advanced technology, especially through the
     development of the Chinese language Internet portal www.Sohu.com (the
                                                  -------------------   
     "Website").

B.   Party B is engaged in the development of computer hardware, technical
     support and services, and has obtained a license to operate as an Internet
     content provider to engage in the provision of Internet information
     services, including the collection, classification and supervision of
     Website content.

C.   Based on the requirements of the relevant government departments, the
     Parties, through mutual consultation, agreed on June, 2000 to restructure
     their respective assets and business (see the attached agreement) in view
     of their respective areas of expertise and the development stage of the
     Website.

D.   Party A undertakes to provide technical support and assistance to Party B
     in respect of Party B's Internet information services, in exchange for
     which Party B undertakes to provide Internet information services to Party
     A.

THE PARTIES THEREFORE AGREE AS FOLLOWS:

1.   Nature and Objectives of Cooperation
     ------------------------------------

     By complementing each other's respective areas of expertise and market

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Cooperation Agreement

                                      -1-

 
     position, the Parties intend hereunder to strengthen cooperation in such
     business areas as content development, application services and e-commerce.

2.   Content of Cooperation
     ----------------------

     2.1  Technical Services and Support
          ------------------------------

          2.1.1  Party A undertakes to provide to Party B exclusive technical
                 services and support for its Internet information service
                 business, which shall relate, but not be limited to, the
                 following areas:

                 2.1.1.1  portal website technology;

                 2.1.1.2  website server application software;

                 2.1.1.3  systems solutions; and

                 2.1.1.4  training of technical personnel and provision of
                          technical consulting.

          2.1.2  Party B agrees to rely exclusively on Party A's technical
                 services and support for the operation and development of the
                 Website, and to remunerate Party A for such services.

          2.1.3  The Parties agree to enter into a separate agreement to
                 stipulate the specific content to be provided, the means of
                 provision, the amount of fees paid by Party A in consideration
                 of such services and related method of payment.

     2.2  Domain Name and Company Name
          ----------------------------

          2.2.1  For the purpose of assisting Party B's business development
                 efforts during the term of this Agreement, Party A authorises
                 Party B to use, on a non-exclusive basis, the second-tier
                 domain name www.Sohu.com.cn, which is registered in the name of
                 and held by Party A. Moreover, Party A undertakes to assist
                 Party B in obtaining from Party A's parent company, Sohu.com
                 Inc., a license to use on a non-exclusive basis the top-level
                 domain name, www.Sohu.com.

          2.2.2  Further to Article 2.2.1 above, Party A authorises Party B to
                 use, for the duration of this Agreement, the trade names
                 "Chinese Symbol" and "Sohu", which are registered in the name
                 of and held by Party A.

          2.2.3  The Parties shall enter into separate licensing agreements for
                 the rights outlined in Articles 2.2.1 and 2.2.2 above, which
                 will specify the terms and conditions of use of those rights.

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          2.2.4  Party B understands that Party A and its parent company,
                 Sohu.com Inc, are now in the process of registering Sohu's
                 trade marks in the PRC. The Parties agree that, when the said
                 registration is completed and should Party B so desire, they
                 shall negotiate and enter into a separate trade mark licensing
                 contract.

     2.3  Information Services Permit and Supervision of Network Security
          ---------------------------------------------------------------

          2.3.1  Party B shall be responsible for the following:

                 2.3.1.1  obtaining and maintaining the continuous validity of
                          the Internet Information Services Permit, in addition
                          to all other operating permits (including, but not
                          limited to, an online news dissemination permit) if
                          required necessary to Party B's lawful operation of
                          its business;

                 2.3.1.2  filing and maintaining the relevant computer network
                          security registrations;

                 2.3.1.3  establishing a responsibility mechanism and
                          supervisory system to handle security issues arising
                          during the course of the Website's operation resulting
                          to content displayed on the Website; and

                 2.3.1.4  implementing and complying with PRC laws in connection
                          with the release of any information online.

     2.4  Content Development and Copyright Licence
          -----------------------------------------

          2.4.1  Party B shall be responsible in consultation with Party A, for
                 developing cooperative relationships, with traditional media
                 and other partners with regard to Website content, and for
                 executing all necessary related agreements, such as content
                 development agreements and content licensing contracts.

          2.4.2  Upon the expiry of any existing content development agreements
                 executed by Party A, Party A shall assist Party B to negotiate
                 with the relevant counter-parties and renew such agreements.

          2.4.3  Party A shall develop in digitalised form the Website content
                 collected by Party B to be released in online and wireless
                 access protocol (WAP) versions, and shall provide to Party B
                 the necessary related technical consulting and guidance
                 services.

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          2.4.4  For the duration of this Agreement, Party A shall license to
                 Party B the overall copyright of the Website design, which is
                 owned by Party A, and the digitalised content developed and
                 owned by Party A as set out above in Article 2.4.3.

          2.4.5  Upon the reasonable request of Party B, Party A undertakes to
                 improve and update the design of the user interface and
                 digitalised content of the Website. Any copyrights arising from
                 such improvements and updating shall be the exclusive property
                 of Party A and licensed to Party B.

          2.4.6  The Parties shall enter into separate licensing agreements for
                 the rights outlined in Articles 2.4.4 and 2.4.5 above, which
                 shall specify the terms and conditions of the use of such
                 rights.

     2.5  Provision of Business Platform
          ------------------------------

          2.5.1  In order to assist Party A in the development of its content
                 and related business operations, Party B agrees to provide
                 Party A with:

                 2.5.1.1  space on the Website for exclusive use by Party A in
                          conducting its online advertising and e-commerce
                          activities on the Website;

                 2.5.1.2  access to and use of any required computer hardware;
                          and

                 2.5.1.3  other Internet information services reasonably
                          requested by Party A.

     2.6  Equipment, Leased Line and Personnel
          ------------------------------------
                 2.6.1    The Parties agree to address issues such as the
                 transfer of equipment and the subleasing of the private leased
                 line according to the attached Assets and Business
                 Restructuring Agreement.

3.   Service Fees and Expenditures
     -----------------------------

     3.1  During the term of this Agreement, in consideration of the network
          security supervision, content development and e-commerce services
          provided by Party B under Articles 2.3, 2.4 and 2.5 above and Party A
          will pay to Party B a monthly service fee within ten (10) days of the
          commencement of each calendar month to reimburse Party B for all its
          costs and expenses incurred in conducting its services for Party A
          hereunder and incremental business tax, which fee is currently RMB
          three hundred thousand (300,000) and will be subject to periodic
          adjustments as agreed by the Parties.

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Cooperation Agreement
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     3.2  Unless the Parties agree otherwise in writing, the monthly fee that
          Party B is obliged to pay to Party A under Article 2 of the Assets and
          Restructuring Agreement will be used to set off the fees that Party A
          is obliged to pay to Party B under Article 3.1 of this Agreement.

          Pursuant to the set-off outlined above, the Parties' payment
          obligations should be discharged automatically. However, if the
          outstanding amount which one Party is obliged to pay to the other
          Party exceeds the outstanding amount to be paid by that other Party,
          the first Party must pay the difference ("Set-off Difference") to the
          other Party.

4.   Representations and Warranties
     ------------------------------

     4.1  Each Party represents and warrants that, as of the date of signing
          hereof:

          4.1.1  it has fully power and authority (corporate or otherwise) as an
                 independent legal person to execute and deliver this Agreement
                 and to carry out its responsibilities and obligations
                 hereunder; and

          4.1.2  it has executed and delivered all necessary documentation and
                 engaged in all necessary activities to enable it to perform
                 this Agreement.

     4.2  Party A represents and warrants that it lawfully possesses the above-
          mentioned domain name, trade names and copyright, namely:

          4.2.1  www.Sohu.com.cn;

          4.2.2  the "Sohu" and "Chinese Symbol" trade names and trade marks;
                 and

          4.2.3  copyright to existing digitalised content of the Website.

     4.3  Party B represents and warrants that it has obtained, and will
          maintain the validity of, an Internet Information Services Permit
          issued by the relevant competent government authorities, and that it
          has filed and is maintaining its computer network security
          registration in accordance with the relevant regulations.

5.   Limitation of Rights
     --------------------

     5.1  Without first securing Party A's written consent to do so, the
          technical support and various licenses in respect of domain names,
          trade names, trade marks, and copyrights provided by Party A to Party
          B may not be transferred, mortgaged or sub-licensed by Party B to any
          third party or used for the benefit of any third party; nor may 

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Cooperation Agreement
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          any of Party B's rights and obligations hereunder be assigned or
          sub-licensed to any third party.

     5.2  Party B undertakes to use the rights granted to it by Party A strictly
          in accordance with the terms of this Agreement, and not to use those
          rights in any way which, in the opinion of Party A, is misleading or
          which damages the commercial reputation and interests of Party A.

     5.3  Party B undertakes to assist Party A in protecting the latter's domain
          name, trade name, trade mark and copyright, to notify Party A of any
          relevant infringement thereof as soon as it comes to Party B's
          attention and, at the request of Party A, to undertake or participate
          in any related litigation or claim for damages.

     5.4  Party B agrees that it shall not, either during the term of this
          Agreement or at any time thereafter, dispute the rights of Party A
          with respect to the technology, domain name, trade name, trade mark,
          copyright, or the validity of this Agreement.

6.   Confidentiality
     ---------------

     6.1  Each Party undertakes to maintain as confidential any trade secrets
          concerning the other Party that, in connection with the execution and
          performance hereunder, such Party learns or receives during the term
          of this Agreement. The Parties agree to use such trade secrets solely
          in connection with the performance of their respective obligations
          under this Agreement. Without written permission from the other Party,
          neither Party shall allow any third party to use such commercial
          secrets, nor disclose any such secrets, including the execution,
          performance or contents of this Agreement, to any third party. Failure
          to abide by this provision shall constitute a breach of this
          Agreement, and shall result in the liability of the breaching Party
          for any corresponding damages.

     6.2  Each Party shall ensure that , with the appropriate written permission
          has been acquired from the other Party, it only discloses trade
          secrets of the other Party to its respective employees, advisors,
          agents or contractors for the purposes of performing this Agreement.
          Furthermore, each Party guarantees to the other Party that any such
          employees, advisors, agents or contractors will maintain the
          confidentiality of the trade secrets thus disclosed, failing which it
          shall be liable for any corresponding damages.

     6.3  Each Party shall, upon the other Party's request, return, destroy, or
          otherwise dispose of all documents, information or software containing
          trade secrets relating to the other Party, and cease to use the said
          trade secrets.

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Cooperation Agreement
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7.   Breach
     ------

     7.1  In the event that either Party breaches or fails to fully carry out
          any of its representations, warranties, agreements or obligations
          hereunder, the non-breaching Party may send a written notice to the
          breaching Party demanding rectification within ten (10) days, and
          demanding that the breaching Party continue to perform the Agreement
          and take sufficient, effective and timely measures to clear up any
          consequences of such breach, as well as to compensate the non-
          breaching Party for any losses that it may have sustained as a
          consequence of such breach.

     7.2  The total amount for which the breaching Party is liable to compensate
          the non-breaching Party for any losses that the latter has sustained
          due to it's the breach shall be equivalent to the total actual and
          potential losses sustained as a result of the said breach, including
          contractual interests that the non-breaching Party would have been
          able to obtain upon the Agreement being performed.

8.   Force Majeure
     -------------

     8.1  "Force Majeure" refers to any event, including but not limited to wars
          or natural disasters, that is unforeseeable or if foreseeable, the
          occurrence and effect of which is unavoidable and insurmountable. In
          light of the special nature of computer networks, Force Majeure shall
          also include all of the following, where they affect the normal
          operation of the Parties' respective computer networks:

          8.1.1  attacks by hackers or invasion by or activation of computer
                 viruses;

          8.1.2  failure on the part of either or both Parties, as a result of
                 the damaged, paralysed or otherwise incapacitated state of
                 their computer systems, to perform their services or
                 obligations under this Agreement;

          8.1.3  major disruption due to technical adjustments by
                 telecommunications departments; or

          8.1.4  temporary suspension of operations as a result of government
                 controls.

     8.2  Should either Party, due to the occurrence of Force Majeure, fail to
          perform this Agreement in full or in part, such Party shall, in
          consideration of the effect of the Force Majeure, be exempted from all
          or some of its responsibilities hereunder, except where PRC laws
          provide otherwise.

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Cooperation Agreement
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     8.3  Should either Party fail to perform in a timely manner its duties
          under this Agreement and subsequently Force Majeure were to occur,
          such Party shall not be exempted from any of its liabilities hereunder
          as a result of its failure to perform said duties.

     8.4  Should either Party be unable to perform this Agreement as a result of
          Force Majeure, it shall inform the other Party, as soon as possible
          following the occurrence of such Force Majeure, of the situation and
          the reason(s) for non-performance, so as to minimize any losses
          incurred by the other Party as a consequence thereof. Furthermore,
          within a reasonable period of time after the notification of Force
          Majeure has been provided, the Party encountering Force Majeure shall
          provide a legal certificate issued by a public notary (or other
          appropriate organization) of the place wherein the Force Majeure
          occurred, in witness of the same.

     8.5  The Party affected by Force Majeure may suspend the performance of its
          obligations under this Agreement until any disruption resulting from
          the Force Majeure has been resolved. However, such Party shall make
          every effort to eliminate any obstacles resulting from the Force
          Majeure, thereby minimising to the greatest extent possible the
          adverse effects of such, as well as any resulting losses.

9.   Effective Date and Term
     -----------------------

     9.1  Subject to the provisions of Article 10.2 hereof, this Agreement shall
          be effective as of the date first indicated above shall have a term of
          twenty (20) years and may be extended upon its expiry by the mutual
          written consent of the Parties.

     9.2  Should either Party wish to extend the term of this Agreement, it
          shall notify the other Party to this effect in writing at least thirty
          (30) days prior to the expiry hereof, to which the other Party shall
          respond in writing within ten (10) days thereafter.

10.  Amendments and Termination
     --------------------------

     10.1 This Agreement shall not be amended or assigned, except by means of a
          written instrument executed by the duly authorised representatives of
          the Parties.

     10.2 This Agreement may only be terminated in the following situations:

          10.2.1 with the mutual written consent of the Parties following
                 consultation;

          10.2.2 within ten (10) days following the issue by the non- 


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Cooperation Agreement
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                 breaching Party of a written notice in accordance with Article
                 7.1 of this Agreement, the breaching Party fails to remedy the
                 breach or to take sufficient, effective and timely measures to
                 resolve any consequences of the said breach, or to compensate
                 the non-breaching Party for any losses it may have sustained as
                 a consequence of that breach, the non-breaching Party shall be
                 entitled to terminate this Agreement unilaterally by means of a
                 written notice; or

          10.2.3 where Force Majeure prevails for thirty (30) or more days, such
                 that the continued performance of this Agreement becomes
                 impossible, either Party shall be entitled to terminate this
                 Agreement by means of a written notice, with immediate effect.

     10.3 The termination or early termination of this Agreement for any reason
          whatsoever shall not affect:

          10.3.1 the validity of any provisions contained herein concerning the
                 settlement of accounts and damages;

          10.3.2 the obligations of Party B under Article 5 of this Agreement in
                 respect of the limitation of rights;

          10.3.3 the continuing obligations of the Parties under Article 6 of
                 this Agreement to observe their commitments in respect of
                 confidentiality.

11.  Settlement of Disputes and Applicable Law
     -----------------------------------------

     11.1 Should a dispute arise between the Parties in connection with the
          interpretation or performance of this Agreement, they shall attempt to
          resolve such dispute through friendly consultations between
          themselves. If the dispute cannot be resolved within thirty (30) days
          after the commencement of such consultations, then either Party may
          submit it to the China International Economic and Trade Commission in
          Beijing for arbitration in accordance with its current effective
          arbitration rules.

     11.2 The execution, validity, interpretation and performance of this
          Agreement shall all be subject to the laws of the PRC, as shall the
          resolution of any disputes arising in respect of this Agreement.

     11.3 During arbitration, the Parties shall, to the extent possible,
          continue to implement those parts of this Agreement unrelated to such
          arbitration.

12.  Notices
     -------

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Cooperation Agreement
                                      -9-

 
     12.1 Unless prior notice of a change of address is given by the relevant
          Party, all correspondence between the Parties during the performance
          of this Agreement shall be delivered either in person, by express
          courier, facsimile transmission, registered mail or e-mail to the
          following correspondence addresses:

 
          Party A:        Sohu ITC Information Technology (Beijing) Co., Ltd.
          Address:        Suite 1519, Tower 2 Bright China Chang An
                          Building, No. 7 Jiangguomennei Avenue, Beijing, PRC
          Zip code:       100005
          Telephone:      (86 10) 6510 2160
          Facsimile:      (86 10) 6510 2159
          E-mail:         tom@itc.com.cn
          Contact person: Mr Tom Gurnee
 
          Party B:        Beijing Sohu Online Network Information Services
                          Co., Ltd.
          Address:        No.7 Beibingmasi Hutong, Dongcheng District,
                          Beijing, PRC
          Zip code:       100027
          Telephone:      (86 10) 6510 1234
          Facsimile:      (86 10) 6510 1234
          E-mail:         maxguo@sohu.com.cn
          Contact person: Mr Max Guo

     12.2 Notices or communications shall be deemed to have been received:

          12.2.1 at the exact time displayed in the corresponding transmission
                 record, if delivered by facsimile, unless such facsimile is
                 sent after 5:00 p.m. or on a non-business day in its place of
                 receipt, in which case the date of receipt shall be deemed to
                 be the following business day in the place of receipt;

          12.2.2 on the date that the receiving Party signs to acknowledge
                 receipt of the correspondence, in the case of delivery by
                 person (including express mail);

          12.2.3 fifteen (15) days after the date shown on the registered mail
                 receipt, in the case of a registered letter; or

          12.2.4 on the successful printing by the sender of a transmission
                 report evidencing the delivery of the relevant e-mail, in the
                 case of an e-mail transmission.

13.  Miscellaneous
     -------------

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Cooperation Agreement
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     13.1 Failure or delay on the part of either Party to exercise any right
          hereunder shall not operate or be interpreted as a waiver thereof, nor
          shall any single or partial exercise of any right preclude any other
          future exercise thereof.

     13.2 The invalidity of any provision of this Agreement shall not affect the
          validity of any other provision hereof.

     13.3 Any matter not specified in this Agreement shall be handled through
          discussions between the Parties and resolved in accordance with the
          laws of the PRC.

Attachment: Assets and Business Restructuring Agreement

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Cooperation Agreement
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SIGNED for and on behalf of

Sohu ITC Information Technology (Beijing) Co., Ltd. (affix company seal)


--------------------------------------------------
Signature of authorised representative

Name      :

Title     :



SIGNED for and on behalf of

Beijing Sohu Online Network Information Services Co., Ltd (affix company seal)

--------------------------------------------------
Signature of authorised representative

Name      :  He Jinmei

Title     :


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Cooperation Agreement
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