EXHIBIT 10.3

SERVICES AGREEMENT

This Services Agreement (this “Agreement”) is dated November 29, 2011 and
effective as of January 1, 2012 by and between (i) Beijing Changyou Gamespace
Software Technology Co., Ltd. (“Gamespace”), a company organized and existing
under the laws of the PRC with its registered address at Room 158, Building 1,
No. 3 Xijing Road, Badachu Hi -technology Park, Shijingshan District, Beijing,
China and its legal representative being Wang Tao, and (ii) Beijing Sohu New
Media Information Technology Co., Ltd. (“Sohu New Media”), a company organized
and existing under the laws of the PRC with its registered address at Room 802,
8th Floor of Sohu.com Internet Plaza, No.1 Park, Zhongguancun East Road, Haidian
District, Beijing, China and its legal representative being Charles Zhang.
Gamespace and Sohu New Media are individually referred to as a “Party,” and
together as the “Parties.” Capitalized terms used herein and not otherwise
defined will have the meanings ascribed to such terms in the Master Transaction
Agreement (as defined below).

RECITALS

WHEREAS, Gamespace is an indirect wholly-owned subsidiary of Changyou.com
Limited, a Cayman Islands corporation (together with its subsidiaries (including
Gamespace) and VIEs, “Changyou”);

WHEREAS, Sohu New Media is an indirect wholly-owned subsidiary of Sohu.com Inc.,
a Delaware corporation (together with its subsidiaries (including Sohu New
Media) and VIEs other than those subsidiaries and VIEs included in the
definition of Changyou, “Sohu”);

WHEREAS, Sohu and Changyou have entered into a Master Transaction Agreement
dated as of November 29, 2011 (the “Master Transaction Agreement”), pursuant to
which Sohu has agreed to sell the 17173 Business (as defined below) to Changyou
(the “17173 Acquisition”) and Changyou has agreed to purchase the 17173 Business
from Sohu; and

WHEREAS, Changyou desires to engage Sohu to provide certain technical support
services with respect to the 17173 Business to support Changyou’s operation of
the 17173 Business, subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing and the terms, conditions,
covenants and provisions of this Agreement, and intending to be legally bound,
the Parties mutually covenant and agree as follows:

ARTICLE I

DEFINITIONS

1.1 Defined Terms. The following capitalized terms have the meanings given to
them in this Section 1.1:

“17173 Acquisition” has the meaning set forth in the recitals to this Agreement.

 

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“17173 Business” means the online game information portal, web-based game
platform, software applications development and distribution, and other
game-related services conducted or engaged in by Sohu in connection with or
through the 17173 Websites immediately prior to the closing of the 17173
Acquisition, consisting of, among other things, (i) links to the games of online
game companies that are customers of the 17173 Websites, with Sohu being
compensated by such customers according to the revenues that such customers earn
from game players who reach the customers’ games using click-throughs from the
Websites and (ii) advertising services provided by Sohu to advertisers on the
17173 Websites.

“17173 Websites” means the homepages of www.17173.com, and www.37wanwan.com, and
all other websites associated with such URLs that are owned or operated by
Changyou on and after the closing of the 17173 Acquisition.

“Affiliate” means any entity that controls, is controlled by, or is under common
control with a Party. As used herein, “control” means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such entity, whether through ownership of voting securities or
other interests, by contract or otherwise. Solely for purposes of this
Agreement, however, Sohu shall not be deemed to an “Affiliate” of Changyou, and
Changyou shall not be deemed to be an “Affiliate” of Sohu. “Agreement” means
this Services Agreement, as the same may be amended and supplemented from time
to time in accordance with the provisions hereof.

“Changyou” has the meaning set forth in the recitals to this Agreement.

“Changyou Websites” means all websites owned, controlled or maintained by
Changyou, including without limitation the 17173 Websites after the closing date
of the 17173 Acquisition.

“Gamespace” has the meaning set forth in the preamble of this Agreement.

“PRC” means the People’s Republic of China, excluding Taiwan, the Hong Kong
Special Administrative Region and the Macao Special Administrative Region.

“Sohu” has the meaning set forth in the recitals to this Agreement.

“Sohu New Media” has the meaning set forth in the preamble of this Agreement.

“Sohu Websites” means all websites owned, operated or controlled by Sohu,
including, without limitation, Sohu.com and Chinaren.com, but not including
Changyou Websites.

“VIE” means a variable interest entity, as such term is defined for the purposes
of generally accepted U.S. accounting principles.

 

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ARTICLE II

TECHNICAL SUPPORT SERVICES

2.1 Sohu PEAK System.

(a) During a period of twenty-five (25) years starting from January 1, 2012,
Sohu New Media will make, or cause other Sohu’s Affiliates to make, available to
Changyou, Sohu’s PEAK online payment platform system to allow registered users
of the 17173 Websites to connect from their accounts directly to their payment
accounts in order to make direct online purchases of Sohu virtual currencies for
playing, through click-throughs from the 37wanwan.com web site, and the web
sites of the online game companies that are customers of 17173 Websites.

(b) For the services provided by Sohu under Section 2.1(a) hereof, Sohu New
Media will charge Gamespace a fee (the “PEAK Service Fee”) equal to 1.1% of the
full face value (i.e., not reduced by any discount offered by Changyou to its
customers) of the Sohu virtual currencies purchased, it being acknowledged by
the Parties that such rate does not exceed the current prevailing rates charged
by third parties for similar services as of the date hereof. Amounts charged by
Changyou to its customers will be collected by Sohu through its PEAK system and
transferred to Gamespace, within 30 days after the end of each calendar quarter.
Gamespace will make a one-time prepayment (payable in RMB) for such services in
an amount of RMB1,906,500 (equivalent to US$300,000) to Sohu New Media no later
than January 31, 2012, which amount will be applied toward the payment by
Gamespace of the PEAK Service Fee under this Section 2.1(b). For the avoidance
of doubt, the conversion rate between US$ and RMB for this Agreement shall be
6.355:1.

2.2 Back-Office Services.

(a) During a period of three (3) years starting from January 1, 2012 (the
“Back-Office Service Period”), Sohu New Media will make, or cause other Sohu’s
Affiliates to make, available to Changyou the following technical services (the
“Back-Office Services”) for the conduct of the 17173 Business by Changyou:

 

  (i) back-office supporting services through Sohu’s CRM system with respect to
accounts of advertising customers of the 17173 Business, including without
limitation (i) tracking and allocation of advertisement resources on the 17173
Websites and the Sohu Game Information Channel, (ii) management of advertiser
information, (iii) management and processing of advertisement contracts with
advertisers and orders therefrom, and (iv) generation of various contract
performance reports;

 

  (ii) generation, through Sohu’s Goto system, of various reports regarding the
effectiveness and efficiency of the performance of advertisement contracts; and

 

  (iii) provision, maintenance and management of email accounts (“17173 Email
Addresses”) registered by users of the 17173 Websites; and provision of
technical support services necessary to enable the 17173 Websites to be accessed
through Sohu Passport by such users using their 17173 Email Addresses.

 

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(b) In consideration of Sohu’s providing such Back-Office Services for the
entire Back-Office Service Period, Sohu New Media will charge Gamespace a
one-time service fee of RMB38,130,000 (equivalent to $6,000,000), which shall be
paid in full in RMB by Gamespace to Sohu New Media no later than January 31,
2012. In addition, if, during the Back-Office Service Period, Sohu upgrades any
software system of Sohu underlying any services that are same or substantially
similar to the Back-Office Services, the corresponding software system
underlying the Back-Office Services shall also be upgraded in substantially the
same manner.

(c) After the expiration of the Back-Office Service Period, Gamespace, on behalf
of itself and Changyou, will have the right, but not the obligation, to obtain
from Sohu a perpetual, worldwide, royalty free license, with the right to
sublicense to any other Changyou’s Affiliate, to use the software system
underlying the Back-Office Services, by Gamespace’s giving 30-day prior written
notice to Sohu New Media, and if Gamespace elects to obtain such a license, Sohu
will have no further obligation to make any upgrade to the software system
subject to such license after the grant of such license. In consideration for
such license, if obtained by Gamespace, Gamespace will pay a one-time license
fee of RMB6,355,000 (equivalent to US$1,000,000), which shall be paid in full in
RMB by Gamespace to Sohu New Media no later than January 31, 2015.

ARTICLE III

INDEMNITIES

3.1 Intellectual Property. Sohu New Media on behalf of itself and Sohu, or
Gamespace on behalf of itself and Changyou, as the case may be (“Indemnifying
Party”), will indemnify, defend and hold harmless the other Party, and its
Affiliates, and their respective directors, officers, employees and agents
(“Indemnitees”), against all claims, actions, liabilities, losses, and expenses
(including reasonable attorneys’ fees) with respect to or arising out of any
claim by a third party that any content provided by such Indemnifying Party and
displayed on the 17173 Websites or the Sohu Websites constitutes defamation or
an invasion of the right of privacy or publicity, or infringement of the
copyright, trademark or other intellectual property right, of such third party.
Expressly excluded from the indemnification obligations hereunder is any content
provided by visitors to the 17173 Websites or Sohu Websites, including, but not
limited to, such visitors who use chat rooms, bulletin boards, or other forums
that allow visitors to display material that is not within the control of the
Indemnifying Party.

3.2 Procedure. The Indemnitee will promptly provide the Indemnifying Party with
written notice of any claim which the Indemnitee believes falls within the scope
of this Article IV; provided however, that, except to the extent the
Indemnifying Party is actually prejudiced by the Indemnitee’s failure to provide
such prompt notice, such failure to provide prompt notice hereunder will not
limit the Indemnitee’s rights under this Article III. The Indemnitee may, at its
own expense, assist in the defense of any such claim if it so chooses, provided
that the Indemnifying Party will control such defense and all negotiations
relative to the settlement of any such claim.

 

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ARTICLE IV

MISCELLANEOUS

4.1 Entire Agreement. This Agreement constitutes the entire agreement between
the Parties with respect to the subject matter hereof and will supersede all
prior written and oral and all contemporaneous oral agreements and
understandings with respect to the subject matter hereof.

4.2 Governing Law and Jurisdiction.

(a) This Agreement, including the validity hereof and the rights and obligations
of the Parties hereunder, shall be construed in accordance with and all disputes
hereunder shall be governed by the laws of the PRC.

(b) Each of the Parties hereto irrevocably agrees that any dispute or
controversy arising out of, relating to, or concerning any interpretation,
construction, performance or breach of this Agreement, shall first be settled by
the Parties through friendly negotiation. If the Parties fail to settle such
dispute or controversy within 30 days after a Party notifies the other Party of
such dispute or controversy, such dispute or controversy shall be submitted to
the China international Economic and Trade Arbitration Commission for
arbitration which shall be conducted in accordance with the Commission’s
arbitration rules in effect at the time of the application for arbitration (the
“Arbitration Rules”). The arbitration shall be held in Beijing. The award of the
arbitral tribunal shall be final, conclusive and binding on the parties to the
arbitration. The party against whom the award of the arbitral tribunal was
entered shall bear all the costs and expenses of such arbitration, including
counsel fees and expenses.

4.3 Amendment. This Agreement may be amended only by mutual written consent of
the Parties.

4.4 Notices. Notices and other communications to be given by any Party pursuant
to the terms of this Agreement will be given in writing to the respective
Parties to the following addresses:

if to Sohu New Media:

Level 12, Sohu.com Internet Plaza

No. 1 Unit Zhongguancun East Road, Haidian District

Beijing 100084

People’s Republic of China

Attention: Carol Yu

Email: carol@sohu-inc.com

 

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if to Gamespace:

East Tower, JinYan Hotel

No. 29 Shijingshan road, Shijingshan

Beijing 100043

People’s Republic of China

Attention: Alex Ho

Email: alex@cyou-inc.com

or to such other address or email address as the Party to whom notice is given
may have previously furnished to the other in writing as provided herein. Any
notice involving non-performance or termination will be sent by hand delivery or
recognized overnight courier. All other notices may also be sent by email,
confirmed by mail. All notices will be deemed to have been given when received,
if hand delivered; when transmitted, if transmitted by email; upon confirmation
of delivery, if sent by recognized overnight courier; and upon receipt if
mailed.

4.5 Counterparts. This Agreement may be executed in counterparts, each of which
will be deemed to be an original but all of which will constitute one and the
same agreement.

4.6 Binding Effect; Assignment. This Agreement will inure to the benefit of and
be binding upon the Parties hereto and their respective legal representatives
and successors, and nothing in this Agreement, express or implied, is intended
to confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement. No Party may assign this Agreement or any
rights or obligations hereunder, without the prior written consent of the other
Party, and any such assignment without such consent will be void; provided,
however, each Party may assign this Agreement to its Affiliate or a successor
entity in conjunction with the transfer of substantially all of the Party’s
business, whether by sale of substantially all assets, merger, consolidation or
otherwise.

4.7 Confidentiality. Each Party shall, and shall cause its Affiliates to, hold,
and shall use their reasonable best efforts to cause their respective
Representatives to hold, in confidence, any and all information, whether written
or oral, obtained from the other Party in connection with the execution and
performance of this Agreement, except for such information which the disclosing
party can prove (a) is generally available to and known by the public through no
fault of the disclosing party, any of their Affiliates or their respective
Representatives; or (b) is lawfully acquired by the disclosing party, any of
their Affiliates or their respective Representatives from third party sources
which are not prohibited from disclosing such information by a legal,
contractual or fiduciary obligation (the “Confidential Information”). If the
disclosing party or any of their Affiliates or their respective Representatives
are compelled to disclose any Confidential Information by judicial or
administrative process or by other requirements of Law, the disclosing party
shall promptly notify the other party in writing and shall disclose only that
portion of such information which the disclosing party, is advised by its
counsel in writing is legally required to be disclosed. Each Party agrees not
to, and shall use their reasonable best efforts to cause their respective
Representatives not to, use any of the Confidential Information except for the
purposes of performing this Agreement.

 

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4.8 Severability. If any term or other provision of this Agreement is determined
by a court, administrative agency or arbitrator to be invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement will nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
Party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the Parties hereto will negotiate in
good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the fullest extent possible.

4.9 Failure or Indulgence not Waiver; Remedies Cumulative. No failure or delay
on the part of any Party in the exercise of any right hereunder will impair such
right or be construed to be a waiver of, or acquiescence in, any breach of any
representation, warranty or agreement herein, nor will any single or partial
exercise of any such right preclude other or further exercise thereof or of any
other right. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise available.

[Signatures on Next Page]

 

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WHEREFORE, the Parties have signed this Services Agreement effective as of the
date first set forth above.

 

Beijing Sohu New Media Information Technology Co., Ltd. By:  

 

  Name: Charles Zhang   Title: Legal Representative Beijing Changyou Gamespace
Software Technology Co., Ltd. By:  

 

  Name: Wang Tao   Title: Legal Representative

 

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