Document:

Exhibit 10.3

 

Exhibit 10.3

[Execution Copy]

U.S.$80,000,000

SINA Corporation

Zero Coupon Convertible Subordinated Notes Due 2003

PURCHASE AGREEMENT

June 30, 2003

 

 

U.S.$80,000,000

SINA Corporation

Zero Coupon Convertible Subordinated Notes Due 2023

PURCHASE AGREEMENT

June 30, 2003

Credit Suisse First Boston LLC

     As Representative of the Several Purchasers,

     c/o Credit Suisse First Boston LLC

     Eleven Madison Avenue,

     New York, N.Y. 10010-3629

Dear Sirs:

     1.     Introductory. SINA Corporation, a Cayman Islands corporation (the
“Company”), proposes, subject to the terms and conditions stated herein, to
issue and sell to the several initial purchasers named in Schedule A hereto
(the “Purchasers”) U.S.$80,000,000 aggregate principal amount of its Zero
Coupon Convertible Subordinated Notes due 2023 (the “Firm Securities”) and also
proposes to grant to the Purchasers an option, exercisable from time to time by
Credit Suisse First Boston LLC to purchase an aggregate of up to an additional
U.S.$20,000,000 principal amount (“Optional Securities”) of its Zero Coupon
Convertible Subordinated Notes due 2023, to be issued under an indenture, which
is expected to be entered into on July 7, 2003 (the “Indenture”), between the
Company and The Bank of New York, as Trustee. The Firm Securities and the
Optional Securities which the Purchasers may elect to purchase pursuant to
Section 3 hereof are herein collectively called the “Offered Securities”. The
United States Securities Act of 1933, as amended, is herein referred to as the
“Securities Act.”

     The holders of the Offered Securities will be entitled to the benefits of
a Registration Rights Agreement of even date herewith among the Company and the
Purchasers (the “Registration Rights Agreement”), pursuant to which the Company
agrees to file a registration statement with the Securities Exchange Commission
(the “Commission”) registering the resale of the Offered Securities and the
Underlying Shares, as hereinafter defined, under the Securities Act.

     The Company hereby agrees with the several Purchasers as follows:

     2.     Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the several Purchasers that:

		
	 	     (a) A preliminary offering circular and an offering circular
relating to the Offered Securities to be offered by the Purchasers have
been prepared by the Company. Such preliminary offering circular (the
“Preliminary Offering Circular”) and offering circular (the “Offering
Circular”), as supplemented as of the date of this Agreement, together
with any Exchange Act Reports (as hereinafter defined) incorporated by
reference, and any other document approved, in

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	 	writing, by the Company for use in connection with the contemplated
resale of the Offered Securities, if any, are hereinafter collectively
referred to as the “Offering Document”. On the date of this Agreement,
the Offering Document does not include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. The preceding sentence does not apply to
statements in or omissions from the Offering Document based upon written
information furnished to the Company by any Purchaser through Credit
Suisse First Boston LLC (“CSFB”) specifically for use therein, it being
understood and agreed that the only such information is that described as
such in Section 7(b) hereof. Except as disclosed in the Offering
Document, on the date of this Agreement, the Company’s Transition Report
on Form 10-K for the transition period from July 1, 2002 to December 31,
2002, as amended, filed with the Securities and Exchange Commission (the
“Commission”) and all subsequent reports (collectively, the “Exchange Act
Reports”) which have been filed by the Company with the Commission or
sent to shareholders pursuant to the Securities Exchange Act of 1934 (the
“Exchange Act”) not include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. Such documents, when they were filed with the Commission,
conformed in all material respects to the requirements of the Exchange
Act, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) and the rules
and regulations of the Commission thereunder.

		
	 	     (b) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the Cayman Islands, with
power and authority (corporate and other) to own its properties and
conduct its business as described in the Offering Document; and the
Company is duly qualified to do business as a foreign corporation in good
standing in all other jurisdictions in which its ownership or lease of
property or the conduct of its business requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not, individually or in the aggregate, have a material
adverse effect on the condition (financial or other), business,
properties or results of operations of the Company and its subsidiaries
taken as a whole (“Material Adverse Effect”).

		
	 	     (c) Each subsidiary of the Company has been duly incorporated and is
an existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority (corporate
and other) to own its properties and conduct its business as described in
the Offering Document; and each subsidiary of the Company is duly
qualified to do business as a foreign corporation in good standing in all
other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except to the extent
that the failure to be so qualified or be in good standing would not,
individually in the aggregate, have a Material Adverse Effect; all of the
issued and outstanding capital stock of each subsidiary of the Company
has been duly authorized and validly issued and is fully paid and
nonassessable; and the capital stock of each subsidiary owned by the
Company, directly or through subsidiaries, is owned free from liens,
encumbrances and defects.

		
	 	     (d) The Indenture and the execution and delivery thereof have been
duly authorized; the Offered Securities have been duly authorized; and
when the Offered Securities are delivered and paid for pursuant to this
Agreement on each Closing Date (as defined below), the Indenture will
have been duly executed and delivered, such Offered Securities will have
been duly executed, authenticated, issued and delivered and will conform
to the description thereof contained in the Offering Document and the
Indenture and such Offered Securities will constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
terms, subject to

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	 	bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors’ rights and to general equity principles.

		
	 	     (e) When the Offered Securities are delivered and paid for pursuant
to this Agreement on each Closing Date, such Offered Securities will be
convertible into the ordinary shares, par value U.S.$0.133 per share
(“Underlying Shares”) of the Company in accordance with the terms of the
Indenture; the Underlying Shares issuable from time to time upon
conversion of such Offered Securities have been duly authorized and
reserved for issuance upon such conversion and, when issued upon such
conversion, will be validly issued, fully paid and nonassessable; the
outstanding Underlying Shares have been duly authorized and validly
issued, are fully paid and nonassessable and conform to the description
thereof contained in the Offering Document; and the stockholders of the
Company have no preemptive rights with respect to the Offered Securities
or the Underlying Shares.

		
	 	     (f) The authorized share capital of the Company conforms as to legal
matters to the description thereof contained in the Offering Circular.

		
	 	     (g) Except for the Investors’ Rights Agreement dated as of October
19, 1999, and the registration rights agreement entered into in
connection with the Company’s acquisition of Sun Media Group dated as of
September 12, 2001, or as disclosed in the Offering Document, there are
no contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the shares registered pursuant to the Registration
Statement, except such as have been validly waived in writing in
connection with the offering hereby and except as described in the
Registration Statement.

		
	 	     (h) No consent, approval, authorization, or order of, or filing
with, any United States, Cayman Islands or PRC governmental agency or
body or any court is required for the consummation of the transactions
contemplated by this Agreement, the Indenture and the Registration Rights
Agreement in connection with the issuance and sale of the Offered
Securities by the Company except as such may be required by the
securities or Blue Sky laws of various states in connection with the
offering of the Offered Securities, or for the order of the Commission
declaring the Exchange Offer Registration Statement or the Shelf
Registration Statement (each as defined in the Registration Rights
Agreement) effective.

		
	 	     (i) Except as disclosed in the Offering Document, under current laws
and regulations of the Cayman Islands and any political subdivision
thereof, all interest, principal, premium, if any, and other payments due
or made on the Offered Securities and dividends and other distributions
declared and payable on the Underlying Shares issuable from time to time
upon conversion thereof and the Underlying Shares issuable from time to
time upon conversion thereof may be paid by the Company to the holder
thereof in United States dollars or Cayman Islands dollar that may be
converted into foreign currency and freely transferred out of the Cayman
Islands and all such payments made to holders thereof who are
non-residents of the Cayman Islands will not be subject to income,
withholding or other taxes under laws and regulations of the Cayman
Islands or any political subdivision or taxing authority thereof or
therein and will otherwise be free and clear of any other tax, duty,
withholding or deduction in the Cayman Islands or any political
subdivision or taxing authority thereof or therein and without the
necessity of obtaining any governmental

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	 	authorization in the Cayman Islands or any political subdivision or
taxing authority thereof or therein.

		
	 	     (j) Neither the Company nor any of its subsidiaries is (i) in
violation of its charter or by-laws or (ii) in default in the performance
or observance of any obligation, agreement or instrument to which the
Company or any such subsidiary is bound or to which any of the properties
of the Company or any such subsidiary is subject, except in the case of
clause (ii), to the extent such default would not have a Material Adverse
Effect.

		
	 	     (k) Each of (A) the execution, delivery and performance of the
Indenture and this Agreement and the Registration Rights Agreement, (B)
the issuance and sale of the Offered Securities and compliance with the
terms and provisions thereof and (C) the issuance and delivery from time
to time of the Underlying Shares by the Company upon conversion of the
Offered Securities in accordance with the terms of the Offered Securities
and the provisions of the Indenture will not result in a breach or
violation of any of the terms and provisions of, or constitute a default
under, any statute, any rule, regulation or order of any governmental
agency or body or any court, domestic or foreign, having jurisdiction
over the Company or any subsidiary of the Company or any of their
properties, or any agreement or instrument to which the Company or any
such subsidiary is a party or by which the Company or any such subsidiary
is bound or to which any of the properties of the Company or any such
subsidiary is subject which, in each case, is material to the Company and
its subsidiaries taken as a whole, or the charter or by-laws of the
Company or any such subsidiary, and the Company has full power and
authority to authorize, issue and sell the Offered Securities.

		
	 	     (l) This Agreement and the Registration Rights Agreement have been
duly authorized, executed and delivered by the Company.

		
	 	     (m) Except as disclosed in the Offering Document, the Company and
its subsidiaries have good and marketable title to all real properties
and all other properties and assets owned by them, in each case free from
liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or to be made thereof
by them; and except as disclosed in the Offering Document, the Company
and its subsidiaries hold any leased real or personal property under
valid and enforceable leases with no exceptions that would materially
interfere with the use made or to be made thereof by them.

		
	 	     (n) Except as set forth in the Offering Document, the Company and
its subsidiaries possess adequate certificates, authorizations or permits
issued by appropriate governmental agencies or bodies, including all
necessary licenses, consents, authorizations, sanctions, permissions,
declarations, approvals, orders, registrations, clearances, certificates,
permits, report to and filings (hereinafter referred to as “PRC
Governmental Authorizations”), with any PRC court (whether at the
national or local level) or PRC governmental agency or body or any stock
exchange authority or any other regulatory body (including, without
limitation, the Ministry of Information Industry, State Administration of
Industry and Commerce, the Ministry of Commerce, China Securities
Regulatory Commission) having jurisdiction over the Company and the PRC
Subsidiaries (as defined herein) (hereinafter referred to as “PRC
Governmental Agency”), for the Company and its subsidiaries necessary to
conduct the business now operated by them and have not received any
notice of proceedings relating to the revocation or modification of any
such certificate, authority or permit that, if determined adversely to
the Company or any of its subsidiaries, would individually or in the
aggregate have a Material Adverse Effect.

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	 	     (o) Except as disclosed in the Offering Document, the Company and
each of the subsidiaries of the Company listed in Schedule C hereto (each
a “PRC Subsidiary”) are in compliance with all regulatory requirements
imposed by PRC Governmental Agencies pertaining to or relating to the
business conducted in the PRC by the Company through the PRC
Subsidiaries, including, but not limited to, licensing requirements
relating to online advertising; and the Company and each of the PRC
Subsidiaries has applied for all permits or licenses to comply with
regulatory requirements to become effective imminently including, but not
limited to, the “Internet Culture Regulation Provisional Rules and
Decrees”.

		
	 	     (p) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company upon due inquiry,
is imminent that might have a Material Adverse Effect.

		
	 	     (q) The Company and its subsidiaries own, possess or can acquire on
reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and
other intellectual property (collectively, “intellectual property
rights”) necessary to conduct the business now operated by them, and have
not received any notice of infringement of or conflict with asserted
rights of others with respect to any intellectual property rights that,
if determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.

		
	 	     (r) Except as disclosed in the Offering Document, there are no
pending legal or governmental actions, suits or proceedings against or
affecting the Company, any of its subsidiaries or any of their respective
properties that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material
Adverse Effect, or would materially and adversely affect the ability of
the Company to perform its obligations under the Indenture or this
Agreement or the Registration Rights Agreement or which are otherwise
material in the context of the sale of the Offered Securities; and no
such actions, suits or proceedings are, to the Company’s knowledge upon
due inquiry, threatened or contemplated.

		
	 	     (s) The financial statements included in or incorporated by
reference in the Offering Document, together with all related schedules
and notes, present fairly the financial position of the Company and its
consolidated subsidiaries as of the dates shown and their results of
operations and cash flows for the periods shown, and, except as otherwise
disclosed in the Offering Document, such financial statements have been
prepared in conformity with the generally accepted accounting principles
in the United States applied on a consistent basis, except where
disclosed therein; all non-GAAP financial information included or
incorporated by reference in the Offering Document complies with the
requirements of Regulation G and Item 10 of Regulation S-K.

		
	 	     (t) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (A) transactions are
executed in accordance with management’s general or specific
authorization; (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles or any other criteria applicable to such statements
and to maintain accountability for assets; (C) access to assets is
permitted only in accordance with management’s general or specific
authorization; and (D) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences. The Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-14 under the
Exchange Act) that are

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	 	effective in ensuring that information required to be disclosed by
the Company in the reports that it will file or submit under the Exchange
Act is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms of the Commission, including,
without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports that
it will file or submit under the Exchange Act is accumulated and
communicated to the Company’s management, including its principal
executive officer or officers and its principal financial officer or
officers, as appropriate to allow timely decisions regarding required
disclosure.

		
	 	     (u) Except as disclosed in the Offering Document, since the date of
the latest audited financial statements included in the Offering Document
there has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of
the Company and its subsidiaries taken as a whole, and, except as
disclosed in or contemplated by the Offering Document, there has been no
dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.

		
	 	     (v) The Company is subject to the reporting requirements of either
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 and
files reports with the Commission on the Electronic Data Gathering,
Analysis, and Retrieval (EDGAR) system.

		
	 	     (w) The Company is not and, after giving effect to the offering and
sale of the Offered Securities and the application of the proceeds
thereof as described in the Offering Document, will not be an “investment
company” as defined in the United States Investment Company Act of 1940
(the “Investment Company Act”).

		
	 	     (x) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Offered Securities are listed
on any national securities exchange registered under Section 6 of the
Exchange Act or quoted in a U.S. automated inter-dealer quotation system.

		
	 	     (y) The offer and sale of the Offered Securities in the manner
contemplated by this Agreement will be exempt from the registration
requirements of the Securities Act by reason of Section 4(2) thereof and
Regulation S thereunder will be exempt from the registration requirements
of the Securities Act by reason of Regulation S thereunder; and subject
to the accuracy of the Purchasers’ representations, warranties and
covenants contained herein, it is not necessary to qualify an indenture
in respect of the Offered Securities under the United States Trust
Indenture Act of 1939, as amended (the “Trust Indenture Act”).

		
	 	     (z) The entering into and performance or enforcement of this
Agreement in accordance with its terms will not subject the Purchasers to
a requirement to be licensed or otherwise qualified to do business in the
PRC, nor will the Purchasers be deemed to be resident, domiciled,
carrying on business through an establishment or place in the PRC or in
breach of any laws or regulations in the PRC by reason of the entering
into, performance or enforcement of this Agreement.

		
	 	     (aa) All local and national PRC governmental tax waivers and other
local and national PRC tax relief accorded to the PRC Subsidiaries are
valid, binding and enforceable and do not violate any provision of any
law or statute or any order rule regulation of any local or national PRC

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	 	Governmental Agency, and each of the subsidiaries of the Company has
paid all taxes in each jurisdiction in which it conducts business, which
it is required to have paid.

		
	 	     (bb) None of the Company, any of its subsidiaries or its officers,
directors, supervisors, managers, agents or employees has, directly or
indirectly, (A) made or authorized any contribution, payment or gift of
funds or property to any official, employee or agent of any governmental
agency, authority or instrumentality in the Cayman Islands, the PRC or
any other jurisdiction or (B) made any contribution to any candidate for
public office, in either case, where either the payment or the purpose of
such contribution, payment or gift was or is prohibited under any
applicable law, rule or regulation of any locality.

		
	 	     (cc) Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf (i) has, within the six-month period prior
to the date hereof, offered or sold in the United States or to any U.S.
person (as such terms are defined in Regulation S under the Securities
Act) the Offered Securities or any security of the same class or series
as the Offered Securities or (ii) has offered or will offer or sell the
Offered Securities (A) in the United States by means of any form of
general solicitation or general advertising within the meaning of Rule
502(c) under the Securities Act or (B) with respect to any such
securities sold in reliance on Rule 903 of Regulation S (“Regulation S”)
under the Securities Act, by means of any directed selling efforts within
the meaning of Rule 902(c) of Regulation S. The Company, its affiliates
and any person acting on its or their behalf have complied and will
comply with the offering restrictions requirement of Regulation S. The
Company has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Offered Securities
except for this Agreement.

		
	 	     (dd) There is no “substantial U.S. market interest” as defined in
Rule 902(n) of Regulation S in the Company’s debt securities.

     3.     Purchase, Sale and Delivery of Offered Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Purchasers, and the Purchasers agree, severally and not jointly, to purchase
from the Company, at a purchase price of 97.5% of the principal amount thereof,
the respective principal amounts of Firm Securities set forth opposite the
names of the several Purchasers in Schedule A hereto.

     The Company will deliver against payment of the purchase price the Firm
Securities in the form of one or more permanent global Securities in definitive
form (the “Firm Global Securities”) deposited with the Trustee as custodian for
The Depository Trust Company (“DTC”) and registered in the name of Cede & Co.,
as nominee for DTC. Interests in any permanent global Securities will be held
only in book-entry form through DTC, except in the limited circumstances
described in the Offering Document. Payment for the Firm Securities shall be
made by the Purchasers in Federal (same day) funds by official check or checks
or wire transfer to an account at a bank acceptable to CSFB drawn to the order
of the Company at the office of Shearman & Sterling LLP,
12th Floor, Gloucester
Tower, The Landmark, 11 Pedder Street, Central, Hong Kong at 9:00 A.M. (New
York time), on July 7, 2003, or at such other time not later than seven full
business days thereafter as CSFB and the Company determine, such time being
herein referred to as the “First Closing Date”, against delivery to the Trustee
as custodian for DTC of the Firm Global Securities representing all of the Firm
Securities. The Firm Global Securities will be made available for checking at
the above office of Shearman & Sterling LLP at least 24 hours prior to the
First Closing Date.

     In addition, upon written notice from CSFB given to the Company from time
to time not more than 30 days subsequent to the date of this Agreement, the
Purchasers may purchase all or less than all of the

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Optional Securities at the purchase price per principal amount of Offered
Securities to be paid for the Firm Securities. The Company agrees to sell to
the Purchasers the principal amount of Optional Securities specified in such
notice and the Purchasers agree, severally and not jointly, to purchase such
Optional Securities. Such Optional Securities shall be purchased from the
Company for the account of each Purchaser in the same proportion as the
principal amount of Firm Securities set forth opposite such Purchaser’s name in
Schedule A hereto bears to the total principal amount of Firm Securities
(subject to adjustment by CSFB to eliminate fractions). No Optional Securities
shall be sold or delivered unless the Firm Securities previously have been, or
simultaneously are, sold and delivered. The right to purchase the Optional
Securities or any portion thereof may be exercised from time to time and to the
extent not previously exercised may be surrendered and terminated at any time
upon notice by CSFB to the Company.

     Each time for the delivery of and payment for the Optional Securities,
being herein referred to as the “Optional Closing Date”, which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a “Closing Date”), shall be determined by CSFB
on behalf of the several Purchasers but shall not be later than seven full
business days after written notice of election to purchase Optional Securities
is given.

     The Company will deliver against payment of the purchase price the
Optional Securities being purchased on each Optional Closing Date in the form
of one or more permanent global Securities in definitive form (each, an
“Optional Global Security”) deposited with the Trustee as custodian for DTC and
registered in the name of Cede & Co., as nominee for DTC. Payment for such
Optional Securities shall be made by the Purchasers in Federal (same day) funds
by official check or checks or wire transfer to an account at a bank acceptable
to CSFB drawn to the order of the Company at the office of Shearman & Sterling
LLP, 12th Floor, Gloucester Tower, The Landmark, 11 Pedder Street, Central,
Hong Kong, against delivery to the Trustee as custodian for DTC of the Optional
Global Securities representing all of the Optional Securities being purchased
on such Optional Closing Date.

     4.     Representations by Purchasers; Resale by Purchasers.

		
	 	     (a) Each Purchaser severally represents and warrants to the Company
that it is an “accredited investor” within the meaning of Regulation D
under the Securities Act.

		
	 	     (b) Each Purchaser severally acknowledges that the Offered
Securities have not been registered under the Securities Act and may not
be offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except in accordance with Regulation S or
pursuant to an exemption from the registration requirements of the
Securities Act. Each Purchaser severally represents and agrees that it
has offered and sold the Offered Securities, and will offer and sell the
Offered Securities only in accordance with Rule 903 or Rule 144A under
the Securities Act (“Rule 144A”). Accordingly, neither such Purchaser
nor its affiliates, nor any persons acting on its or their behalf, have
engaged or will engage in any directed selling efforts with respect to
the Offered Securities and such Purchaser, its affiliates and all persons
acting on its or their behalf have complied and will comply with the
offering restrictions requirement of Regulation S and Rule 144A.

		
	 	     (c) Each Purchaser severally agrees that it and each of its
affiliates has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Offered Securities
except for any such arrangements with the other Purchasers or affiliates
of the other Purchasers or with the prior written consent of the Company.

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	 	     (d) Each Purchaser severally agrees that it and each of its
affiliates will not offer or sell the Offered Securities in the United
States by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act,
including, but not limited to (i) any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media
or broadcast over television or radio, or (ii) any seminar or meeting
whose attendees have been invited by any general solicitation or general
advertising. Each Purchaser severally agrees, with respect to resales
made in reliance on Rule 144A of any of the Offered Securities, to
deliver either with the confirmation of such resale or otherwise prior to
settlement of such resale a notice to the effect that the resale of such
Offered Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A.

		
	 	     (e) Each of Purchaser severally agrees that (i) it has not offered
or sold and will not offer or sell or permit to be offered or sold in
Hong Kong, by means of any document, any notes, other than to persons
whose ordinary business is to buy or sell shares or debentures, whether
as principal or agent, or in circumstances which do not constitute an
offer to the public within the meaning of the Companies Ordinance (Cap.
32) of Hong Kong; and (ii) unless it is a person permitted to do so under
the securities laws of Hong Kong, it has not issued or had in its
possession for the purpose of issue, and will not issue or have in its
possession for the purpose of issue, any advertisement, document or
invitation, whether in Hong Kong or elsewhere, which is or contains an
invitation to the public to enter into or offer to enter into an
agreement to acquire, dispose of, subscribe for or underwrite the Offered
Securities (except if permitted to do so under the securities laws of
Hong Kong) other than with respect to Offered Securities intended to be
disposed of to persons outside Hong Kong or only to “professional
investors” within the meaning of the Securities and Futures Ordinance
(Cap. 571) of Hong Kong and any rules made thereunder.

		
	 	     (f) Each Purchaser severally represents and agrees that (i) it has
not offered or sold, and, prior to the expiry of a period of six months
from the closing date, will not offer or sell any Offered Securities to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments
(as principal or agent) for the purposes of their businesses or otherwise
in circumstances which have not resulted and will not result in an offer
to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995 (as amended); (ii) it has only
communicated or caused to be communicated and will only communicate or
cause to be communicated any invitation or inducement to engage in
investment activity (within the meaning of section 21 of the Financial
Services and Markets Act 2000 (the “FSMA”)) received by it in connection
with the issue or sale of any Offered Securities in circumstances in
which section 21(1) of the FSMA does not apply to the Company; and (iii)
it has complied with and will comply with, all applicable provisions of
the FSMA with respect to anything done by it in relation to the Offered
Securities in, from or otherwise involving the United Kingdom.

     5.     Certain Agreements of the Company. The Company agrees with the several
Purchasers that:

		
	 	     (a) The Company will advise CSFB promptly of any proposal to amend
or supplement the Offering Document and will not effect such amendment or
supplementation without CSFB’s consent. If, at any time prior to the
completion of the resale of the Offered Securities by the Purchasers, any
event occurs as a result of which the Offering Document as then amended
or supplemented would include an untrue statement of a material fact or
omit to state any material fact

10

 

		
	 	necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, or if it is
necessary at any such time to amend or supplement the Offering Document
to comply with any applicable law, the Company promptly will notify CSFB
of such event and promptly will prepare, at its own expense, an amendment
or supplement which will correct such statement or omission or effect
such compliance. Neither CSFB’s consent to, nor the Purchasers’ delivery
to offerees or investors of, any such amendment or supplement shall
constitute a waiver of any of the conditions set forth in Section 6.

		
	 	     (b) The Company will furnish to CSFB copies of any preliminary
offering circular, the Offering Document and all amendments and
supplements to such documents, in each case as soon as available and in
such quantities as CSFB requests, and the Company will furnish to CSFB on
the date hereof one copy of the Offering Document signed by a duly
authorized officer of the Company. At any time when the Company is not
subject to Section 13 or 15(d) of the Exchange Act and is not exempt from
reporting pursuant to Rule 12g3-2(b) under the Exchange Act, the Company
will promptly furnish or cause to be furnished to CSFB and, upon request
of holders and prospective purchasers of the Offered Securities, to such
holders and purchasers, copies of the information required to be
delivered to holders and prospective purchasers of the Offered Securities
pursuant to Rule 144A(d)(4) under the Securities Act (or any successor
provision thereto) in order to permit compliance with Rule 144A in
connection with resales by such holders of the Offered Securities. The
Company will pay the expenses of printing and distributing to the
Purchasers all such documents.

		
	 	     (c) The Company will arrange for the qualification of the Offered
Securities for sale and the determination of their eligibility for
investment under the laws of such jurisdictions in the United States and
Canada as CSFB designates and will continue such qualifications in effect
so long as required for the resale of the Offered Securities by the
Purchasers, provided that the Company will not be required to qualify as
a foreign corporation or to file a general consent to service of process
in any such state.

		
	 	     (d) During the period of two years after the later of the First
Closing Date and the last Optional Closing Date, the Company will, upon
request, furnish to CSFB, each of the other Purchasers and any holder of
Offered Securities a copy of the restrictions on transfer applicable to
the Offered Securities.

		
	 	     (e) During the period of two years after the later of the First
Closing Date and the last Optional Closing Date, the Company will not,
and will not permit any of its affiliates (as defined in Rule 144 under
the Securities Act) to, resell any of the Offered Securities that have
been reacquired by any of them; provided, however, that this covenant
shall not apply to any of the Offered Securities that have been
reacquired by any of the affiliates of the Company and that are sold by
any of them pursuant to an effective Registration Statement.

		
	 	     (f) During the period of two years after the later of the First
Closing Date and the last Optional Closing Date, the Company will not be
or become, an open-end investment company, unit investment trust or
face-amount certificate company that is or is required to be registered
under Section 8 of the Investment Company Act.

		
	 	     (g) The Company will pay all expenses (together with VAT where
applicable) incidental to the performance of its obligations under this
Agreement, the Indenture and the Registration Rights Agreement, including
(i) the fees and expenses of the Trustee and its professional advisers;
(ii) all expenses in connection with the execution, issue,
authentication,

11

 

		
	 	packaging and initial delivery of the Offered Securities and, as
applicable, the Exchange Securities (as defined in the Registration
Rights Agreement), the preparation and printing of this Agreement, the
Registration Rights Agreement, the Offered Securities, the Indenture,
the Offering Document and amendments and supplements thereto, and any
other document relating to the issuance, offer, sale and delivery of the
Offered Securities and as applicable, the Exchange Securities; (iii) the
cost of qualifying the Offered Securities for trading in The
PortalSM
Market (“PORTAL”) and any expenses incidental thereto; (iv) the cost of
any advertising approved by the Company in connection with the issue of
the Offered Securities; (v) for any expenses (including fees and
disbursements of counsel) incurred in connection with qualification of
the Offered Securities for sale under the laws of such jurisdictions in
the United States and Canada as CSFB designates and the printing of
memoranda relating thereto, and (vi) for expenses incurred in
distributing preliminary offering circulars and the Offering Document
(including any amendments and supplements thereto) to the Purchasers,
except that CSFB shall reimburse the Company, up to 0.25% of the gross
proceeds of the Offered Securities, for reasonable out of pocket expenses
incurred by the Company as set forth above. It being understood,
however, that except as provided in this Section 5, each Purchaser will
pay all of its costs and expenses, including fees and disbursements of
counsel in connection with any offers it may make.

		
	 	     (h) In connection with the offering, until CSFB shall have notified
the Company and the other Purchasers of the completion of the resale of
the Offered Securities, neither the Company nor any of its affiliates has
or will, either alone or with one or more other persons, bid for or
purchase for any account in which it or any of its affiliates has a
beneficial interest any Offered Securities or attempt to induce any
person to purchase any Offered Securities; and neither it nor any of its
affiliates will make bids or purchases for the purpose of creating
actual, or apparent, active trading in, or of raising the price of, the
Offered Securities.

		
	 	     (i) For a period of 90 days after the date of the initial offering
of the Offered Securities by the Purchasers, the Company will not offer,
sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under
the Securities Act relating to, any United States dollar-denominated debt
securities issued or guaranteed by the Company and having a maturity of
more than one year from the date of issue, or any ordinary shares, par
value U.S.$0.133 per share, of the Company (“Ordinary Shares”) or
securities convertible into or exchangeable or exercisable for Ordinary
Shares or warrants or other rights to purchase Ordinary Shares, or
publicly disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of CSFB. The
foregoing sentence shall not apply to (A) the sale or conversion of
Offered Securities under this Agreement, (B) the issuance by the Company
of any Ordinary Shares upon the exercise of an option or warrant or the
conversion of a security, in each case, outstanding on the date hereof,
(C) the grant by the Company of options to directors, employees,
consultants or other service providers of the Company or its Subsidiaries
pursuant to a plan in effect on the date hereof, (D) any Ordinary Shares
or other rights to acquire capital stock of the Company issued pursuant
to equipment financing, lease financing or working capital financing
activities entered into in the ordinary course of business, or (E) any
Ordinary Shares or other rights to acquire capital stock of the Company
issued in connection with the acquisition of complementary businesses or
technologies by merger or acquisition or in connection with partnering,
license or similar transactions; provided, however, that, in the case of
(D) and (E), any person acquiring any Ordinary Shares or other rights to
acquire capital stock of the Company is otherwise subject to a similar
lock-up agreement for 90 days. The Company will not at any time offer,
sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any securities under circumstances where such offer, sale,
pledge, contract or disposition would cause the

12

 

		
	 	exemption afforded by Section 4(2) of the Securities Act or the safe
harbor of Regulation S thereunder to cease to be applicable to the offer
and sale of the Offered Securities.

		
	 	     (j) The Company will indemnify and hold harmless the Purchasers
against any documentary, stamp or similar issuance tax, including any
interest and penalties, on the creation, issuance and sale of the Offered
Securities and on the execution and delivery of this Agreement. All
payments to be made by the Company hereunder shall be made without
withholding or deduction for or on account of any present or future
taxes, duties or governmental charges whatsoever within the Cayman
Islands, Hong Kong or the PRC unless the Company is compelled by law to
deduct or withhold such taxes, duties or charges. In that event, the
Company shall pay such additional amounts as may be necessary in order
that the net amounts received after such withholding or deduction shall
equal the amounts that would have been received if no withholding or
deduction had been made.

     6.     Conditions of the Obligations of the Purchasers. The obligations of
the several Purchasers to purchase and pay for the Firm Securities on the First
Closing Date and for the Optional Securities on each Optional Closing Date will
be subject to the accuracy of the representations and warranties on the part of
the Company herein, to the accuracy of the statements of officers of the
Company made pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional conditions
precedent:

		
	 	     (a) The Purchasers shall have received a letter, dated the date of
this Agreement and the Closing Date, of PricewaterhouseCoopers in the
form attached to this Agreement as Schedule B.

		
	 	     (b) Subsequent to the execution and delivery of this Agreement,
there shall not have occurred (i) any change, or any development or event
involving a prospective change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as one enterprise which, in the reasonable judgment of
CSFB, is material and adverse and makes it impractical or inadvisable to
proceed with completion of the offering or the sale of and payment for
the Offered Securities; (ii) any downgrading in the rating of any debt
securities of the Company by any “nationally recognized statistical
rating organization” (as defined for purposes of Rule 436(g) under the
Securities Act), or any public announcement that any such organization
has under surveillance or review its rating of any debt securities of the
Company (other than an announcement with positive implications of a
possible upgrading, and no implication of a possible downgrading, of such
rating)or any announcement that the Company has been placed on negative
outlook; (iii) any change in U.S., Cayman Islands, PRC or international
financial, political or economic conditions or currency exchange rates or
exchange controls as would, in the reasonable judgment of CSFB, be likely
to prejudice materially the success of the proposed issue, sale or
distribution of the Offered Securities, whether in the primary market or
in respect of dealings in the secondary market, (iv) any material
suspension or material limitation of trading in securities generally on
the New York Stock Exchange, Nasdaq, or any setting of minimum prices for
trading on such exchange; (v) or any suspension of trading of any
securities of the Company on any exchange or in the over-the-counter
market; (vi) any banking moratorium declared by U.S. Federal or New York
authorities; (vii) any major disruption of settlements of securities or
clearance services in the United States; (viii) any attack on, outbreak
or escalation of hostilities or act of terrorism involving the United
States, Cayman Islands or the PRC, any declaration of war by Congress or
any other national or international calamity or emergency if, in the
reasonable judgment of CSFB, the effect of any such attack, outbreak,
escalation, act, declaration, calamity or emergency makes it impractical
or inadvisable to proceed with completion of the offering or sale of and
payment for the Offered Securities.

13

 

		
	 	     (c) The Purchasers shall have received an opinion, dated such
Closing Date of Maples and Calder Asia, Cayman Islands counsel for the
Company that:

		
	 	     (i) The Company has been duly incorporated and is validly
existing as an exempted company with limited liability for an
unlimited duration under the laws of the Cayman Islands with full
corporate power and authority to own its property and assets and to
carry on its business in accordance with its Memorandum and
Articles of Association and to enter into and execute and perform
its obligations under this Agreement;

		
	 	     (ii) The Company has an authorised capital as set forth in the
Offering Circular, and all of the issued Shares in the capital of
the Company (including the Shares being issued and delivered from
time to time upon conversion when issued, entered on the Register
of Members of the Company and delivered in accordance with the
terms of the Purchase Agreement and the Indenture) have been duly
and validly authorised and issued, are or, upon entry as fully paid
on the Register of members of the Company following payment of the
conversion price, will be, fully paid and non-assessable and
conform to the description thereof contained in the Offering
Circular;

		
	 	     (iii) The execution and delivery of this Agreement, the
Indenture and the Registration Rights Agreement by the Company and
the performance of its obligations thereunder have been duly
authorised and approved by all necessary corporate action of the
Company and do not violate, conflict with or result in a breach of
any of the terms or provisions of its memorandum and articles of
association or any law, public rule or regulation applicable to the
Company in the Cayman Islands currently in force and do not
violate, conflict with or result in a breach of any existing order
or decree of any governmental authority or agency or any official
body in the Cayman Islands;

		
	 	     (iv) This Agreement, the Indenture and the Registration Rights
Agreement, when executed and delivered for and on behalf of the
Company, will constitute legal, valid and binding obligations of
the Company enforceable in the Cayman Islands in accordance with
its terms except and in so far as such enforcement may be limited
as hereinafter set forth;

		
	 	     (v) No authorisations, consents, orders, permissions or
approvals are required from any governmental authorities or
agencies or other official bodies in the Cayman Islands and no
notice to or other filing with or action by any Cayman Islands
governmental authority or regulatory body is required in connection
with:

	 	 	 	 	 
	 	 	
(A)
	 	the execution and delivery of this
Agreement, the Indenture and the Registration Rights
Agreement;
	 	 	 	 	 
	 	 	
(B)
	 	the performance of any obligation
under this Agreement, the Indenture and the Registration
Rights Agreement; and
	 	 	 	 	 
	 	 	
(C)
	 	the payment of any amount under this
Agreement, the Indenture and the Registration Rights
Agreement.

14

 

		
	 	     (vi) It is not necessary to ensure the legality, validity,
enforceability or admissibility in evidence of this Agreement that
any document be filed, recorded or enrolled with any governmental
department, agency or other authority in the Cayman Islands;

		
	 	     (vii) The statements in the Offering Circular under the
captions “Enforceability of Civil Liabilities”, “Description of
Share Capital – Differences in Corporate Law”, “Certain Income Tax
Considerations – Cayman Islands Taxation” insofar as such
statements constitute summaries of the legal matters, documents or
proceedings referred to therein, in each case to the extent, and
only to the extent, governed by the laws of the Cayman Islands,
fairly present the information and summarise the matters referred
to therein;

		
	 	     (viii) The Company is in good standing with the Registrar of
Companies in the Cayman Islands;

		
	 	     (ix) No stamp duties or other similar taxes or charges are
payable under the laws of the Cayman Islands in respect of (i) the
execution or delivery of the Purchase Agreement, the Indenture and
the Registration Rights Agreement or the performance or enforcement
of the terms thereof by any of the Purchasers, (ii) the issuance
and sale of the Offered Securities by the Company; (iii) the
issuance and delivery of the Shares upon the conversion of the
Offered Securities or (iv) the sale and delivery outside of the
Cayman Islands by the Purchasers of the Offered Securities to the
subsequent purchasers thereof, unless they are executed in or
thereafter brought within the jurisdiction of the Cayman Islands
(e.g. for the purposes of enforcement);

		
	 	     (x) There are currently no taxes or other charges or
deductions payable (by withholding or otherwise) to the Cayman
Islands Government or any taxing authority thereof on or by virtue
of (i) the execution, delivery or enforcement of this Agreement,
the Indenture and the Registration Rights Agreement, (ii) any
payment of any nature to be made by the Company under any of this
Agreement, the Indenture and the Registration Rights Agreement
(iii) the issuance and sale of the Offered Securities by the
Company, (iv) the issuance and delivery of the Shares upon the
conversion of the Offered Securities or (v) the sale and delivery
outside of the Cayman Islands by the Initial Purchasers of the
Offered Securities to the initial purchasers thereof. The Cayman
Islands currently have no income, corporate or capital gains tax
and no estate duty, inheritance tax or gift tax;

		
	 	     (xi) The choice of the laws of New York to govern this
Agreement, the Indenture and the Registration Rights Agreement will
be upheld as a valid choice of law under the laws of the Cayman
Islands and the courts of the Cayman Islands would uphold such
choice of law in a suit on this Agreement, the Indenture and the
Registration Rights Agreement brought in the courts of the Cayman
Islands, assuming it is so pleaded. An action against the Company
in the Cayman Islands under this Agreement, the Indenture and the
Registration Rights Agreement could be instituted in the Grand
Court, which has jurisdiction over the Company, without first
having to obtain a judgment in respect of this Agreement, the
Indenture and the Registration Rights Agreement in a court of New
York or any other relevant jurisdiction. In the event of any
proceedings being brought in the Cayman Islands courts in respect
of a monetary obligation expressed to be payable in a currency
other than Cayman Islands dollars, a Cayman Islands court would
give judgment

15

 

		
	 	expressed as an order to pay such currency or its Cayman
Islands dollar equivalent at the time of payment or enforcement of
the judgment;

		
	 	     (xii) The submission to the jurisdiction of the courts sitting
in New York City, and the appointment of an agent to accept service
of process in such jurisdiction, is legal, valid and binding on the
Company;

		
	 	     (xiii) Although there is no statutory enforcement in the
Cayman Islands of judgments obtained in New York, the courts of the
Cayman Islands will recognise and enforce a judgment of a foreign
court of competent jurisdiction in respect of any legal suit or
proceeding arising out of or relating to this Agreement, the
Indenture and the Registration Rights Agreement without retrial on
the merits based on the principle that a judgment of a competent
foreign court imposes upon the judgment debtor an obligation to pay
the sum for which judgment has been given provided that such
judgment is final and conclusive, for a liquidated sum, not in
respect of taxes or a fine or penalty, is not inconsistent with a
Cayman Islands judgment in respect of the same matter, and was not
obtained in a manner and is not of a kind the enforcement of which
is contrary to the public policy of the Cayman Islands. A Cayman
Islands court may stay proceedings if concurrent proceedings are
being brought elsewhere. A foreign judgment may be final and
conclusive even if subject to appeal. However, if appealable, a
Cayman Islands court may stay enforcement until such appeal has
been heard;

		
	 	     (xiv) Based on such counsel’s review of the Register of Writs
and other Originating Process for the period from 9 July 1997,
there are no actions pending against the Company in the Grand Court
of the Cayman Islands on July 4, 2003. A search at the Companies
Registry in the Cayman Islands would not reveal any order or
resolution for the winding up of the Company because under Cayman
Islands law the records kept by the Registrar of Companies are not
documents of public record. The enquiries referred to above which
such counsel has made at the Grand Court of the Cayman Islands have
revealed no record of the presentation of any winding up petition
in respect of the Company. Such counsel assumes that there has
been no change in this position since the date on which the
enquiries were made; and

		
	 	     (xv) There is no exchange control legislation under Cayman
Islands law and accordingly there are no exchange control
regulations imposed under Cayman Islands law.

		
	 	     (d) The Purchasers shall have received an opinion, dated such
Closing Date of Jun He Law Offices, PRC counsel for the Company, that:

		
	 	     (i) Each of the PRC Subsidiaries has been duly incorporated
and is validly existing as a limited liability company under the
laws of the PRC with legal right, power and authority (corporate or
otherwise), as authorized by the PRC government, to own, use, lease
and operate its assets and, to the best of such counsel’s knowledge
after due inquiries under current circumstance, to conduct its
business in connection with online advertising, mobile value-added
services (except for the provision of trans-provincial mobile
value-added services may be required the trans-provincial value
added telecom license issued by the Ministry of Information
Industry which none of the PRC Subsidiaries has obtained) and
online games (the provision of which may be subject to the approval
of the Ministry of Culture in accordance with the Interim
Regulations on the Management of the Culture of the Internet, which
will come into effective as of July 1, 2003) (for purposes of such

16

 

		
	 	opinion, online advertising, mobile value-added services and
online games collectively referred to hereinafter as the “Major Business”) in the manner as described in the Offering Circular and
is duly qualified to transact business under PRC law and
regulations. The Articles of Association, the business license and
other constituent documents of each PRC Subsidiary comply with the
requirements of applicable PRC law and regulations and are in full
force and effect;

		
	 	     (ii) All equity interest of each of the material PRC
Subsidiaries listed in Schedule D hereto (each a “Material PRC
Subsidiary”) is fully paid and legally owned by the entities or
individuals, as the case may be, listed in Schedule C attached to
such counsel’s opinion (the “Shareholders”), with such counsel’s
proper verification, free and clear of all liens, encumbrances,
equities or claims except for the pledges as described in Schedule
D to such counsel’s opinion; each Material PRC Subsidiary has
obtained all PRC Governmental Authorizations which are required
under PRC law and regulations to be obtained from governmental
agencies for the ownership by each of the Shareholders of
its/his/her equity interest in such Material PRC Subsidiary, and no
other PRC Governmental Authorization is required under PRC law and
regulations for such ownership;

		
	 	     (iii) Based on such counsel’s general review of the title
documents and without independent check or verification thereof,
each Material PRC Subsidiary has valid title to, or valid leasehold
interests in, all of their material real property and valid title
to all material personal property owned by it, to such counsel’s
knowledge and without independent check or verification thereof, in
each case free and clear of all liens, encumbrances, third party
rights or interest, defects or any other restrictions except such
as are described in the Offering Circular or such as do not
materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by such
Material PRC Subsidiary; subject to such counsel having received
the asset list of each subsidiary and receipts to evidence such
ownership and any real property and building held under lease by
each Material PRC Subsidiary is held by it under valid, subsisting
and enforceable leases in full force and effect with such
exceptions as are not material and do not interfere with the use
made or proposed to be made of such property and buildings by such
Material PRC Subsidiary and no material default (or event which
with notice or lapse of time, or both, would constitute such as
default) by such Material PRC Subsidiary has occurred and is
continuing under any such lease;

		
	 	     (iv) Based upon the representations and warranties of the
Company and the PRC Subsidiaries, there are no legal, arbitral or
governmental proceedings current or pending or threatened or likely
to be threatened in the PRC to which the Company or any of the
Material PRC Subsidiaries is a party or of which any property or
asset of the Company or any of the Material PRC Subsidiaries is
the subject which, if determined adversely to the Company or such
Material PRC Subsidiary, as the case may be, would individually or
in the aggregate have a material adverse effect on the general
affairs, management, business condition (financial or otherwise),
assets, liabilities, current or future combined financial position,
shareholders’ equity or results of operations of the Company or
such Material PRC Subsidiary or on the Company’s ability to
consummate the transactions contemplated by this Agreement, the
Indenture or the Registration Rights Agreement, except for those as
listed in Schedule E attached to such counsel’s opinion; and no
such proceedings are threatened or contemplated by any PRC
Governmental Agency or non-governmental

17

 

		
	 	persons or entities and there is no claim, event, fact or
circumstance of material importance which is likely to give rise to
a claim against the Company or any of the Material PRC Subsidiaries
in the PRC;

		
	 	     (v) Each of (A) the issue and sale of the Offered Securities,
(B) the issuance and delivery of the common shares of the Company
upon conversion by holders of the Offered Securities in accordance
with the terms of the Offered Securities and the provisions of the
Indenture, (C) the authorization, execution and delivery by the
Company of this Agreement, the Indenture and the Registration
Rights Agreement, (D) the performance by the Company of all of its
obligations under, and the compliance by the Company with all of
the provisions of, this Agreement, the Indenture and the
Registration Rights Agreement, and (E) the consummation of all of
the transactions contemplated in each of this Agreement, the
Indenture and the Registration Rights Agreement, do not and will
not (i) conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any
agreement or instrument, insofar as such document is governed by
PRC law, to which any of the Company or any Material PRC Subsidiary
is a party or by which the Company or any Material PRC Subsidiary
is bound or to which any of the property or assets of the Company
or any Material PRC Subsidiary is subject, (ii) result in any
violation of the provisions of the Articles of Association or
business licenses or other constituent documents of any Material
PRC Subsidiary or any law or statute or any order, rule, ruling or
regulation of any PRC Governmental Agency having jurisdiction over
the Company or such Material PRC Subsidiary or any of their
properties, or (iii) require any PRC Government Authorization;

		
	 	     (vi) Each of the contracts listed in Schedule F of such
counsel’s opinion (each a “Material Contract”) has been duly
authorized, executed and delivered by the applicable Material PRC
Subsidiary or Shareholder and such entity or person, to the extent
applicable, has taken all necessary corporate actions to authorize
the performance thereof; the applicable Material PRC Subsidiary had
the corporate power and capacity to enter into and to perform its
obligations under such Material Contract; if applicable, such
Material Contract has been properly transferred, amended or
assigned such that the applicable Subsidiary is the obligor and
beneficiary under such Material Contract; such transfers,
amendments or assignments were duly authorized, executed and
delivered by the parties to the applicable Material Contract; all
PRC Governmental Authorizations required in the PRC for such
transfers, amendments and assignments have been obtained and are in
full force and effect; and all necessary steps for such transfers
and assignments have been taken and all consents required from all
counter parties to such contracts have been obtained and are in
full force and effect;

		
	 	     (vii) The events and transactions set forth in the Offering
Circular relating to the issue and sale of the Offered Securities
do not violate applicable PRC law, and no PRC Government
Authorizations are required for the consummation of the
transactions contemplated in each of the Offering Circular, this
Agreement, the Indenture and the Registration Rights Agreement.

		
	 	     (viii) Such counsel is not aware and has not heard from or
been informed by the Company or the PRC Subsidiaries or other
sources, in each case after due inquiries under current
circumstances, there are any legal or governmental proceedings
pending in the PRC challenging the effectiveness or validity of the
events and transactions set forth in the

18

 

		
	 	Offering Circular in connection with the issue and sale of the
Offered Securities, and such proceedings are threatened or
contemplated by any PRC Governmental Agency in the PRC;

		
	 	     (ix) To the best of such counsel’s knowledge after due
inquiries, the Material PRC Subsidiaries have all necessary PRC
Governmental Authorizations with all PRC Governmental Agency for
the Company and the Material PRC Subsidiaries to own, lease,
license and use properties and assets and to conduct their
businesses in connection with the Major Business in so far as such
properties and assets and the conduct of such business are governed
by PRC law, and such PRC Governmental Authorizations are in full
force and effect and contain no materially burdensome restrictions
or conditions not described in the Offering Circular; nothing has
come to such counsel’s attention that any of the Company and the
Material PRC Subsidiaries are in violation of the provisions of any
such PRC Governmental Authorizations or that the business conducted
by it violates any PRC law to which any of the Company or the
Material PRC Subsidiaries is subject or by which any of the Company
and the PRC Subsidiaries is bound in connection with the Major
Business;

		
	 	     (x) Nothing has come to such counsel’s attention after due
inquiries with the Company and the Subsidiaries that any of the
Material PRC Subsidiaries is in violation of its constituent
documents or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in
loan agreement, lease or other agreement or instrument governed by
the PRC law to which it is a party or by which it or any of its
properties may be bound;

		
	 	     (xi) Each Material PRC Subsidiary owns or has valid licenses
in full force and effect or otherwise has the legal right to use,
or can acquire on reasonable terms, trademarks, service marks and
trade names currently employed by it in connection with the
business currently operated by it; except as described in the
Offering Circular, based upon the representations and warranties of
the Material PRC Subsidiaries, the Material PRC Subsidiaries have
not received any notice of infringement of or conflict with
asserted rights of others with respect to any of the foregoing
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in any material adverse
change in the condition, financial or otherwise, in the earnings,
business or results of operations of the Company and the Material
PRC Subsidiaries, taken as a whole;

		
	 	     (xii) The statements set forth in the Offering Circular
insofar as they purport to describe provisions of PRC law and
documents governed by the PRC law referred to therein are fair
summarization of such matters and are correct in major respects;

		
	 	     (xiii) The entering into and performance or enforcement of
this Agreement in accordance with its terms will not subject the
Purchasers to a requirement to be licensed or otherwise qualified
to do business in the PRC, nor will the Purchasers be deemed to be
resident, domiciled, carrying on business through all establishment
or place in the PRC or in breach of any laws or regulations in the
PRC by reason of the entering into, performance or enforcement of
this Agreement; and

		
	 	     (xiv) Such counsel has no reason to believe that, as of the
date of the preliminary form of the Offering Circular, as of the
date of the final form of the Offering Circular and as of the date
hereof, the Offering Circular or any further amendment or
supplement thereto made by the Company (other than the financial
statements therein, as to which such counsel expresses no opinion)
contained, insofar as matters relating to the PRC

19

 

		
	 	Subsidiaries and matters of PRC law are concerned, an untrue
statement of a material fact or omitted to state a material fact
necessary to make the statement therein, in the light of the
circumstances under which they were made, not misleading.

		
	 	     (e) The Purchasers shall have received an opinion, dated such
Closing Date, of Venture Law Group, a Professional Corporation, United
States counsel for the Company, that:

		
	 	     (i) Assuming this Agreement and the Registration Rights
Agreement have been duly authorized, executed and delivered by the
Company under Cayman Islands law, this Agreement and the
Registration Rights Agreement have each been duly authorized,
executed and delivered by the Company;

		
	 	     (ii) Assuming the Indenture has been duly authorized, executed
and delivered under Cayman Islands law, the Indenture has been duly
authorized, executed and delivered; assuming the Offered Securities
delivered on such Closing Date have been duly authorized, executed,
authenticated, issued and delivered under Cayman Islands law, the
Offered Securities delivered on such Closing Date have been duly
authorized and conform to the description thereof contained in the
Offering Document; and assuming the Indenture and the Offered
Securities delivered on such Closing Date constitute valid and
legally binding obligations of the Company under Cayman Islands
law, the Indenture and the Offered Securities delivered on such
Closing Date against payment of the purchase price therefore, when
executed by the Company and authenticated by the Trustee, in the
manner provided for in the Indenture, will constitute valid and
legally binding obligations of the Company enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’ rights
and to general equity principles;

		
	 	     (iii) Assuming the Ordinary Shares initially issuable upon
conversion of the Offered Securities delivered on such Closing Date
have been duly authorized and reserved for issuance upon such
conversion and, when issued upon such conversion, will be validly
issued, fully paid and nonassessable under Cayman Islands law, the
Ordinary Shares initially issuable upon conversion of the Offered
Securities delivered on such Closing Date have been duly authorized
and reserved for issuance upon such conversion and, when issued
upon such conversion, will be validly issued, fully paid and
nonassessable; the authorized capital stock of the Company conforms
as to legal matters to the description thereof contained in the
Offering Document;

		
	 	     (iv) The Company is not and, after giving effect to the
offering and sale of the Offered Securities and the application of
the proceeds thereof as described in the Offering Document, will
not be an “investment company” as defined in the Investment Company
Act of 1940, as amended;

		
	 	     (v) No consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is required for
the Company’s execution, delivery and performance of this
Agreement, the Registration Rights Agreement or the Indenture or
the consummation of the transactions contemplated thereby, except
such as may be required under applicable state securities and Blue
Sky laws, and except such as may be required by federal and state
securities laws with respect to the Company’s obligations under the
Registration Rights Agreement;

20

 

		
	 	     (vi) Such counsel is not aware of any pending legal or
governmental actions, suits or proceedings involving the Company,
any of its subsidiaries or any of their respective properties that,
if determined adversely to the Company or any of its subsidiaries,
would individually or in the aggregate have a Material Adverse
Effect;

		
	 	     (vii) The execution and delivery by the Company of the
Indenture, this Agreement and the Registration rights Agreement do
not, and the Company’s performance of its obligations under the
Indenture, this Agreement and the Registration Rights Agreement,
including the issuance and sale of the Offered Securities and
compliance with the terms and provisions thereof and the issuance
and delivery from time to time of the Underlying Shares upon
conversion of the Offered Securities in accordance with the terms
of the Offered Securities and the provisions of the Indenture, will
not, (i) violate the Company’s Certificate of Incorporation of
Bylaws, (ii) conflict with, or constitute a default under, any
existing obligation of or restriction on the Company under any
other agreement listed as an exhibit to the Company’s transition
report on Form 10-K for the transition period from July 1, 2002 to
December 31, 2002, or (iii) result in any violation of any
California or federal law, administrative regulation or court
decree as known to such counsel as applicable to the Company and
identified by an officer of the Company in a certificate delivered
to such counsel; it being understood that such counsel need express
no opinion as to the effect of the Company’s performance of its
obligations in this Agreement, the Indenture or the Registration
Rights Agreement on the Company’s compliance with financial
covenants in Other Agreements;

		
	 	     (viii) The statements (A) in the Offering Circular under the
captions “Description of the Notes” and “Certain Income Tax
Consideration — U.S. Federal Income Tax Consequences” insofar as
such statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters,
documents and proceedings and fairly summarize the matters referred
to therein;

		
	 	     (ix) Such counsel has no reason to believe that the Offering
Circular, or any amendment or supplement thereto, or any Exchange
Act Report incorporated by reference in the Offering Circular as of
the date hereof and as of such Closing Date, contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading; such documents when they were filed with
the Commission, conformed in all material respects with the
requirements of the Exchange Act and the rules and regulations of
the Commission thereunder, including the Sarbanes-Oxley Act; it
being understood that such counsel need express no opinion as to
the financial statements or other financial data contained in the
Offering Circular and the Exchange Act Reports; and

		
	 	     (x) Assuming the accuracy of the representations, warranties
and covenants of the Company and the Purchasers contained in the
Agreement, it is not necessary in connection with (i) the offer,
sale and delivery of the Offered Securities by the Company to the
several Purchasers pursuant to this Agreement or (ii) the resales
of the Offered Securities by the several Purchasers in the manner
contemplated by this Agreement, to register the Offered Securities
under the Securities Act or to qualify an indenture in respect
thereof under the Trust Indenture Act.

21

 

		
	 	     (f) The Purchasers shall have received from Shearman & Sterling LLP,
US counsel for the Purchaser, such opinion or opinions, dated such the
Closing Date, with respect to the validity of the Offered Securities, the
Offering Circular, the exemption from registration for the offer and sale
of the Offered Securities by the Company to the several Purchasers and
the resales by the several Purchasers as contemplated hereby and other
related matters as CSFB may require, and the Company shall have furnished
to such counsel such documents as they request for the purpose of
enabling them to pass upon such matters. In rendering such opinion,
Shearman & Sterling LLP may rely as to the incorporation of the Company
and all other matters governed by Cayman Islands law upon the opinion of
Maples and Calder and Jun He Law Offices referred to above.

		
	 	     (g) The Purchasers shall have received a certificate, dated such
Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Company in which such officers, to
the best of their knowledge after reasonable investigation, shall state
that the representations and warranties of the Company in this Agreement
are true and correct, that the Company has complied with all agreements
and satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date, and that, subsequent to the
respective dates of the most recent financial statements in the Offering
Document and Exchange Act Reports there has been no material adverse
change, nor any development or event involving a prospective material
adverse change, in the condition (financial or other), business,
properties or results of operations of the Company and its subsidiaries
taken as a whole except as set forth in the Offering Document and
Exchange Act Reports or as described in such certificate.

		
	 	     (h) The Purchasers shall have received a letter, dated such Closing
Date, of PricewaterhouseCoopers which meets the requirements of
subsection (a) of this Section, except that the specified date referred
to in such subsection will be a date not more than three days prior to
such Closing Date for the purposes of this subsection.

		
	 	     (i) On or prior to the date of this Agreement, the Purchasers shall
have received lockup letters from each of the executive officers and
directors of the Company and certain affiliated entities of the executive
officers and directors of the Company.

     Documents described as being “in the agreed form” are documents which are
in the forms which have been initialed for the purpose of identification by
Shearman & Sterling LLP, copies of which are held by the Company and CSFB, with
such changes as CSFB may approve.

     The Company will furnish the Purchasers with such conformed copies of such
opinions, certificates, letters and documents as the Purchasers reasonably
request. CSFB may in its sole discretion waive on behalf of the Purchasers
compliance with any conditions to the obligations of the Purchasers hereunder,
whether in respect of an Optional Closing Date or otherwise.

     7.     Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Purchaser, its officers, partners, members, directors and
each person, if any, who controls such Purchaser within the meaning of Section
15 of the Securities Act, against any losses, claims, damages or liabilities,
joint or several, to which such Purchaser may become subject, under the
Securities Act or the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Offering Document, or any amendment or supplement
thereto, or any related preliminary offering circular or the Exchange Act
Reports, or arise out of or are based upon the omission or alleged omission to
state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, including any losses, claims, damages or

22

 

liabilities arising out of or based upon the Company’s failure to perform its
obligations under Section 5(a) of this Agreement, and will reimburse each
Purchaser for any legal or other expenses reasonably incurred by such Purchaser
in connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with written information furnished
to the Company by any Purchaser through CSFB specifically for use therein, it
being understood and agreed that the only such information consists of the
information described as such in subsection (b) below; and provided, further,
that with respect to any untrue statement or alleged untrue statement in or
omission or alleged omission from any preliminary offering circular the
indemnity agreement contained in this subsection (a) shall not inure to the
benefit of any Purchaser that sold the Offered Securities concerned to the
person asserting any such losses, claims, damages or liabilities, to the extent
that such sale was an initial resale by such Purchaser and any such loss,
claim, damage or liability of such Purchaser results from the fact that there
was not sent or given to such person, at or prior to the written confirmation
of the sale of such Offered Securities to such person, a copy of the Offering
Document (exclusive of any material included therein but not attached thereto)
if the Company had previously furnished copies thereof to such Purchaser.

		
	 	     (b) Purchaser will severally and not jointly indemnify and hold
harmless the Company, its directors and officers and each person, if any,
who controls the Company within the meaning of Section 15 of the
Securities Act, against any losses, claims, damages or liabilities to
which the Company may become subject, under the Securities Act or the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in the Offering Document, or any amendment or supplement
thereto, or any related preliminary offering circular, or arise out of or
are based upon the omission or the alleged omission to state therein a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, in
each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information
furnished to the Company by such Purchaser through CSFB specifically for
use therein, and will reimburse any legal or other expenses reasonably
incurred by the Company in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are
incurred, it being understood and agreed that the only such information
furnished by any Purchaser consists of the following information in the
Offering Document furnished on behalf of each Purchaser: under the
caption “Plan of Distribution”, the third paragraph, the third and fourth
sentences of the eleventh paragraph and the thirteenth paragraph;
provided, however, that the Purchasers shall not be liable for any
losses, claims, damages or liabilities arising out of or based upon the
Company’s failure to perform its obligations under Section 5(a) of this
Agreement.

		
	 	     (c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under subsection (a) or (b) above, notify the
indemnifying party of the commencement thereof; but the failure to notify
the indemnifying party shall not relieve it from any liability that it
may have under subsection (a) or (b) above except to the extent that it
has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and provided further that the
failure to notify the indemnifying party shall not relieve it from any
liability that it may have to an indemnified party otherwise than under
subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein

23

 

		
	 	and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under
this Section for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement
of any pending or threatened action in respect of which any indemnified
party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party unless such settlement includes (i)
an unconditional release of such indemnified party from all liability on
any claims that are the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or
failure to act by or on behalf of any indemnified party.

		
	 	     (d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a
result of the losses, claims, damages or liabilities referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and
the Purchasers on the other from the offering of the Offered Securities
or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and the Purchasers on the
other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities as well as any other relevant
equitable considerations. The relative benefits received by the Company
on the one hand and the Purchasers on the other shall be deemed to be in
the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total discounts
and commissions received by the Purchasers from the Company under this
Agreement. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company or the Purchasers and
the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of
this subsection (d). Notwithstanding the provisions of this subsection
(d), no Purchaser shall be required to contribute any amount in excess of
the amount by which the total price at which the Offered Securities
purchased by it were resold exceeds the amount of any damages which
Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. The
Purchasers’ obligations in this subsection (d) to contribute are several
in proportion to their respective purchase obligations and not joint.

		
	 	     (e) The obligations of the Company under this Section shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls Purchaser within the meaning of the Securities Act or the
Exchange Act; and the obligations of the Purchasers under this Section
shall be in addition to any liability which the respective Purchasers may
otherwise have and shall extend, upon the same terms and conditions, to
each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act.

24

 

     8.     Default of Purchasers. If any Purchaser or Purchasers default in their
obligations to purchase Offered Securities hereunder on either the First
Closing Date or any Optional Closing Date and the aggregate principal amount of
Offered Securities that such defaulting Purchaser or Purchasers agreed but
failed to purchase does not exceed 10% of the total principal amount of Offered
Securities that the Purchasers are obligated to purchase on such Closing Date,
CSFB may make arrangements satisfactory to the Company for the purchase of such
Offered Securities by other persons, including any of the Purchasers, but if no
such arrangements are made by such Closing Date, the non-defaulting Purchasers
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Offered Securities that such defaulting Purchasers
agreed but failed to purchase on such Closing Date. If any Purchaser or
Purchasers so default and the aggregate principal amount of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the total
principal amount Offered Securities that the Purchasers are obligated to
purchase on such Closing Date and arrangements satisfactory to CSFB and the
Company for the purchase of such Offered Securities by other persons are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Purchaser or the Company, except as
provided in Section 9 (provided that if such default occurs with respect to
Optional after the First Closing Date, this Agreement shall not terminate as to
the Firm or any Optional Securities purchased prior to such termination). As
used in this Agreement, the term “Purchaser” includes any person substituted
for a Purchaser under this Section. Nothing herein will relieve a defaulting
Purchaser from liability for its default.

     9.     Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of
the Company or its officers and of the several Purchasers set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Purchaser, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. If this Agreement is terminated
pursuant to Section 8 or if for any reason the purchase of the Offered
Securities by the Purchasers is not consummated, the Company shall remain
responsible for the expenses to be paid or reimbursed by it pursuant to Section
5 and the respective obligations of the Company and the Purchasers pursuant to
Section 7 shall remain in effect and if any Offered Securities have been
purchased hereunder the representations and warranties in Section 2 and all
obligations under Section 5 shall also remain in effect. If the purchase of the
Offered Securities by the Purchasers is not consummated for any reason other
than solely because of the termination of this Agreement pursuant to Section 8
or the occurrence of any event specified in clause (iii), (iv), (vi), (vii) or
(viii) of Section 6(b), the Company will reimburse the Purchasers for all
out-of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Offered Securities, up
to U.S.$100,000.

     10.     Notices. All communications hereunder will be in writing and, if sent
to the Purchasers will be mailed, delivered or faxed and confirmed to the
Purchasers c/o Credit Suisse First Boston LLC, Eleven Madison Avenue, New York,
N.Y. 10010-3629, Attention: Transactions Advisory Group (fax: 1-212-325-4296),
or, if sent to the Company, will be mailed, delivered or faxed and confirmed to
it at Room 1802, United Plaza, 1468 Nan Jing Road West, Shanghai 20040, China
(fax: (8610) 8580-5095), Attention: Charles Chao; provided, however, that any
notice to a Purchaser pursuant to Section 7 will be mailed, delivered or faxed
and confirmed to such Purchaser.

     11.     Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
controlling persons referred to in Section 7, and no other person will have any
right or obligation hereunder, except that holders of Offered Securities shall
be entitled

25

 

to enforce the agreements for their benefit contained in the second and third
sentences of Section 5(b) hereof against the Company as if such holders were
parties thereto.

     12.     Representation of Purchasers. CSFB will act for the several
Purchasers in connection with this purchase, and any action under this
Agreement taken by CSFB.

     13.     Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.

     14.     Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of laws.

     The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. The Company irrevocably appoints Corporation
Service Company, 1172 Avenue of the Americas, 17th Floor New York, NY 10036, as
its authorized agent in the Borough of Manhattan in The City of New York upon
which process may be served in any such suit or proceeding, and agrees that
service of process upon such agent, and written notice of said service to the
Company, by the person serving the same to the address provided in Section 10,
shall be deemed in every respect effective service of process upon the Company
in any such suit or proceeding. The Company further agrees to take any and all
action as may be necessary to maintain such designation and appointment of such
agent in full force and effect for a period of seven years from the date of
this Agreement.

     The obligation of the Company in respect of any sum due to any Purchaser
shall, notwithstanding any judgment in a currency other than United States
dollars, not be discharged until the first business day, following receipt by
such Purchaser of any sum adjudged to be so due in such other currency, on
which (and only to the extent that) such Purchaser may in accordance with
normal banking procedures purchase United States dollars with such other
currency; if the United States dollars so purchased are less than the sum
originally due to such Purchaser hereunder, the Company agrees, as a separate
obligation and notwithstanding any such judgment, to indemnify such Purchaser
against such loss. If the United States dollars so purchased are greater than
the sum originally due to such Purchaser hereunder, such Purchaser agrees to
pay to the Company an amount equal to the excess of the dollars so purchased
over the sum originally due to such Purchaser hereunder.

26

 

     If the foregoing is in accordance with the Purchasers’ understanding of
our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Company and the
several Purchasers in accordance with its terms.

	 	 	 	 	 
	 	 	Very truly yours,
	 	 	 	 	 
	 	 	SINA Corporation
	 	 	 	 	 
	 	 	
By	 	 
	 	 	 	 	

	 	 	 	 	Name:
	 	 	 	 	Title:

Credit Suisse First Boston LLC

     Acting on behalf of itself

     and as the Representatives of

     the several Purchasers

	 	 	 
	By Credit Suisse First Boston LLC
	 	 	 
	By  	 	 
	 	 	

	 	 	
Name:
	 	 	
Title:

27

 

SCHEDULE A

	 	 	 	 	 	 
	 	 	 	Principal Amount of
	Purchaser	 	Firm Securities
	
	 	

	Credit Suisse First Boston LLC
	 	 	U.S.$72,000,000	 
	CITIC Capital Markets Ltd
	 	 	U.S.$  8,000,000	 
	 
	 	 	
	 
	 	Total
	 	 	U.S.$80,000,000	 

28

 

SCHEDULE B

Form of PricewaterhouseCoopers Letter

SINA Corporation

88 Jianguo Road

16/F SOHO New Town, Building C

Chaoyang District, Beijing, 100022

People’s Republic of China

Credit Suisse First Boston LLC

Eleven Madison Avenue

New York, New York 10010

U.S.A.

Ladies and Gentlemen:

We have audited the consolidated financial statements of SINA Corporation (the
“Company”) and subsidiaries as of December 31, 2002, June 30, 2002 and 2001 and
for the six months ended December 31, 2002 and each of the three years in the
period ended June 30, 2002 included in the Company’s Transition Report on Form
10-K for the transition period of the six months ended December 31, 2002, and
incorporated by reference in the confidential Offering Circular (the “Offering
Circular” dated as of the date hereof) for the Company’s Zero Coupon
Convertible Subordinated Notes due July 15, 2023 (the “Notes”). Our reports
with respect thereto are also incorporated by reference in the offering
circular dated June 30, 2003.

This letter is intended for use in connection with the offer and sale of the
Notes in the United States in reliance on Rule 144A of the Act (as defined
herein) to qualified institutional buyers as defined in Rule 144A. It is not
to be used in any other jurisdiction whatsoever, except in connection with any
potential or actual proceeding or dispute under United States federal or state
securities laws, in connection with the offering of the Notes.

This letter is being furnished in reliance upon your representation to us that:

	a.	 	You are knowledgeable with respect to the due diligence review process
that would be performed if this placement of securities were being
registered pursuant to the Securities Act of 1933 (the “Act”).
	 
	b.	 	In connection with the offering of the Zero Coupon Convertible
Subordinated Notes, the review process you have performed is substantially
consistent with the due diligence review process that you would have
performed if this placement of securities were being registered pursuant
to the Act.

In connection with the Offering Circular:

	1.	 	We are independent certified public accountants with respect to the
Company under Rule 101 of the Code of Professional Conduct of the American
Institute of Certified Public Accountants, and its rulings and
interpretations.

29

 

	2.	 	Company officials have advised us that the financial statements included
in the Offering Circular are prepared in accordance with Regulation S-X of
the Securities and Exchange Commission (the “SEC”). In our opinion, the
consolidated financial statements and financial statement schedule audited
by us and incorporated by reference in the Offering Circular comply as to
form in all material respects with the applicable sections of Regulation
S-X.
	 
	3.	 	We have not audited any financial statements of the Company as of any
date or for any period subsequent to December 31, 2002; although we have
conducted an audit for the six months ended December 31, 2002, the purpose
(and therefore the scope) of the audit was to enable us to express an
opinion on the consolidated financial statements as of December 31, 2002
and for the six months then ended, but not on the financial statements for
any interim period within that period. Therefore, we are unable to and do
not express any opinion on the unaudited condensed consolidated balance
sheet as of March 31, 2003 and the unaudited condensed consolidated
statements of operations, of cash flows and of changes in shareholders’
equity for the three month periods ended March 31, 2003 and 2002 included
in the Company’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2003 incorporated by reference in the Offering Circular, or on the
financial position, results of operations, or cash flows as of any date or
for any period subsequent to December 31, 2002.
	 
	4.	 	For purposes of this letter we have read the 2003 minutes of the meetings
of the shareholders, the Board of Directors of the Company and its
subsidiaries as set forth in the minute books as of June 27, 2003,
officials of the Company having advised us that the minutes of all such
meetings through that date were set forth therein, and have carried out
other procedures to June 27, 2003 (our work did not extend to the period
from June 28, 2003 to June 30, 2003, inclusive), as follows:

	 	(a)	 	With respect to the three month periods ended March 31, 2003
and March 31, 2002, we have -

	 	 	 
	 	(i)	
Performed the procedures specified by the
American Institute of Certified Public Accountants for a
review of interim financial information as described in SAS
No. 100 (applicable to 2003) and SAS No. 71(applicable to
2002), Interim Financial Information, on the unaudited
condensed consolidated financial statements for these periods,
described in 4, included in the Company’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2003, incorporated
by reference in the Offering Circular; and
	 
	 	(ii)	
Inquired of certain officials of the Company who
have responsibility for financial and accounting matters
whether the unaudited condensed consolidated financial
statements referred to in 5. a(i) above comply as to form in
all material respects with the applicable sections of
Regulation S-X.

	 	(b)	 	With respect to the period from April 1, 2003 to May 31,
2003, we have -

	 	 	 
	 	(i)	
Read the unaudited consolidated financial data of
the Company and subsidiaries for April and May of 2003 and
2002 furnished us by the Company, officials of the Company
having advised us that no such financial data as of any date
or for any period subsequent to May 31, 2003, were available,
and

30

 

	 	 	 
	 	(ii)	
Inquired of certain officials of the Company who
have responsibility for financial and accounting matters as to
whether the unaudited consolidated financial data referred to
in b(i) are stated on a basis substantially consistent with
that of the audited consolidated financial statements
incorporated by reference in the Offering Circular.

	 	 	 	The foregoing procedures do not constitute an audit made in accordance
with generally accepted auditing standards. Also, they would not
necessarily reveal matters of significance with respect to the comments
in the following paragraph. Accordingly, we make no representations as to
the sufficiency of the foregoing procedures for your purposes.

	5.	 	Nothing came to our attention as a result of the foregoing procedures,
however, that caused us to believe that:

	 	 	 	 	 
	 	(a)	
(i)
	 	Any material modifications should be made to the
unaudited condensed consolidated financial statements described in
5a.(i), incorporated by reference in and included in the Offering
Circular, for them to be in conformity with accounting principles
generally accepted in the United States of America; or
	 	 	 	 	 
	 	 	
(ii)
	 	The unaudited condensed consolidated financial
statements described in 5a.(i) do not comply as to form in all
material respect is with the applicable sections of Regulation
of S-X.

	 	 	 	(b) At May 31, 2003, (i) there was any changes in the capital
stock (other than issuance of common stock under the Company’s
employee stock plans), increase in long-term debt or decrease in
consolidated net current assets or stockholders’ equity as compared
with the amounts shown in the March 31, 2003 unaudited condensed
consolidated balance sheet included in the Company’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2003,
incorporated by reference in and included in the Offering Circular;
or (ii) for the period from April 1, 2003 to May 31, 2003, there was
any decrease, as compared with the corresponding period in the
preceding year, in consolidated net revenues or any increases in the
operating loss or net loss, except in all instances for changes,
increases, or decreases that the Offering Circular discloses have
occurred or may occur.

	6.	 	As mentioned in 5b, Company officials have advised us that no
consolidated financial data as of any date or for any period subsequent to
May 31, 2003, were available; accordingly, the procedures carried out by
us with respect to changes in financial data items after May 31, 2003,
have, of necessity, been even more limited than those with respect to the
periods referred to in 5. We have inquired of certain officials of the
Company who have responsibility for financial and accounting matters
whether (i) at June 27, 2003 there was any change in the capital stock
(other than issuance of common stock under the Company’s employee stock
plans), increase in long-term debt or decrease in consolidated net current
assets (working capital) or stockholders’ equity of the Company as
compared with amounts shown on the March 31, 2003 unaudited condensed
consolidated balance sheet included in the Company’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2003 incorporated by reference
in the Offering Circular or (ii) for the period from April 1, 2003 to
June 27, 2003, there were any decreases, as compared with the
corresponding period in the preceding year, in total consolidated net
revenues, income from operations or net income. On the basis of these
inquiries and our reading of the minutes as described in 5 above, nothing
came to our attention that caused us to believe that there was any such

31

 

	 	 	increase or decrease, except in all instances that the Offering Circular
discloses have occurred or may occur.
	 
	7.	 	For purposes of this letter, we have also read the items identified by
you on the attached copy of the Offering Circular and have performed the
following procedures, which were applied as indicated with respect to the
symbols explained below. We make no comment as to whether the SEC would
view any non-GAAP financial information included or incorporated by
reference in the Offering Circular as being compliant with the
requirements of Regulation G or Item 10 of Regulation S-K.

	 	 	 
	 	A	
Compared to or recalculated or derived from a corresponding amount in
the consolidated financial statements of the Company at December 31,
2002, June 30, 2002 and 2001, and the results of their operations and
their cash flows for the six months ended December 31, 2002 and each
of the three years in the period ended June 30, 2002, 2001 and 2000
included in the Company’s Transition Report on Form 10-K for the
transition period of the six months ended December 31, 2002
incorporated by reference in the Offering Circular, adjusted where
appropriate for rounding, and found such amounts to be in agreement.
As applicable, we make no representation as to the reasons set forth
in the Offering Circular and in the Form 10-K for any increase or
decrease in the amounts or percentages. The term “working capital” as
used in the Selected Consolidated Financial Data section of the
Offering Circular and the Form 10-K is defined as current assets less
current liabilities.
	 	 	 
	 	B	
Compared to or recalculated or derived from a corresponding amount in
the condensed consolidated financial statements of the Company
included in the Company’s quarterly report on Form 10-Q for the
quarter ended March 31, 2003 incorporated by reference in the Offering
Circular. As applicable, we make no representation as to the reasons
set forth in the Offering Circular and in the Form 10-Q for any
increase or decrease in the amounts or percentages. The term “working
capital” as used in the Selected Consolidated Financial Data sections
of the Offering Circular and the Form 10-Q is defined as current
assets less current liabilities. We make no comment as to the
definition of “total capitalization” as used in the Capitalization
section.
	 	 	 
	 	C	
Compared to a schedule prepared by the Company from its accounting
records. We (a) compared the amounts on the schedule to corresponding
amounts appearing in the accounting records and found such amounts to
be in agreement, and (b) determined that the schedule was
mathematically correct.
	 	 	 
	 	D	
Compared to or recalculated or derived from a corresponding amount in
the consolidated financial statements of the Company at June 30, 1999
and 1998, and each of the two years in the period ended June 30, 1999
and 1998, not incorporated by reference or included in the Offering
Circular. As applicable, we make no representation as to the reasons
set forth in the Offering Circular for any increase or decrease in the
amounts or percentages. The term “working capital” as used in the
Selected Consolidated Financial Data sections of the Offering Circular
and the Form 10-K is defined as current assets less current
liabilities.
	 	 	 
	 	E	
Recomputed from the actual March 31, 2003 column to give effect to the
estimated net proceeds of the Notes to be offered in the Offering
Circular. However, we make no comment as to whether the sale of the
Notes will be

32

 

	 	 	 
	 	 	
consummated and the use of proceeds as described therein will actually occur.
	 	 	 
	 	F	
Compared to or recalculated or derived from a corresponding amount in
the unaudited consolidated financial statements of the Company at
December 31, 2001, and the results of their operations and their cash
flows for the six months ended December 31, included in the Company’s
Transition Report on Form 10-K for the transition period of the six
months ended December 31, 2002 incorporated by reference in the
Offering Circular, adjusted where appropriate for rounding, and found
such amounts to be in agreement. As applicable, we make no
representation as to the reasons set forth in the Offering Circular
and in the Form 10-K for any increase or decrease in the amounts or
percentages. The term “working capital” as used in the Selected
Consolidated Financial Data section of the Offering Circular and the
Form 10-K is defined as current assets less current liabilities.

	8.	 	The procedures enumerated in paragraph 8 do not constitute an audit
conducted in accordance with generally accepted auditing standards.
Accordingly, we make no representations regarding the sufficiency of the
foregoing procedures for your purposes.
	 
	9.	 	It should be understood that we make no representations regarding
questions of legal interpretation or regarding the sufficiency for your
purposes of the procedures enumerated in paragraphs 8; also, such
procedures would not necessarily reveal any material misstatement of the
amounts or percentages listed above. Further, we have addressed ourselves
solely to the foregoing data as set forth in the Offering Circular and
make no representations regarding the adequacy of disclosure or regarding
whether any material facts have been omitted.
	 
	10.	 	This letter is solely for the information of the addressees and to assist
Credit Suisse First Boston LLC in conducting and documenting its
investigation of the affairs of the Company in connection with the
offering of the Notes covered by the Offering Circular, and is not to be
used, circulated, quoted, or otherwise referred to for any other purpose,
including but not limited to the registration, purchase or sale of the
Notes or securities, nor is it to be filed with or referred to in whole or
in part in the Offering Circular or any other document, except that
reference may be made to it in the Purchase Agreement in connection with
the offering of the Notes or in any list of closing documents pertaining
to the offering of convertible notes covered by the Offering Circular.

Yours very truly,

33

 

SCHEDULE C

List of PRC Subsidiaries

	 	 	 	 	 
	Subsidiary	 	Ownership by the Company
	
	 	

	Beijing SINA Information Technology Co., Ltd.
	 	 	99.35	%
	Beijing SINA Internet Technology Service Co., Ltd.
	 	 	100	%
	Shanghai SINA Online Information Technology Co., Ltd.
	 	 	100	%
	Shanghai SINA Technology Service Co. Ltd.
	 	 	100	%
	Star-Village.com (Beijing) Internet Technology Limited
	 	 	100	%
	Shanghai NC-SINA Information Technology Co. Ltd.
	 	 	51	%
	Beijing SINA Interactive Advertising Co., Ltd.
	 	 	25	%

34

 

SCHEDULE D

List of Material PRC Subsidiaries

	 	 	 	 	 
	Subsidiary	 	Ownership by the Company
	
	 	

	Beijing SINA Internet Tech. Service Co., Ltd.
	 	 	100	%
	Beijing SINA Info. Tech. Co., Ltd.
	 	 	99.35	%
	Beijing SINA Internet Info. Service Co. Ltd.
	 	 	0	%
	Beijing Star-Village.com Cultural Development Co., Ltd.
	 	 	0	%
	Guangzhou Media Message Technologies, Inc.
	 	 	0	%

35<PAGE>

                                                                   EXHIBIT 10.29

April 21, 2003

Richard Okumoto
102 Strathmore Place
Los Gatos, CA 95032

Dear Rich:

Photon Dynamics, Inc. (the "Company") is pleased to offer you employment in the
position of Chief Financial Officer ("CFO") of the Company on the following
terms:

         1. POSITION, DUTIES AND RESPONSIBILITIES. We would like you to begin
employment with the Company on or around May 12, 2003 (the "Employment Date").
You will serve in a full-time capacity as Chief Financial Officer of the
Company, reporting to the Company's Chief Executive Officer (the "CEO"). As CFO,
you have overall responsibility for management of the Company's finances, and
shall continue to perform duties customarily associated with this position and
such other duties as are assigned from time to time by the Company. You shall
devote your full time and attention during normal business hours to the business
affairs of the Company, except for reasonable vacations and periods of illness
or incapacity. By signing this letter agreement, you represent and warrant to
the Company that you are under no contractual commitments inconsistent with your
obligations to the Company.

         2. COMPENSATION AND EMPLOYEE BENEFITS.

                  2.1      BASE SALARY. Your base salary is $4,327.00 per week
($225,000 annually), less payroll deductions and required withholdings, paid
according to the Company's regular payroll schedule and procedures. Your salary
will be subject to adjustment as determined by the Company.

                  2.2      INCENTIVE BONUS. You will be eligible to receive an
annual incentive bonus of up to $112,500 for each Company fiscal year during
which you are employed (the "Bonus Year"), based on the achievement of
performance goals and financial targets. You and the CEO will establish such
goals and targets by mutual agreement, within 60 days after the Employment Date
and the end of each Bonus Year. For the first Bonus Year, which will end on
September 30, 2003, you will be eligible to receive a pro rata share of the
annual bonus amount, up to a total of $47,250, provided that you are employed at
the end of the first Bonus Year. Any bonus payment shall be subject to payroll
deductions and required withholdings.

                  2.3      STOCK OPTION GRANTS. Subject to approval of the
Board, the Company shall grant you options to purchase an aggregate of 90,000
shares of the Company's common stock (the "Common Stock") pursuant to the
Company's Amended and Restated 1995 Stock Option Plan. The exercise price

<PAGE>

R. Okumoto
April 21, 2003
Page 2

of the Stock Options shall be equal to the fair market value of the stock as of
the date of grant as determined by the Board. The options will vest over a
50-month period as follows: twelve percent (12%) of the options will vest and
become exercisable six (6) months after your employment date; thereafter, the
remaining options will vest 2% per month over an additional forty-four (44)
months, so that the Stock Options will be fully vested and exercisable after you
complete four (4) years and two (2) months of employment with the Company. The
Stock Options will otherwise be governed by the terms and conditions of the
applicable stock option plans, stock option agreements and grant notices.

                  2.4      EMPLOYEE BENEFITS. You are entitled to receive all
benefits, including accrual of Paid Time Off, and health and disability
benefits, for which you are eligible under the terms and conditions of the
standard Company benefit plans, which may be in effect from time to time and
provided by the Company to its senior executive level employees generally. After
termination of your employment with the Company, to the extent provided by the
federal COBRA law or, if applicable, state insurance laws, and by the Company's
then-current group health insurance policies, you will be eligible to continue
your group health insurance benefits at your own expense.

                  2.5      RELOCATION. The Company will reimburse you for actual
expenses reasonably incurred in connection with your relocation to California,
subject to the Company's general policies and procedures governing such
reimbursements (the "Relocation Reimbursement"). If any portion of the
Relocation Reimbursement paid to you by the Company is taxable, you shall be
entitled to receive from the Company an additional payment (the "Gross-Up
Payment") in an amount that shall fund the payment by you of any income and
employment taxes imposed on the Relocation Reimbursement as well as all income
and employment taxes imposed on the Gross-Up Payment.

         3. OTHER ACTIVITIES DURING EMPLOYMENT. During your employment with the
Company, you will not engage in any other gainful employment business or
activity without the prior written consent of the Company. While you are
employed by the Company, you also will not assist any person or organization in
competing with the Company, in preparing to compete with the Company or in
soliciting or hiring any employees of the Company. Nothing in this letter
agreement will prevent you from accepting speaking or presentation engagements
in exchange for honoraria, serving on boards of charitable organizations or
owning no more than one percent (1%) of the voting stock of a corporation.

         4. COMPANY POLICIES; PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT.
As a Company employee, you are expected to abide by Company policies and
procedures, and acknowledge in writing that you have read the Company's Employee
Handbook. You must also sign and comply with the enclosed Proprietary
Information and Inventions Agreement as a condition of your continuing
employment.

         5. AT-WILL EMPLOYMENT. Your employment with the Company is at-will.
Either you or the Company may terminate the employment relationship at any time,
with or without cause and with or without advance notice, provided that you may
be removed from any position that you hold as an employee of the Company only in
the manner provided by the Bylaws of the Company and applicable law.

<PAGE>

R. Okumoto
April 21, 2003
Page 3

         6. CHANGE IN CONTROL.

                  6.1      DEFINITION. For purposes of this Agreement, "Change
in Control" means the occurrence in a single transaction or in a series of
related transactions of any one or more of the following events:

                           (a)      any person (within the meaning of Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) becomes the
owner, directly or indirectly, of securities of the Company representing more
than fifty percent (50%) of the combined voting power of the Company's then
outstanding securities other than by virtue of a merger, consolidation or
similar transaction;

                           (b)      there is consummated a merger, consolidation
or similar transaction involving (directly or indirectly) the Company and,
immediately after the consummation of such merger, consolidation or similar
transaction, the stockholders of the Company immediately prior thereto do not
own, directly or indirectly, outstanding voting securities representing more
than fifty percent (50%) of the combined outstanding voting power of the
surviving entity in such merger, consolidation or similar transaction or more
than fifty percent (50%) of the combined outstanding voting power of the parent
of the surviving entity in such merger, consolidation or similar transaction; or

                           (c)      there is consummated a sale, lease, license
or other disposition of all or substantially all of the consolidated assets of
the Company and its subsidiaries, other than a sale, lease, license or other
disposition of all or substantially all of the consolidated assets of the
Company and its subsidiaries to an entity, more than fifty percent (50%) of the
combined voting power of the voting securities of which are owned by
stockholders of the Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale, lease, license or other
disposition.

                  6.2      TERMINATION AFTER A CHANGE IN CONTROL. In the event
that within twelve (12) months following a Change in Control, the Company
terminates your employment without Cause (as defined below) or you resign for
Good Reason (as defined below) (a Change in Control Termination), all stock
options held by you shall have their vesting accelerated such that all options
are fully vested and exercisable as of the date of the Change in Control
Termination (the "Acceleration"). As a precondition of receiving the
Acceleration, you must first sign and allow to become effective a general
release of claims in favor of the Company in a form acceptable to the Company.

                  6.3      DEFINITION OF "CAUSE." For purposes of this
Agreement, "Cause" shall mean the occurrence of one or more of the following:
(a) your indictment or conviction of any felony or crime involving moral
turpitude or dishonesty; (b) your participation in any fraud against the Company
or its successor; (c) breach of your duties to the Company or its successor,
including, without limitation, persistent unsatisfactory performance of job
duties; (d) intentional damage to any property of the Company or its successor;
(e) willful conduct that is demonstrably injurious to the Company or its
successor, monetarily or otherwise; (f) breach of any agreement with the Company
or its successor, including your Proprietary Information and Inventions
Agreement; or (g) conduct by you that in the good faith and reasonable
determination of the Company demonstrates gross unfitness to serve. Physical or
mental disability or death shall not constitute Cause hereunder.

<PAGE>

R. Okumoto
April 21, 2003
Page 4

                  6.4      DEFINITION OF "GOOD REASON." For purposes of this
Agreement, your voluntary termination of employment with the Company will be
considered a termination for "Good Reason" if you resign your employment because
one of the following events occurs without your consent: (a) a reduction of your
then-existing annual base salary by more than ten percent (10%), unless the
then-existing base salaries of other executive officers of the Company are
accordingly reduced; (b) a material reduction in the package of benefits and
incentives, taken as a whole, provided to you (not including raising of employee
contributions to the extent of any cost increases imposed by third parties),
except to the extent that such benefits and incentives of other executive
officers of the Company are similarly reduced; (c) assignment to you of any
duties or any limitation of your responsibilities substantially inconsistent
with your position, duties, responsibilities and status with the Company
immediately prior to the date of the Change in Control; or (d) relocation of the
principal place of your employment to a location that is more than fifty (50)
miles from your principal place of employment immediately prior to the date of
the Change in Control.

                  6.5      LIMITATION ON PAYMENTS. If any payment or benefit you
would receive pursuant to a Change in Control from the Company or otherwise
("Payment") would (i) constitute a "parachute payment" within the meaning of
Section 280G of the Code, and (ii) but for this sentence, be subject to the
excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then such
Payment shall be equal to the Reduced Amount. The "Reduced Amount" shall be
either (x) the largest portion of the Payment that would result in no portion of
the Payment being subject to the Excise Tax or (y) the largest portion, up to
and including the total, of the Payment, whichever amount, after taking into
account all applicable federal, state and local employment taxes, income taxes,
and the Excise Tax (all computed at the highest applicable marginal rate),
results in your receipt, on an after-tax basis, of the greater amount of the
Payment notwithstanding that all or some portion of the Payment may be subject
to the Excise Tax. If a reduction in payments or benefits constituting
"parachute payments" is necessary so that the Payment equals the Reduced Amount,
reduction shall occur in the following order unless you elect in writing a
different order (provided, however, that such election shall be subject to Board
approval if made on or after the effective date of the event that triggers the
Payment): reduction of cash payments; cancellation of Acceleration; reduction of
employee benefits. In the event that Acceleration is to be reduced, it shall be
cancelled in the reverse order of the date of grant of your Options (i.e.,
earliest granted Option cancelled last) unless you elect in writing a different
order for cancellation.

The accounting firm engaged by the Company for general audit purposes as of the
day prior to the effective date of the Change in Control shall perform the
foregoing calculations. If the accounting firm so engaged by the Company is
serving as accountant or auditor for the individual, entity or group effecting
the Change in Control, the Company shall appoint a nationally recognized
accounting firm to make the determinations required hereunder. The Company shall
bear all expenses with respect to the determinations by such accounting firm
required to be made hereunder.

The accounting firm engaged to make the determinations hereunder shall provide
its calculations, together with detailed supporting documentation, to you and
the Company within fifteen (15) calendar days after the date on which your right
to a Payment is triggered (if requested at that time by you or the Company) or
such other time as requested by you or the Company. If the accounting firm
determines that no Excise Tax is payable with respect to a Payment, either
before or after the application of the Reduced Amount, it shall furnish you and
the Company with an opinion reasonably acceptable to you that

<PAGE>

R. Okumoto
April 21, 2003
Page 5

no Excise Tax will be imposed with respect to such Payment. Any good faith
determinations of the accounting firm made hereunder shall be final, binding and
conclusive upon you and the Company.

         7. GENERAL PROVISIONS.

                  7.1      SEVERABILITY. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability will
not affect any other provision or any other jurisdiction, but such invalid,
illegal or unenforceable provision will be reformed, construed and enforced in
such jurisdiction so as to render it valid, legal, and enforceable consistent
with the intent of the parties insofar as possible.

                  7.2      ENTIRE AGREEMENT. This Agreement, together with the
Proprietary Information and Inventions Agreement, constitutes the entire and
exclusive agreement between you and the Company, and it supersedes any prior
agreement, promise, representation, or statement, written or otherwise, between
you and the Company with regard to this subject matter. It is entered into
without reliance on any promise, representation, statement or agreement other
than those expressly contained or incorporated herein, and it cannot be modified
or amended except in a writing signed by you and a duly authorized officer of
the Company.

                  7.3      SUCCESSORS AND ASSIGNS. This Agreement is intended to
bind and inure to the benefit of and be enforceable by you, the Company and your
and its respective successors, assigns, heirs, executors and administrators,
except that you may not assign any of your duties hereunder and you may not
assign any of your rights hereunder without the written consent of the Company,
which shall not be withheld unreasonably.

                  7.4      GOVERNING LAW. All questions concerning the
construction, validity and interpretation of this Agreement will be governed by
the law of the State of California as applied to contracts made and to be
performed entirely within California.

<PAGE>

R. Okumoto
April 21, 2003
Page 6

To indicate your acceptance of the Company's offer of continued employment,
please sign and date this Agreement and the enclosed Proprietary Information and
Inventions Agreement and return the signed documents to me.

Sincerely,

PHOTON DYNAMICS, INC.

BY: /s/ E. Floyd Kvamme
    _____________________________
         E. Floyd Kvamme
         Chairman of the Board

BY: /s/ Elwood Spedden
    _____________________________
         Elwood Spedden
         President & CEO

ACCEPTED AND AGREED:

/s/ Richard Okumoto                                   April 21, 2003
___________________________________               _______________________
RICHARD OKUMOTO                                   DATE

Enclosure - Proprietary Information and Inventions Agreement

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