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                                                                    Exhibit 10.3

                          REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of September
29, 2000, by and among Damark International, Inc., a Minnesota corporation, with
headquarters located at 7101 Winnetka Avenue North Minneapolis, Minnesota 55428
(the "COMPANY"), and the undersigned buyers (each, a "BUYER" and collectively,
the "BUYERS").

                  WHEREAS:

                  A.       In connection with the Securities Purchase Agreement
by and among the parties of even date herewith (the "SECURITIES PURCHASE
AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions of the Securities Purchase Agreement, to issue and sell to the Buyers
shares of the Company's Series D Convertible Preferred Stock (the "SERIES D
PREFERRED SHARES"), which will be convertible into shares of the Company's
common stock, $.01 par value per share (the "COMMON STOCK") (as converted, the
"CONVERSION SHARES") in accordance with the terms of the Certificate of
Designation setting forth the rights and preferences of the Company's Series D
Convertible Preferred Stock (the "CERTIFICATE OF DESIGNATION"); and

                  B.       In consideration for the Buyers agreeing to purchase
the Series D Preferred Shares, the Company shall issue and deliver to the Buyers
common stock purchase warrants (the "WARRANTS") to purchase additional shares of
Common Stock pursuant to the terms of the Securities Purchase Agreement (the
shares of Common Stock issued or issuable upon exercise of the Warrants are
hereinafter referred to as the "WARRANT SHARES");

                  C.       To induce the Buyers to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws:

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyers hereby agree as follows:

         1.       DEFINITIONS.

                  As used in this Agreement, the following terms shall have the
following meanings:

                  (a)      "INVESTOR" means a Buyer and any transferee or
assignee thereof to whom a Buyer assigns its rights under this Agreement and who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9.

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                  (b)      "PERSON" means a corporation, a limited liability
company, an association, a partnership, an organization, a business, an
individual, an entity, a governmental or political subdivision thereof or a
governmental agency.

                  (c)      "REGISTER," "REGISTERED," and "REGISTRATION" refer to
a registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement(s) by the United States Securities and Exchange
Commission (the "SEC").

                  (d)      "REGISTRABLE SECURITIES" means (i) the Conversion
Shares issued or issuable upon conversion of the Series D Preferred Shares, (ii)
the Warrant Shares issued or issuable upon exercise of the Warrants, (iii) the
Dividend Shares (as defined in the Certificate of Designation) and (iv) any
shares of capital stock issued or issuable with respect to the Conversion
Shares, the Series D Preferred Shares, the Warrant Shares or the Warrants as a
result of any stock split, stock dividend, recapitalization, exchange or similar
event.

                  (e)      "REGISTRATION STATEMENT" means a registration
statement of the Company filed under the 1933 Act.

         Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.

         2.       REGISTRATION.

                  (a)      MANDATORY REGISTRATION. The Company shall prepare,
and, on or prior to thirty (30) days after the initial issuance date of the
Series D Preferred Shares (the "CLOSING DATE"), file with the SEC a Registration
Statement or Registration Statements (as is necessary) on Form S-3 (or, if such
form is unavailable for such a registration, on such other form as is available
for such a registration, subject to the consent of each Buyer and the provisions
of Section 2(c)) covering the resale of all of the Registrable Securities, which
Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the 1933 Act, such Registration Statement(s) also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Series D Preferred Shares and exercise of the Warrants to
prevent dilution resulting from stock splits, stock dividends or similar
transactions. Such Registration Statement shall initially register for resale at
least 200% of that number of shares of Common Stock equal to the number of
Registrable Securities issuable as of the date immediately preceding the date
the Registration Statement is initially filed with the SEC, subject to
adjustment as provided in Section 3(b). Such registered shares of Common Stock
shall be allocated among the Investors pro rata based on the total number of
Registrable Securities issued or issuable as of each date that a Registration
Statement, as amended, relating to the resale of the Registrable Securities is
declared effective by the SEC. The Company shall use its best efforts to have
the Registration Statement declared effective by the SEC within one hundred and
five (105) days after the Closing Date.

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                  (b)      COUNSEL AND INVESTMENT BANKERS. Subject to Section 5
hereof, in connection with any offering pursuant to Section 2, the Buyers shall
have the right to select legal counsel and an investment banker or bankers and
manager or managers to administer their interest in the offering, which
investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company. The Company shall reasonably cooperate with any
such counsel and investment bankers.

                  (c)      ELIGIBILITY FOR FORM S-3. The Company represents,
warrants and covenants that as of the date hereof it meets the requirements for
the use of Form S-3 for registration of the sale by the Buyers and any other
Investor of the Registrable Securities and thereafter shall use its best efforts
to remain eligible to use Form S-3, and the Company has filed and shall file all
reports required to be filed by the Company with the SEC in a timely manner so
as to obtain and maintain such eligibility for the use of Form S-3. In the event
that Form S-3 is not available for sale by the Investors of the Registrable
Securities, then the Company (i) with the consent of each Investor pursuant to
Section 2(a) (which consent shall not be unreasonably withheld), shall register
the sale of the Registrable Securities on another appropriate form and not more
than twenty (20) days after being notified that Form S-3 is not available and
(ii) the Company shall undertake to register the Registrable Securities on Form
S-3 as soon as such form is available, provided that the Company shall maintain
the effectiveness of the Registration Statement then in effect until such time
as a Registration Statement on Form S-3 covering the Registrable Securities has
been declared effective by the SEC.

         3.       RELATED OBLIGATIONS.

                  At such time as the Company is obligated to file a
Registration Statement with the SEC pursuant to Section 2(a), the Company will
use its best efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition thereof and, pursuant
thereto, the Company shall have the following obligations:

                  (a)      The Company shall promptly prepare and file with the
SEC a Registration Statement with respect to the Registrable Securities (on or
prior to the thirtieth (30th) day after the Closing Date and solely (unless
otherwise consented to in writing by the Investors) for the registration of
Registrable Securities pursuant to Section 2(a)) and use its best efforts to
cause such Registration Statement(s) relating to Registrable Securities to
become effective as soon as possible after such filing (but no later than one
hundred and five (105) days after the issuance of the Series D Preferred Shares
for the registration of Registrable Securities pursuant to Section 2(a)), and
keep the Registration Statement(s) effective pursuant to Rule 415 at all times
until the earlier of (i) six months after the date as of which the Investors may
sell all of the Registrable Securities without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (or successor thereto) or (ii) the date on
which (A) the Investors shall have sold all the Registrable Securities and (B)
none of the Series D Preferred Shares or Warrants are outstanding (the
"REGISTRATION PERIOD"), which Registration Statement(s) (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading. In the event
that the Registration Statement is not declared effective by the SEC within one
hundred and five (105) days after the Closing Date (the "REQUIRED FILING
PERIOD"),

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the Company will pay each Investor a penalty until such time that the
Registration Statement is declared effective by the SEC (all such payments to be
made in cash and nonrefundable (subject to pro ration for partial months)) as
set forth in Section 2(c) of the Certificate of Designation.

                  (b)      The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement(s) and the prospectus(es) used in connection with the
Registration Statement(s), which prospectus(es) are to be filed pursuant to Rule
424 promulgated under the 1933 Act, as may be necessary to keep the Registration
Statement(s) effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement(s). In the event the number of shares available under a Registration
Statement filed pursuant to this Agreement is insufficient to cover all of the
Registrable Securities, the Company shall amend the Registration Statement, or
file a new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover all of the Registrable Securities, in each
case, as soon as practicable, but in any event within fifteen (15) days after
the necessity therefor arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to rely). The
Company shall use it best efforts to cause any such necessary amendment and/or
new Registration Statement to become effective as soon as practicable following
the filing thereof. For purposes of the foregoing provision, if applicable, the
number of shares available under a Registration Statement shall be deemed
"insufficient to cover all of the Registrable Securities" if at any time the
number of Registrable Securities issued or issuable upon conversion and
redemption of the Series D Preferred Shares and exercise of the Warrants is
greater than the quotient determined by dividing (i) the number of shares of
Common Stock available for resale under such Registration Statement by (ii) 1.5.
For purposes of the calculation set forth in the foregoing sentence, any
restrictions on the convertibility of the Series D Preferred Shares and
exercisibility of the Warrants shall be disregarded and such calculation shall
assume that the Series D Preferred Shares and Warrants are then convertible and
exercisable into shares of Common Stock at the then prevailing Conversion Rate
(as defined in the Certificate of Designation) and Exercise Price (as defined in
the Warrants).

                  (c)      The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement(s) and its
legal counsel without charge (i) promptly after the same is prepared and filed
with the SEC at least one copy of the Registration Statement and any amendment
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits, the prospectus(es) included
in such Registration Statement(s) (including each preliminary prospectus) and,
with regards to the Registration Statement, any correspondence by or on behalf
of the Company to the SEC or the staff of the SEC and any correspondence from
the SEC or the staff of the SEC to the Company or its representatives, (ii) upon
the effectiveness of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including any preliminary
prospectus, as such Investor may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Investor. The

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Company will promptly respond to any and all comments received from the SEC,
with a view towards causing any Registration Statement or any amendment thereto
to be declared effective by the SEC as soon as practicable and shall, subject to
Section 3(h), promptly file an acceleration request as soon as practicable
following the resolution or clearance of all SEC comments or, if applicable,
following notification by the SEC that the Registration Statement or any
amendment thereto will not be subject to review.

                  (d)      The Company shall use its best efforts to (i)
register and qualify the Registrable Securities covered by the Registration
Statement(s) under such other securities or "blue sky" laws of such
jurisdictions in the United States as any Investor reasonably requests, (ii)
prepare and file in those jurisdictions, such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction.
The Company shall promptly notify each Investor who holds Registrable Securities
of the receipt by the Company of any notification with respect to the suspension
of the registration or qualification of any of the Registrable Securities for
sale under the securities or "blue sky" laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.

                  (e)      In the event Investors who hold a majority of the
Registrable Securities being offered in the offering select underwriters for the
offering, the Company shall, subject to Section 2(b) hereof, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, including, without limitation, customary indemnification and contribution
obligations, with the underwriters of such offering.

                  (f)      As promptly as practicable after becoming aware of
such event, the Company shall notify each Investor in writing of the happening
of any event as a result of which the prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and promptly prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and deliver
ten (10) copies of such supplement or amendment to each Investor (or such other
number of copies as such Investor may reasonably request). The Company shall
also promptly notify each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to each Investor by
facsimile on the same day of such effectiveness and by overnight mail), (ii) of
any request by the SEC for amendments or supplements to a Registration Statement
or related prospectus or related information, and (iii) of

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the Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.

                  (g)      The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (and, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.

                  (h)      The Company shall permit each Investor and a single
firm of counsel, initially Schulte Roth & Zabel LLP or such other counsel as
thereafter designated as selling stockholders' counsel by the Investors who hold
a majority of the Registrable Securities being sold, to review and comment upon
the Registration Statement(s) and all amendments and supplements thereto at
least four (4) business days prior to their filing with the SEC, and not file
any document in a form to which such counsel reasonably objects. The Company
shall not submit a request for acceleration of the effectiveness of a
Registration Statement(s) or any amendment or supplement thereto without the
prior approval of such counsel, which consent shall not be unreasonably
withheld.

                  (i)      At the request of the Investors who hold a majority
of the Registrable Securities being sold, the Company shall furnish, on the date
that Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the Registration Statement (i) if required by an underwriter, a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the underwriters and the Investors.

                  (j)      The Company shall make available for inspection by
(i) any Investor, (ii) any underwriter participating in any disposition pursuant
to a Registration Statement, (iii) one firm of attorneys and one firm of
accountants or other agents retained by the Investors, and (iv) one firm of
attorneys retained by all such underwriters (collectively, the "INSPECTORS") all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "RECORDS"), as shall be reasonably
deemed necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are
so notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise
required under the 1933 Act, (b) the release of such Records is ordered pursuant
to a final, non-appealable subpoena or order from a court or government body of

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competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
or any other agreement. Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investors' ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.

                  (k)      The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.

                  (l)      The Company shall use its best efforts either to (i)
cause all the Registrable Securities covered by a Registration Statement to be
listed on each securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market System or the Nasdaq
SmallCap Market for such Registrable Securities and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register with the National Association of Securities Dealers, Inc. as such with
respect to such Registrable Securities. The Company shall pay all fees and
expenses in connection with satisfying its obligation under this Section 3(l).

                  (m)      The Company shall cooperate with the Investors who
hold Registrable Securities being offered and, to the extent applicable, any
managing underwriter or underwriters, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permit sales of
unlegended securities in a timely

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fashion that complies with then mandated securities settlement procedures for
regular way market transactions.

                  (n)      The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.

                  (o)      The Company shall provide a CUSIP number, a transfer
agent and registrar of all such Registrable Securities not later than the
effective date of such Registration Statement.

                  (p)      If requested by the managing underwriters or an
Investor, the Company shall immediately incorporate in a prospectus supplement
or post-effective amendment such information as the managing underwriters and
the Investors agree should be included therein relating to the sale and
distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being sold to
such underwriters, the purchase price being paid therefor by such underwriters
and with respect to any other terms of the underwritten (or best efforts
underwritten) offering of the Registrable Securities to be sold in such
offering; make all required filings of such prospectus supplement or
post-effective amendment as soon as notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment; and supplement or
make amendments to any Registration Statement if requested by a shareholder or
any underwriter of such Registrable Securities.

                  (q)      The Company shall use its best efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.

                  (r)      The Company shall otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC in connection with
any registration hereunder.

         4.       OBLIGATIONS OF THE INVESTORS.

                  (a)      At least seven (7) days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
each Investor or its counsel in writing of the information the Company requires
from each such Investor if such Investor elects to have any of such Investor's
Registrable Securities included in the Registration Statement. It shall be a
condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information as may be requested in writing by the Company regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.

                  (b)      Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection

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with the preparation and filing of the Registration Statement(s) hereunder,
unless such Investor has notified the Company in writing of such Investor's
election to exclude all of such Investor's Registrable Securities from the
Registration Statement.

                  (c)      Each Investor agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
3(g) or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to the Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of 3(f) and, if so directed by the Company, such Investor shall
deliver to the Company (at the expense of the Company) or destroy all copies in
such Investor's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.

                  (d)      No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Investors entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements, and (iii) agrees to pay its pro rata share of
all underwriting discounts and commissions.

         5.       EXPENSES OF REGISTRATION.

                  All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company and fees and disbursements of
one counsel for the Investors, shall be paid by the Company. In addition, the
Company shall pay all of the Investors' reasonable costs (including legal fees)
incurred in connection with the successful enforcement of the Investors' rights
hereunder.

         6.       INDEMNIFICATION.

                  In the event any Registrable Securities are included in a
Registration Statement under this Agreement:

                  (a)      To the fullest extent permitted by law, the Company
will, and hereby does, indemnify, hold harmless and defend each Investor who
holds such Registrable Securities, the directors, officers, partners, employees,
agents and each Person, if any, who controls any Investor within the meaning of
the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934
ACT"), and any underwriter (as defined in the 1933 Act) for the Investors, and
the directors and officers of, and each Person, if any, who controls, any such
underwriter within the meaning of the 1933 Act or the 1934 Act (each, an
"INDEMNIFIED PERSON"), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, attorneys' fees, amounts paid in
settlement or expenses, joint or several (collectively, "CLAIMS"), incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory

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agency, body or the SEC, whether pending or threatened, whether or not an
indemnified party is or may be a party thereto ("INDEMNIFIED DAMAGES"), to which
any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other "blue sky" laws of any jurisdiction in
which Registrable Securities are offered, or the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"VIOLATIONS"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c);
(ii) with respect to any preliminary prospectus, shall not inure to the benefit
of any such person from whom the person asserting any such Claim purchased the
Registrable Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected in the prospectus, as
then amended or supplemented, if such prospectus was timely made available by
the Company pursuant to Section 3(c), and the Indemnified Person was promptly
advised in writing not to use the incorrect prospectus prior to the use giving
rise to a Violation and such Indemnified Person, notwithstanding such advice,
used it; and (iii) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.

                  (b)      In connection with any Registration Statement in
which an Investor is participating, each such Investor agrees to severally and
not jointly indemnify, hold harmless and defend, to the same extent and in the
same manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers who signs the Registration Statement, each Person, if

                                       10
<PAGE>

any, who controls the Company within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or are based upon any Violation, in each case
to the extent, and only to the extent, that such Violation occurs in reliance
upon and in conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement; and,
subject to Section 6(d), such Investor will reimburse any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.

                  (c)      The Company shall be entitled to receive indemnities
from underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same extent as
provided above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.

                  (d)      Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right (at its expense) to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that such indemnifying party shall diligently pursue such defense and
that an Indemnified Person or Indemnified Party shall have the right to retain
its own counsel with the fees and expenses to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the Indemnified Person or
Indemnified Party, as the case may be, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The Company shall pay reasonable fees for only one
separate legal counsel for the Investors, and

                                       11
<PAGE>

such legal counsel shall be selected by the Investors holding a majority in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its written
consent, provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the consent of the Indemnified Party or Indemnified Person, consent to entry of
any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.

                  (e)      The indemnification required by this Section 6 shall
be made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.

                  (f)      The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.

         7.       CONTRIBUTION.

                  To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.

                                       12
<PAGE>

         8.       REPORTS UNDER THE 1934 ACT.

                  With a view to making available to the Investors the benefits
of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("RULE 144"), the
Company agrees to:

                  (a)      make and keep public information available, as those
terms are understood and defined in Rule 144;

                  (b)      file with the SEC in a timely manner all reports and
other documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements (it being understood
that nothing herein shall limit the Company's obligations under Section 4(c) of
the Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and

                  (c)      furnish to each Investor so long as such Investor
owns Registrable Securities, promptly upon request, (i) a written statement by
the Company that it has complied with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.

         9.       ASSIGNMENT OF REGISTRATION RIGHTS.

                  The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assignable by the Investors to
any Person (a "Transferee") of all or any portion of Registrable Securities if:
(i) the Investor agrees in writing with the Transferee to assign such rights,
and a copy of such agreement is furnished to the Company within a reasonable
time after such assignment; (ii) the Company is, within a reasonable time after
such transfer or assignment, furnished with written notice of (a) the name and
address of such Transferee, and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such securities
by the Transferee is restricted under the 1933 Act and applicable state
securities laws; (iv) at or before the time the Company receives the written
notice contemplated by clause (ii) of this sentence the Transferee agrees in
writing with the Company to be bound by all of the provisions contained herein;
(v) such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement; (vi) such Transferee shall be
an "accredited investor" as that term is defined in Rule 501 of Regulation D
promulgated under the 1933 Act; and (vii) in the event the assignment occurs
subsequent to the date of effectiveness of the Registration Statement required
to be filed pursuant to Section 2(a), the Transferee agrees to pay all
reasonable expenses of amending or supplementing such Registration Statement to
reflect such assignment.

                                       13
<PAGE>

         10.      AMENDMENT OF REGISTRATION RIGHTS.

                  Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold a majority of the Registrable Securities. Any amendment
or waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.

         11.      MISCELLANEOUS.

                  (a)      A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.

                  (b)      Any notices consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided a copy
is mailed by U.S. certified mail, return receipt requested; (iii) three (3) days
after being sent by U.S. certified mail, return receipt requested; or (iv) one
(1) day after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:

                  if to the Company:

                           DAMARK International, Inc.
                           7101 Winnetka Avenue
                           Brooklyn Park, Minnesota 55428
                           Telephone:     763-531-0066
                           Facsimile:     763-531-0481
                           Attention:     Mark A. Cohn, Chairman and Chief
                           Executive Officer

                  with a copy to:
                           Kaplan, Stangis and Kaplan, P.A.
                           5500 Wells Fargo Center
                           90 South Seventh Street
                           Minneapolis, Minnesota 55402
                           Telephone:     612-375-1138
                           Facsimile:     612-375-1143
                           Attention:     Bruce J. Parker

                  if to a Buyer, to its address and facsimile number on the
                  Schedule of Buyers attached hereto, with copies to such
                  Buyer's counsel as set forth on the Schedule of Buyers.

                                       14
<PAGE>

         Each party shall provide five (5) days prior notice to the other party
of any change in address, phone number or facsimile number.

                  (c)      Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.

                  (d)      This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York without regard to the
principles of conflict of laws. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.

                  (e)      This Agreement, the Certificate of Designation, the
Warrants and the Securities Purchase Agreement (including all schedules and
exhibits thereto) constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. The aforementioned documents supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.

                  (f)      Subject to the requirements of Section 9, this
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.

                  (g)      The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

                  (h)      This Agreement may be executed in two or more
identical counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement. This Agreement, once executed
by a party, may be delivered to the other party hereto by facsimile transmission
of a copy of this Agreement bearing the signature of the party so delivering
this Agreement; PROVIDED that an original is promptly delivered thereafter to
the other party.

                  (i)      Any legal action, suit or proceeding brought against
the Company with respect to this Agreement may be brought in any federal court
of the Southern District of New York or any state court located in New York
County, State of New York, and by execution and delivery of this Agreement, the
Company hereby irrevocably and unconditionally waives any claim (by way of
motion, as a defense or otherwise) of improper venue, that it is not subject
personally to the jurisdiction of such court, that such courts are an
inconvenient forum or that this Agreement or the subject matter may not be
enforced in or by such court. The Company hereby irrevocably and unconditionally
consents to the service of process of any of the aforementioned courts in any
such action, suit or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, at its address set forth or provided for in
Section 14, such service to become effective 10 days after such mailing. Nothing
herein contained shall be deemed to affect the right of any party to serve
process in any manner permitted by law or commence legal proceedings or
otherwise proceed against any other party in any other

                                       15
<PAGE>

jurisdiction to enforce judgments obtained in any action, suit or proceeding
brought pursuant to this Section. The Company irrevocably submits to the
executive jurisdiction of the aforementioned courts in such action, suit or
proceeding. THE COMPANY HEREBY IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING, WHETHER AT LAW OR EQUITY, BROUGHT BY IT OR THE HOLDER IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

                  (j)      Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

                                       16
<PAGE>

         IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.

COMPANY:                            BUYERS:

DAMARK INTERNATIONAL, INC.          BAYSTAR CAPITAL, L.P.

By:____________________________     By:______________________________________
Name: Mark A. Cohn                  Name:    _______________
Its:  Chairman and Chief            Its:     _______________
      Executive Officer

                                    BAYSTAR INTERNATIONAL LIMITED

                                    By:_________________________________________
                                       Name:    _______________
                                       Its:     _______________

                                    STARK INTERNATIONAL

                                    By:_________________________________________
                                    Name:    _______________
                                    Its:     _______________

                                    SHEPHERD INVESTMENTS INTERNATIONAL LTD.

                                    By:_________________________________________
                                    Name:    _______________
                                    Its:     _______________

                                       17
<PAGE>

                               SCHEDULE OF BUYERS

<TABLE>
<CAPTION>
                                                 INVESTOR ADDRESS AND                INVESTOR'S LEGAL COUNSEL AND
           INVESTOR NAME                           FACSIMILE NUMBER                        COUNSEL'S ADDRESS
------------------------------------  ------------------------------------------  -----------------------------------
<S>                                   <C>                                         <C>
BayStar Capital, L.P                  1500 West Market Street                     Eleazer Klein, Esq.
                                      Suite 200                                   Schulte Roth & Zabel LLP
                                      Mequon, WI 53092                            900 Third Avenue
                                      Attention: Brian Davidson                   New York, New York  10022
                                                                                  Fax:  (212) 593-5955

BayStar International, Ltd            1500 West Market Street                     Eleazer Klein, Esq.
                                      Suite 200                                   Schulte Roth & Zabel LLP
                                      Mequon, WI 53092                            900 Third Avenue
                                      Attention: Brian Davidson                   New York, New York  10022
                                                                                  Fax:  (212) 593-5955

Stark International                   1500 West Market Street                     Eleazer Klein, Esq.
                                      Suite 200                                   Schulte Roth & Zabel LLP
                                      Mequon, WI 53092                            900 Third Avenue
                                      Attention: Brian Davidson                   New York, New York  10022
                                                                                  Fax:  (212) 593-5955

Shepherd Investments                  1500 West Market Street                     Eleazer Klein, Esq.
International Ltd.                    Suite 200                                   Schulte Roth & Zabel LLP
                                      Mequon, WI 53092                            900 Third Avenue
                                      Attention: Brian Davidson                   New York, New York  10022
                                                                                  Fax:  (212) 593-5955
</TABLE>

                                       18<PAGE>
                                                                 Exhibit 10.35

                                   EXPLANATION

Oplink (US) Company:

         Shanghai Jiayi Industrial Development Co., Ltd. and Shanghai Yecheng
Construction and Development Co., Ltd. are two companies under the Industrial
Zone Development Controlling Company. Because the government is unable to
participate directly in investing in the projects, the Development Controlling
Company is again assuming some government functions in the industrial zone.
Therefore, the responsibility of developing and constructing standard factory
buildings is being undertaken by these two companies under the controlling
company. The Industrial Zone Administrative Committee is responsible for
supervising and implementing the policies relating to the commitments of these
companies.

         Hereby explained

              [SEAL:]  Shanghai Jiading Industrial Zone Administrative Committee
              Shanghai Jiading Industrial Zone Administrative Committee

                                    August 17, 2000

<PAGE>

                  STATEMENT OF INTENT TO LEASE FACTORY BUILDING

First Party:             Shanghai Yecheng Construction Development Co., Ltd.
Legal Representative:    Ma Weidi
Registered Address:      No. 555 Yecheng Road, Jiading Industrial Zone, Shanghai

Second Party:            Oplink Communications (Shanghai) Co., Ltd. (Planned)
Legal Representative:
Registered Address:

         Shanghai Yecheng Construction and Development Co., Ltd. ("First
Party") and Oplink Communications (Shanghai) Co., Ltd. ("Second Party"),
pursuant to the relevant laws and regulations of the People's Republic of China,
and in conformance with the principles of equity, mutual benefit, and sincere
cooperation, have engaged in several discussions and have agreed on the
following statement of intent concerning the leasing of factory buildings:

ARTICLE 1         THE PREMISES

1.1      As a result of consultations between First Party and Second Party,
First Party shall, in accordance with the planning requirements of Second Party,
construct for Second Party industrial factory buildings ("factory buildings") on
Lot 31 in Jiading Industrial Zone and shall lease them with the surrounding area
(the factory buildings and the surrounding area are called "factory area" below)
to Second Party, to serve as Second Party's production buildings and office and
residential buildings.

1.2      The total area of the factory area is approximately 123,000 square
meters. (The first phase factory building will have an area of 45,000 square
meters.) All relevant areas will be based on actual measurements.

1.3      The duration of the factory building lease will be five years,
beginning on the day of formal delivery of possession for use.

                                      1

<PAGE>

ARTICLE 2         RENT AND PAYMENT METHODS

2.1      Rent Unit Rates
During the first year, Second Party shall rent from First Party no fewer than
15,000 square meters. Rent shall be 10 yuan/month-square meter and shall not
change for five years. During the second year, Second Party shall rent at least
15,000 more square meters from First Party. Rent shall be 11.5 yuan/month-square
meters and shall not change for five years. During the third year, Second Party
shall rent at least 15,000 more square meters from First Party. Rent shall be 13
yuan/month-square meter and shall not change for five years.

2.2      Second Party shall pay rent once per month. Each month, payment shall
be made by the tenth day of the month.

ARTICLE 3         OBLIGATIONS OF FIRST PARTY

3.1      First Party shall be responsible for transacting the formalities
of lease approval or lease registration that relate to this statement of intent,
both of which, according to the Chinese government, First Party must possess. It
shall, moreover, assume responsibility for all expenses relating to such
formalities.

3.2      First Party shall assist Second Party with transacting the registration
formalities relating to enterprise use.

3.3      Delivery of Factory Buildings

         First Party shall, in a timely manner and in accordance with its
agreement with Second Party, deliver possession of the factory buildings.
Moreover, it shall provide construction drawings prior to delivery of the
factory buildings so that Second Party can install equipment. If Second Party
commissions First Party to be responsible for finish work at the factories, then
First Party shall not deem the beginning of the lease period to fall within the
finish work period.

3.4      The factory buildings that First Party constructs shall, prior to
delivery, pass inspection by the fire prevention department.

3.5      If Second Party leases First Party's factory buildings in accordance
with the lease, First Party shall add a bonus rent-free three months
in addition to the normal rent-free three months for a total of six months
rent-free.

3.6      First Party is responsible for maintaining the common areas of the
leased factory area in clean and orderly condition and for providing
sufficient roads to enable trucks and other vehicles to enter Second Party's
factory area. Second Party agrees to pay a monthly management fee based on the
number of square meters in the factory area. The fee shall be one yuan per month
per square meter during the first five years. Discussions on how to adjust this
shall begin in the fifth year. The adjustment shall not exceed 5%. (Management
fees are used to maintain factory area landscaping, cleanliness, and security
and for normal maintenance of factory buildings.)

                                         2
<PAGE>

3.7      The clear height of the factory buildings should meet Second Party
equipment requirements. (Second Party shall provide specific data.)

3.8      First Party is responsible for normal maintenance of the factory
buildings. But if Second Party damages the factory buildings as a result of
improper use, Second Party shall be responsible for repairing such damage and
for the repair expense.

3.9      Water, Electricity, and Communications
         First Party shall assist Second Party with the applications for
permission to use water, electricity, and communications, and it shall ensure
that permission to use each of these utilities shall remain effective throughout
the period of the lease. Second Party shall be responsible for the expansion and
engineering expenses of applying for water, communications, or other utilities.
The expanded capacity charge for water is 825 yuan/m3 per day. First Party is
responsible for providing personal-use water within the factory building. Second
Party is responsible for industrial-use water. The basic allocation of
electricity for which First Party is responsible is 70 kVA/1,000 m2. Second
Party shall bear the costs for amounts in excess of the basic allocation. The
charge for expanded capacity electricity is 290 yuan/kVA. Beginning at the end
of 2001, there will no longer be expanded capacity charges. If, upon expiration
of the lease, Second Party does not renew, First Party shall agree to repurchase
equipment at post-depreciation prices in accordance with state regulations on
power-supply equipment depreciation. Communications charges: 1,000 yuan/line.
First Party is responsible for bringing lines into service within two months
after Second Party pays the charges.

3.10     The lot already has the "six connections and one level"
(telecommunications, electricity, water, sewage, drainage, roads, and graded
land) up to the boundary lines. Every effort shall be made to satisfy Second
Party's requirements for gas lines, in accordance with industrial zone planning.
The inner diameter of water lines shall be 300 mm to the boundary lines.

ARTICLE 4         OBLIGATIONS OF SECOND PARTY

4.1      Second Party shall comply with the agreement between the two parties
and lease First Party's factory buildings in a timely manner. If it fails to
lease First Party's factory buildings when required to do so, Second Party shall
pay First Party a factory building idle fee. The idle fee shall be 50% of rent.
The payment period may not exceed one year. First Party shall reserve six months
for it [T.N.: PRESUMED: "SECOND PARTY"]. When the reserved period expires, First
Party shall have the right to dispose of the reserved factory buildings.

4.2       Second Party shall, as provided in Article 2 herein, pay rent to First
Party in a timely manner. If it fails to do so, Second Party shall pay First
Party a penalty equal to 0.1% of monthly rent for each day it is in default. The
late payment penalty may not exceed 1.5%.

                                       3
<PAGE>

4.3      Second Party shall pay water, electric, and, telecommunication charges
that are actually incurred in the factory area.

4.4      If Second Party has particular requirements with respect to water,
electrical, and fire prevention facilities in the factory area and in the
factory buildings, First Party may take responsibility for construction, but
Second Party must bear all expenses thereby incurred.

ARTICLE 5         MISCELLANEOUS

         Because these factory buildings are to be custom-built according to
Second Party's requirements, they will have a rather narrowly-defined
usefulness. In order to reduce and divide up the risk, Second Party is willing
to sign a formal contract within 60 days after this statement of intent is
signed. Within 60 days after this statement of intent is signed, Second Party
must submit the following: plans for constructing the factory buildings, the
number of factory buildings that are to be rented each year, delivery dates, and
other specific requirements. These are to be submitted for confirmation by First
Party. The signed agreement will serve as an attachment hereto. Within five
working days after this agreement is signed, Second Party must sign a formal
lease for a three-floor building, and it must make applications for water,
electricity, and telecommunications services. It also must carry out finish work
on the factory buildings.

ARTICLE 6         BREACH OF CONTRACT

6.1      If Second Party is unable to sign a formal contract within the
prescribed period of time, as stipulated in Article 5, this statement of intent
shall become void.

ARTICLE 7         TERMINATION AND RENEWAL OF LEASE

7.1      If Second Party must continue leasing the factory buildings when the
lease expires, it must notify First Party six months in advance, and the two
parties, after consulting with each other, shall sign a separate contract.
Second Party has first priority with respect to leasing of factory buildings.

7.2      The rent required for continued leasing of the factory buildings shall
be 5%-8% higher than in the previous period. The two parties shall determine the
specific figures through consultations with each other.

ARTICLE 8         RESOLUTION OF DISPUTES

         If a dispute should arise between First Party and Second Party on
account of this statement of intent, the two parties should first resolve such
dispute through negotiation. If the negotiations fail, either party has the
right to submit the matter to the Shanghai branch of the China International
Economics and Trade Arbitration Commission for arbitration.

                                      4
<PAGE>

ARTICLE 9         If there should be issues not fully covered hereunder, the two
parties shall jointly discuss and sign a formal contract with respect to such
issues.

ARTICLE 10        There are four identical copies of this statement of intent.
Each party has two copies.

ARTICLE 11        For the customs policy, see Attachment 1. For the tax break
policy, see Attachment 2.

First Party:      Shanghai Yecheng Construction and Development Co., Ltd.
Representative:   Yang [ILLEGIBLE]ping

Second Party:     Oplink (Shanghai) Co., Ltd. (Planned)
Representative:   Wu Zhouling Zhou[ILLEGIBLE]

                                                     August 18, 2000

                                      5
<PAGE>

Attachment 1

                                POLICY ON CUSTOMS

1.   Jiading Customs shall carry out contract control based on actual enterprise
     operating conditions. Generally, one export contract corresponds to
     managing one logbook. The number of logbooks shall be based on the amount
     of contracts. There shall be no discrimination on account of there being a
     need for many enterprise logbooks. In addition, the number of contracts
     shall not be limited. The number of contracts shall be based on enterprise
     demand.

2.   The effective period for a logbook is generally determined according to the
     term of the contract. The majority have one year periods. An application
     for extension can be made if it is to be managed for more than one year.
     Extensions within three months are generally approved by Jiading Customs.
     (This requires two work days.) The maximum is two years, depending on the
     authorization process. This control method is the same as in the processing
     and trading zones.

3.   Imported materials shall be bonded. They shall be exempt from import duties
     and value added tax. In principle, there can be just one verification
     measurement unit. If there is a specific reason, then two measurement units
     may be employed. Customs will determine the specifics.

4.   The carry-forward method can be used for procurement of domestic bonded
     materials. Customs shall continue to bond such materials.

5.   Outsourcing can be carried out after Jiading Customs has granted approval
     and put the relevant documents on file.

6.   Determinations of attrition volumes shall be based on accurate information
     provided by the enterprise. The enterprise's information shall be respected
     except where otherwise stipulated by the customs head office.

7.   Production equipment that is imported by an enterprise for its own use is
     completely duty free. Exemption from duties for equipment is reviewed and
     approved by the municipal foreign investment commission. Review and
     approval takes approximately two weeks.

8.   Enterprises register contracts with Jiading Customs. Registration is
     completed within three days. If all customs declaration documents are in
     order, customs can generally be cleared within two hours.

9.   Your company is deemed a Class A enterprise in the aforementioned
     procedures. We hope that, after it establishes its factories, your company
     can operate normally and strive to comply with standards.

All of the above has been confirmed by Jiading Customs.

                                      6
<PAGE>

Attachment 2

            Jiading Industrial Zone Preferential Tax Treatment Policy

1.       VALUE ADDED TAX
         The value added tax rate is 17%. The tax on export goods is zero.
2.       ENTERPRISE INCOME TAX
         The enterprise income tax rate is 15%. Beginning with the first
         profitable year, the policy of "two years exemption and three years 50%
         reduction" takes effect. "Product export enterprises" can still enjoy
         50% tax reductions. "Advanced technology enterprises" (identified by
         the "Shanghai Foreign Investment Association") receive a three year
         extension on 50% reductions, i.e. "two years exemptions and six years
         50% reductions." The local revenue portions of business tax, enterprise
         income tax, and value added tax on "High-technology results conversion
         projects" (identified by the "Shanghai High-technology Results
         conversion Services Center") shall, for three years after they are
         identified as such, be refunded according to revenues and expenditures
         specified by the fiscal authorities. For the two subsequent years, 50%
         of revenues and expenditures shall be refunded according to revenues
         and expenditures specified by the fiscal authorities. Cumulatively,
         this is "five years exemptions and five years 50% reductions."
3.       PERSONAL INCOME TAX
         No such tax is collected on monthly foreign staff income below 4,000
         yuan. A nine-grade progressive excess income tax is collected on income
         above 4,000 yuan. No such tax is collected on monthly Chinese staff
         income below 1,000 yuan. A nine-grade progressive excess income tax is
         collected on income above 1,000 yuan.
4.       LOCAL INCOME TAX
         This tax rate is 3%. Local income tax exemptions and reductions are in
         effect for same periods of time as for enterprise income taxes.
         "Product export enterprises" can be exempted from local income tax.
         "Advanced technology enterprises" first receive two years of tax
         exemption. They then receive three more years of tax exemption,
         followed by three years of tax reduction. That is, they receive "five
         years exemption and three years 50% reduction."
5.       VEHICLE USE TAX
         The annual tax on passenger vehicles is 320 yuan/vehicle. The annual
         tax on cargo trucks is 60 yuan/ton. The annual tax on motorcycles
         (two-wheeled) is 60 yuan/ton [SIC], and the tax on three-wheeled
         "motorcycles" is 80 yuan/vehicle.
6.       STAMP TAX
         The tax rates are 0.1%, 0.003%, 0.05%, 0.0005%, and 0.3%.
7.       CUSTOMS DUTIES
         Equipment that an enterprise imports for its own use as part of its
         gross investment and that complies with the requirements of Encouraged
         Category or Restricted Category B in the "Foreign Investment Industries
         List" is exempt from import duties and "import link" value added tax,
         unless it is listed in the "Import Schedule of Foreign Investment Items
         for which No Tax Exemption Shall Be Granted."

                                       7
<PAGE>

                             FACTORY BUILDING LEASE

First Party:          Shanghai Yecheng Construction Development Co., Ltd.
Chairman:             Tang Wenhua
Registered Address:   No. 555 Yecheng Road, Jiading Industrial Zone, Shanghai

Second Party:         Oplink Communications (Shanghai) Co., Ltd. (Planned)
Legal Representative: Liu Yanliang
Registered Address:   No. 925, A4, Yecheng Road, Jiading Industrial Zone,
                      Shanghai

     Shanghai Yecheng Construction and Development Co., Ltd. (hereinafter
referred to as First Party) and Oplink Communications (Shanghai) Co., Ltd.
(hereinafter referred to as Second Party), in accordance with the relevant laws
and regulations of the People's Republic of China, and based on the principles
of equity, mutual benefit, and sincere cooperation, have concluded this contract
with the following specific provisions based on the "Statement of Intent to
Lease Factory Building" executed by the Two Parties on August 18, 2000:

ARTICLE 1         PURPOSE OF THE LEASE

1.1  As a result of consultations between First Party and Second Party, First
Party shall, in accordance with the planning requirements of Second Party,
construct for Second Party industrial factory buildings ("factory buildings") on
Lot 31 in the Jiading Industrial Zone and shall lease them together with the
surrounding area (the factory buildings and the surrounding area are hereinafter
jointly referred to as "factory area") to Second Party, to serve as Second
Party's production buildings and office and residential buildings.

1.2  The total area of the factory area is approximately 123,000 square meters
(of which the factory building in the first phase will have an area of 45,000
square meters.) All concerned area measurements will be based on actual
measurements.

                                       8
<PAGE>

1.3  The factory building lease shall have a term of five years, beginning on
the day of formal delivery of possession for use.

First Party shall deliver to Second Party factory buildings with an area of
15,000 square meters PLUS OR MINUS 10% by the end of 2001, and shall deliver
to Second Party a two-story steel structure factory building with a total
building area of 4,320 square meters (actually calculated based on the
building's area per survey) by the end of February. The height of the ground
level of said factory building shall be no less than 5M, with
intercolumnation of 7.5 x 9.0M; the roof shall be steel structure covered
with an insulation layer, protected on all sides by a brick wall, with tiles
affixed to the outer wall; one dual-purpose passenger and freight elevator
shall be installed with a weight capacity of 2.5 tons; the floor surface of
the ground level shall have weight-bearing capacity of 1000 kilograms/square
meter, and the second floor shall have weight-bearing capacity of 500
kilograms/square meter. Moreover, one factory building shall be delivered by
each of the end of June and the end of October (each building having an area
of approximately 5000 square meters).

ARTICLE 2         RENT AND PAYMENT METHODS

2.1  Rent Unit Rates

In 2001, the total area rented by Second Party from First Party shall be no
fewer than 15,000 square meters PLUS OR MINUS 10%. Rent shall be 10
yuan/square meter per month and shall not change for five years.

In 2002, Second Party shall cumulatively rent no fewer than 30,000 square
meters PLUS OR MINUS 10% from First Party. Rent shall be 11.5 yuan/square
meter per month and shall not change for five years;

In 2003, Second Party shall cumulatively rent no fewer than 45,000 square
meters PLUS OR MINUS 10% from First Party. Rent shall be 13 yuan/square meter
per month and shall not change for five years.

2.2  Second Party shall pay rent once per month. Each month, payment shall be
made by the tenth day of the month.

                                       9
<PAGE>

ARTICLE 3      OBLIGATIONS OF FIRST PARTY

3.1  First Party shall be responsible for completing lease approval and lease
registration procedures relating to this Lease, such as First Party is required
by the Chinese government to possess, and shall, moreover, assume responsibility
for all expenses relating thereto.

3.2  First Party shall assist Second Party with completion of registration
procedures relating to enterprise use.

3.3  Delivery of Factory Buildings
     First Party shall deliver possession of the factory buildings in
accordance with its agreement with Second Party and on schedule, and shall
provide construction drawings prior to delivery of the factory buildings so that
Second Party can install equipment. If Second Party commissions First Party to
be responsible for outfitting work at the factories, then First Party shall not
deem the beginning of the lease period to fall within the outfitting work
period.

3.4  Factory buildings constructed by First Party shall pass inspection by the
fire prevention department prior to delivery.

3.5  If Second Party leases First Party's factory buildings in accordance with
the lease, First Party shall add a bonus rent-free three months in addition to
the normal rent-free three months for a total of six months rent-free.

3.6  First Party is responsible for maintaining the common areas of the leased
factory area in clean and orderly condition and for providing sufficient roads
to enable trucks and other vehicles to enter Second Party's factory area. Second
Party agrees to pay a monthly property management fee based on the number of
square meters in the factory area. The fee shall be one yuan per month per
square meter during the first five years. Discussions on how to adjust this
shall begin in the fifth year. The degree of such adjustment shall not exceed
5%. (Management fees are used to maintain factory area landscaping, cleanliness,
and security and for normal maintenance of factory buildings.)

                                      10
<PAGE>

3.7  First Party shall be responsible for normal maintenance tasks with respect
to the factory buildings. However, repairs of damage caused to the buildings as
the result of inappropriate use on the part of Second Party shall be the
responsibility of Second Party, which shall also bear the cost of such repairs.

3.8  Water, Electricity, and Communications      First Party shall assist
Second Party in completing all use permits and procedures with respect to
water, electricity, and communications, and it shall ensure that the permits
for each shall remain effective throughout the period of the lease. Second
Party shall be responsible for the expansion and engineering expenses of
applying for water, communications, or other utilities. The expanded capacity
charge for water is 825 yuan/m(3) per day. First Party is responsible for
providing personal-use water within the factory building. Second Party is
responsible for industrial-use water. The basic allocation of electricity for
which First Party is responsible is 70 kVA/1,000 m(2). Second Party shall
bear the costs for amounts additional to the basic allocation. The charge for
expanded capacity electricity is 290 yuan/kVA. Beginning at the end of 2001,
there will no longer be expanded capacity charges. If, upon expiration of the
lease, Second Party does not renew, First Party agrees to repurchase
equipment at prices net of depreciation in accordance with state regulations
on the depreciation of power-supply equipment. Communications charges: 1,000
yuan/line. First Party is responsible for coordinating the initiation of
service within two months after Second Party pays the charges.

3.9  The lot is already equipped with the six connections and one level
[telecommunications, electricity, water, sewage, drainage, roads, and graded
land] to the boundary lines of the property. Every effort shall be made to
satisfy Second Party's requirements for gas lines, in accordance with industrial
zone planning. The inner diameter of water lines shall be 300 mm to the boundary
lines.

ARTICLE 4         OBLIGATIONS OF SECOND PARTY

4.1  Second Party shall comply with the agreement between the two parties by
leasing First Party's factory buildings in a timely manner. If Second Party
shall not lease First Party's factory buildings when the time comes, Second
Party shall notify First Party six months in advance. If First Party has already
completed the construction of the factory buildings, then Second Party shall pay
First Party 9 months' factory building idle fee. If First Party has already
begun foundation slab construction (such as rebar, concrete or pile driving),
Second Party shall pay First Party 6 months' building idle fee. The idle fee
shall be 50% of rent. If First Party has not begun construction, then Second
Party need not pay idle fees.

                                      11
<PAGE>

4.2  Second Party shall, as provided in Article 2 herein, pay rent to First
Party in a timely manner. If there is a delay, Second Party shall pay a late
charge of 0.1% of the monthly rent for each day of such delay. The late payment
penalty shall not exceed a maximum of 1.5%.

4.3  Second Party shall pay water, electric, and, telecommunication charges that
are actually incurred in the factory area.

4.4  If Second Party has particular requirements with respect to water,
electrical, and fire prevention facilities in the factory area and in the
factory buildings, First Party may take responsibility for construction, but
Second Party must bear expenses incurred therefor.

4.5  Prior to delivery of the factory buildings, Second Party shall pay rent for
the two months immediately following the rent-free period to First Party, said
rent to serve as prepaid rent.

ARTICLE 5         MISCELLANEOUS

5.1  This factory area plan has been confirmed by the two parties, and all
efforts shall be exerted to retain the original style of First Party's plans
while satisfying Second Party's production requirements. Second Party requires
that First Party provide one production-use building with an area of
approximately 5,000 square meters every four months going forward, with specific
delivery dates at the end of February, the end of June and the end of October
each year.

5.2  Separate leases shall be executed for each specific building, to serve as
attachments hereto.

5.3  If Second Party intends to use the factory buildings in advance of or after
the original plan, then Second Party must notify First Party six months in
advance, and First Party shall provide the factory buildings in a timely manner
in accordance with Second Party's requirements. Corresponding time for the delay
period shall be deducted from the rent-free period.

                                      12
<PAGE>

ARTICLE 6         SUBLEASE AGREEMENT

6.1  During the term of the lease, Second Party may only sublet the factory
buildings to other parties in part or in whole after obtaining the written
consent of First Party.

6.2  If Second Party sublets said factory buildings, executed subleasing
contracts must meet the following requirements:

     (1)  The termination date of subleasing contracts must not exceed the
          termination date provided hereunder;

     (2)  During the term of the sublease, in addition to the rights enjoyed and
          obligations assumed by Second Party under the subleasing contracts,
          Second Party shall continue to perform the obligations provided
          hereunder;

     (3)  During the term of the sublease, in the event that this Lease is
          modified, dissolved or terminated, the subleasing contract shall also
          modified, dissolved or terminated accordingly.

6.3 If Second Party sublets said factory buildings, subleasing contracts
executed must be signed and approved by First Party, and may only take effect
after registration and filing procedures are completed in accordance with the
relevant regulations.

6.4 If Second Party sublets said factory buildings, First Party may receive
profits from the sublease rent at the specific income ratio of 50% for each of
First and Second Parties.

ARTICLE 7         TERMINATION AND RENEWAL OF LEASE

7.1  If Second Party must continue leasing the factory buildings when the lease
expires, it must notify First Party six months in advance, and the two parties,
after consulting with each other, shall execute a separate contract. Second
Party has first priority with respect to leasing of factory buildings.

7.2  The rent required for continued leasing of the factory buildings shall be
5%-8% higher than the rent at the end of the previous period. The two parties
shall determine the specific figures through mutual consultation.

                                      13
<PAGE>

ARTICLE 8         CONDITIONS FOR MODIFICATION AND DISSOLUTION HEREOF

8.1  During the term of the Lease, this contract may not be modified or
dissolved except in the event of one of the following circumstances:

     (1)  First Party or Second Party has special reasons, and after reaching
          consensus through consultations with each other, the two parties agree
          that First Party shall take early recovery or Second Party shall
          effect early return of said buildings in part or in whole;

     (2)  Because Second Party has defaulted with respect to the provisions
          hereunder, and has failed to correct such default within thirty days
          after First Party presents such instance of default; however, if the
          aforementioned default cannot be corrected within thirty days, Second
          Party must begin corrections and exert all efforts to complete
          corrections within a reasonable time period;

     (3)  Because force majeure events have damaged said buildings and auxiliary
          facilities such that performance of this contract cannot continue;

     (4)  During the term of the Lease, said buildings are approved for relation
          by the concerned municipal or district government departments, or the
          real estate title therefor has been legally restricted by judicial or
          executive authorities, or other circumstances have appeared due to
          prohibitions of laws or regulations that are not the responsibility of
          First Party.

     (5)  In the event of occurrence of the circumstances in 8-1(3) or 8-1(4)
          occur, First Party shall, at Second Party's request, assist Second
          Party in locating other equivalent buildings.

8.2  In the event that this contract is modified or dissolved, the Party
requiring the modification or dissolution shall proactively propose such
modification or dissolution to the other Party. In the event that modification
or dissolution of this contract causes one Party to incur losses, the other
Party shall be responsible for compensation of such losses, with the exception
of clauses (3) and (4) under Article 8-1, liability for which may be legally
waived.

                                      14
<PAGE>

ARTICLE 9         SECOND PARTY'S BREACH OF CONTRACT LIABILITY

9.1  If, during the period of the lease, Second Party commits any of the acts
listed below, First Party shall be entitled to terminate this contract and
recover possession of said building. Second Party shall compensate First Party
for losses caused by such act:

(1)  Without the written consent of First Party, Second Party sublets, assigns,
     or lends said building to another party, or it exchanges the use thereof.

(2)  Without the written consent of First Party, Second Party alters the primary
     structure of the building with the result that the building is damaged,
     and, after receiving written notice from First Party, Second Party fails to
     correct the situation and effect repairs within the prescribed period of
     time.

(3)  Without authorization, [Second Party] changes the lease purpose provided
     hereunder, or uses said building to conduct activities that are in
     violation of laws or rules.

(4)  Rent arrears accumulate for three months or more.

(5)  Other circumstances caused by Second Party that permit recovery of said
     building in accordance with laws and regulations.

9.2  Upon expiration of the Lease, if Second Party has not renewed the lease
with First Party, and it fails to return the buildings according to schedule,
Second Party shall pay rent and a breach of contract penalty of 0.1% of the
original monthly rent to First Party for each day of delinquency.

9.3  In the event that Second Party does not continue to lease the factory
buildings upon expiration of the Lease, and the provisions of Article 5
hereunder are violated, then execution shall proceed in accordance with the
provisions of Article 4 hereunder.

ARTICLE 10        FIRST PARTY'S BREACH OF CONTRACT LIABILITY

10.1  If First Party fails to deliver possession of said building to Second
Party for use by Second Party on time as provided hereunder, First Party shall
add one month to the rent-free period for said factory buildings each month of
delinquency.

                                      15
<PAGE>

10.2  After this contract is signed by the two parties, if First Party fails to
complete registration procedures with the Real Estate Transaction Department and
obtain a "building lease certificate" in accordance with regulations, First
Party shall assume full responsibility, and Second Party shall have the right to
terminate this contract.

ARTICLE 11        OTHER PROVISIONS

11.1  Supplementary provisions may be executed for matters not fully covered
herein after consensus is reached through consultations between the two parties.
However, supplementary provisions shall comply with relevant state and municipal
administrative building regulations. Supplementary provisions and attachments
hereto shall be inseparable parts hereof.

11.2  At the time of signing of this contract on the parts of First Party and
Second Party, they have full capacity under civil law. They clearly comprehend
each of their respective rights, obligations, and responsibilities, and they are
willing to discharge this contract strictly in accordance with its provisions.
If one party violates this contract, the other party has the right to demand
compensation as provided hereunder.

11.3  Disputes arising between First Party and Second Party in the course of
performance of this contract shall be resolved through negotiations. In the
event that negotiations are unsuccessful, application shall be made to the
Shanghai Arbitration Commission for arbitration.

11.4  There are four identical copies of this contract, two to be held by each
of First Party and Second Party, and all possessing equal legal effect.

First Party:      Shanghai Yecheng Construction Development Co., Ltd.

Representative:   [illegible signature]

Second Party:     Oplink Communications (Shanghai) Co., Ltd.

Representative:   [illegible signature]

                                                          September 22, 2000

                                      16
<PAGE>

                  STATEMENT OF INTENT TO LEASE FACTORY BUILDING

         First Party:      Shanghai Jiayi Industrial Development Co., Ltd.
         Second Party:     Oplink Communications, Inc.

         Pursuant to the applicable laws and regulations of the People's
Republic of China, and following amicable discussions between First Party and
Second Party, Second Party has decided to lease from First Party one standard
industrial factory building at No. 925 Yecheng Road, Jiading Industrial Zone, in
Shanghai. The two parties, moreover, have agreed on the following statement of
intent:

I.       Address and area of standard industrial factory building
         The address of the standard industrial factory building is No. 925
         Jiading Industrial Zone, Shanghai. The floor space of the factory
         building is 4,230 square meters.

II.      Specifications and height of standard industrial factory building
         A three-story steel-concrete structure. The ground floor is 4.5 meters.
         The second and third floors are 3.6 meters.

III.     Price and duration of the standard industrial factory building
         The rent for said factory building is set at 12.5 yuan per square meter
         per month. The duration of the lease for said factory building is five
         years, beginning July 25 2000, with eight months rent free. The
         property management fee for the factory building is 1 yuan per square
         meter per month. (Calculated from the total floor space of 4,230 square
         meters.)

IV.      Purpose of the standard industrial factory building
         Second Party has decided to lease the factory building to establish
         Shanghai Oplink Communications Co., Ltd., solely owned by Second Party.

                                      17
<PAGE>

         Gross investment is 10 million US dollars, and registered capital is 5
         million US dollars.

V.       Scope of operations
         Production, research and development, and sale of optic
         telecommunications equipment, optic telecommunications subsystems,
         optic fiber equipment, optic parts, crystal optic products, and
         instruments and equipment for production of optic fiber equipment.

VI.      Duration of operations The duration of operations is 15 years.

VII.     For customs policy, see Attachment 1. For preferential tax treatment
         policy, see Attachment 2.

         First Party:      Shanghai Jiayi Industrial Development Co., Ltd.
         Representative:   Yang [ILLEGIBLE]ping

         Second Party:     Oplink Communications, Inc.
         Representative:   Wu Zhouling Zhou [ILLEGIBLE]

                                    August 18, 2000

                                      18
<PAGE>

[IDENTICAL TO ATTACHMENT 1 ABOVE]

                                      19
<PAGE>

                                      20
[IDENTICAL TO ATTACHMENT 2 ABOVE]

<PAGE>

                                 BUILDING LEASE

                 Shanghai Jiayi Industrial Development Co., Ltd.

                                      21
<PAGE>

                                 BUILDING LEASE

                             (Contract No.:       )

Parties to this Lease

         Lessor (First Party): Shanghai Jiayi Industrial Development Co., Ltd.

         Lessee (Second Party): Oplink Communications (Shanghai) Co., Ltd.
         (Planned)

         Second Party leases a standard factory building from First Party in
order to meet production growth needs. Pursuant to the relevant laws and
regulations of the People's Republic of China and the relevant municipal rules
and regulations, First Party and Second Party, after having achieved a consensus
through consultations based on the principles of free will, equity, and mutual
benefit, make this contract wherein First Party leases to Second Party the
factory building which it lawfully owns and Second Party leases from First Party
the factory building for its own use.

         I. LOCATION, AREA, AND FACILITIES OF BUILDING

1-1.     First Party leases the factory building located at NO. 925 YECHENG
         ROAD, JIADING INDUSTRIAL ZONE, SHANGHAI CITY, which it lawfully owns,
         to Second Party for use by Second Party.

1-2.     The standard factory building that First Party leases to Second Party
         for use by Second Party is one building with a floor space of 4,230
         square meters.

                                      22
<PAGE>

1-3.     The structure and facilities of said building should comply with the
         following requirements:
         THREE-STORY CONCRETE-STEEL structure. Ground floor height: 4.5 meters.
         Height of second and third floors: 3.6 meters.

1-4.     Before Second Party performs finish work, First Party is responsible
         for making sure that the construction engineering of said building
         passes fire prevention inspection. Second Party must, upon completion
         of interior trim and finish work, report to Jiading Fire Prevention
         Supervision Office, which will conduct a completion acceptance check.

         II. PURPOSE OF LEASE

2-1.     When First Party leases said building to Second Party and issues a
         "Certificate of Real Estate Rights" to Second Party, the purpose on
         such certificate shall be "factory building."

2-2.     Second Party warrants to First Party that it shall lease said building
         only for the business purposes listed in the scope of operations on its
         business license.

2-3.     During the term of the lease, Second Party may not change the purpose
         and use of said building without first obtaining prior written consent
         from First Party and, as required by regulations, reporting to and
         receiving authorization from the departments concerned.

         III. DURATION OF LEASE

3-1.     The duration of this building lease shall be a total of 5 years,
         beginning JULY 25, 2000, with 8 months rent free.

3-2.     Upon expiration of the lease, First Party has the right to recover the
         entire premises. Second Party shall surrender possession according to
         schedule. If Second Party requests renewal, it must submit a written
         statement of intent to First Party six months prior to expiration of
         the lease. After First Party has given its consent, a new lease shall
         be executed. First Party shall lease said building to Second Party for
         a reasonable market price and for the agreed upon duration. Second
         Party shall have the option to renew.

                                      23
<PAGE>

         IV. RENT AND PAYMENT METHODS

4-1.     Rent for said building: 12.5 yuan/square meter/month, a total of 52,875
         yuan/month.

4-2.     The rent for said building shall not change for FIVE years. After five
         years, the two parties shall consult with each other and make
         adjustments based on the Chinese price index and exchange rate
         fluctuations.

4-3.     Second Party must pay the current month's rent by the tenth of each
         month. If Second Party fails to make payment when payment is due,
         Second Party must pay a penalty of 0.1% of one month's rent for each
         day that it is in default. The penalty may not exceed 1.5% of one
         month's rent.

4-4.     When Second Party offers to purchase said factory building, First Party
         shall agree to allow Second Party to deduct rent that has already been
         paid.

         V. OTHER EXPENSES

5-1.     First Party is responsible for installing, in addition to pre-existing
         factory building windows, one course of sealed windows and shall
         complete such installation within one month after Second Party formally
         begins to perform its finish work.

5-2.     First Party is responsible for improving the original elevator
         facilities and shall submit same for acceptance at the same time that
         Second Party obtains its business license.

5-3.     First Party promises to plant a lawn on the west side of the factory
         building. Moreover, in accordance with the seasons, it shall begin
         planting in November 2000 and shall complete planting by the end of
         November.

5-4.     First Party shall provide electric power capacity of 300 kVA for the
         entire building and shall, moreover, assume responsibility for the
         application and installation expenses that are thereby incurred. If
         electricity usage exceeds 300 kVA, Second Party shall be entirely
         responsible for the expanded capacity charges (RMB 290/kVA in 2000,
         free beginning at the end of 2001) and equipment costs. First Party and
         Second Party shall cooperate in making applications and carrying out
         installation for both base and excess electricity. If, upon expiration
         of the lease, Second Party does not renew, First Party shall agree to
         buy back equipment for the depreciated price in accordance with the
         relevant state regulations on depreciation of equipment.

                                      24
<PAGE>

         First Party shall ensure a sufficient supply of water for Second
         Party's production needs, and Second Party shall bear the expense of
         applying for water. The expanded capacity charge for water is 825
         yuan/m3 per day. First Party shall also ensure that Second Party is
         able to obtain permission for at least 60 telephone lines. Second Party
         shall be responsible for the expense arising from its use of water,
         electricity, gas, and telephones during the duration of the lease.

5-5.     First Party shall assume property management responsibilities such as
         maintaining security, providing landscaping, and cleaning. Second Party
         shall pay property management fees in the amount of ONE yuan/square
         meter/month, the total being 4,230 yuan/month, paid when rent is paid.

         VI. RESPONSIBILITY FOR BUILDING REPAIR

6-1.     During the term of the lease, First Party shall ensure safe use of the
         premises. Second Party shall take good care of and make reasonable use
         of the building and appurtenant facilities that it is leasing. If
         Second Party, on account of improper use or poor management, causes
         damage to the building or facilities, Second Party shall immediately
         take responsibility for repairs or shall provide economic compensation.

6-2.     If Second Party intends to alter the existing structure or fittings of
         the building in a major way, it shall first obtain approval from First
         Party, and Second Party shall handle the expenses on its own. If, upon
         expiration of the lease, First Party requests that the building be
         restored to its original condition, Second Party must so restore it.

6-3.     During the term of the lease, Second Party shall perform periodic
         maintenance on the building and facilities.

6-4.     If, for reasons of FORCE MAJEURE, the building is damaged or Second
         Party suffers losses, neither of the two parties shall be liable to the
         other.

         VII. SUBLEASE AGREEMENTS

7-1.     If Second Party is to sublet part or all of said building to another
         party during the term of the lease, it must first obtain the written
         consent of First Party.

                                      25
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7-2.     If Second Party sublets said building, the sublease contract that it
         makes shall comply with the following provisions:

(1)      The termination date of the sublease contract may not postdate the
         termination date stipulated by this lease.

(2)      During the sublease period, Second Party, in addition to having the
         rights and obligations stipulated by the sublease contract, shall also
         continue to perform the obligations stipulated hereunder.

(3)      If, during the sublease period, this lease is changed, dissolved, or
         terminated, the sublease contract should be changed, dissolved, or
         terminated accordingly.

7-3.     If Second Party intends to sublet said building, the sublease contract
         that it makes cannot take effect until it is signed and approved by
         First Party hereto and is registered and put on file in accordance with
         the relevant regulations.

7-4.     If Second Party sublets said building, First Party may earn a profit
         from the sublease rent. The specific income shall be decided through a
         separate written agreement between First Party and Second Party.

         VIII. REQUIREMENTS FOR CHANGING OR DISSOLVING THIS CONTRACT

8-1.     During the lease period, this lease may not be changed or dissolved
         except when:

(1)      First Party or Second Party has special cause, and the two parties,
         after having consulted with each other, agree that First Party may
         recover possession prior to termination or that Second Party may vacate
         part or all of said building prior to termination.

(2)      Second Party violates the stipulations hereof, and, within 30 days
         after First Party puts forward a demand, Second Party fails to correct
         the situation. However, if said violation cannot be corrected within 30
         days, Second Party must begin to correct the situation within 30 days
         and shall make every effort to complete correction within a reasonable
         period of time.

(3)      FORCE MAJEURE causes damage to said building and appurtenant
         facilities, and continued performance hereof becomes impossible.

                                      26

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(4)      During the lease period, said building is approved by the municipal or
         district government for removal, or the property rights relating to
         said building are lawfully restricted by judicial or administrative
         organs, or there occur other legal or regulatory prohibitions for which
         First Party is not liable.

(5)      In the event of 8-1 (3) or 8-1 (4), First Party shall, as required by
         Second Party, assist Second Party with finding an equivalent building.

8-2.     If one party requests that the contract be changed or dissolved, such
         party shall, on its own initiative, make such request to the other
         party. Except where lawfully relieved of liability by 8-1 (3) and 8-1
         (4) hereunder, if a party suffers losses on account of changes to or
         dissolution hereof, the other party shall be responsible for paying
         compensation.

         IX. SECOND PARTY'S BREACH OF CONTRACT LIABILITY

9-1.     If, during the period of the lease, Second Party commits any of the
         acts listed below, First Party shall have the right to terminate this
         contract and recover possession of said building. Second Party shall
         compensate First Party for losses caused by such act:

(1)      Without the written consent of First Party, Second Party sublets,
         assigns, or lends said building to another party, or it exchanges the
         use thereof.

(2)      Without the written consent of First Party, Second Party alters the
         primary structure of the building with the result that the building is
         damaged. Moreover, after receiving a written notice from First Party,
         it fails to rectify the situation and effect repairs within the
         prescribed period of time.

(3)      Without authorization, it changes the lease purpose that is provided
         hereunder, or it uses said building to conduct activities that are in
         violation of laws or rules.

(4)      It allows rent arrears to accumulate for a period of more than three
         months.

                                      27
<PAGE>

(5)      Other situations caused by Second Party that, according to laws and
         regulations, permit recovery of said building.

9-2.     If, upon expiration of the lease, Second Party has not renewed the
         lease with First Party, and it fails to surrender possession upon
         expiration, Second Party shall pay First Party a penalty equal to 0.1%
         of the original monthly rent.

         X. FIRST PARTY'S BREACH OF CONTRACT LIABILITY

10-1.    If First Party fails to deliver possession of said building to Second
         Party for use by Second Party on the date stipulated hereunder, First
         Party shall compensate Second Party in the amount of 100,000 yuan for
         each month that it is in default.

10-2.    If, after this contract is signed by First Party and Second Party,
         First Party fails to register the contract, as required, at the real
         estate transaction department and obtain a "building lease
         certificate," First Party shall assume full responsibility, and Second
         Party shall have the right to terminate this contract.

         XI. OTHER PROVISIONS

11-1.    If First Party and Second Party discuss and reach an agreement on
         issues not fully covered herein, they may then make supplementary
         provisions. But the supplementary provisions shall comply with relevant
         state and municipal building regulations. Supplementary provisions and
         attachments hereto shall be integral parts hereof.

11-2.    When First Party and Second Party sign this contract, they have full
         capacity under civil law. They clearly comprehend each of their rights,
         obligations, and responsibilities, and they are willing to perform this
         contract strictly in accordance with its provisions. If one party
         violates this contract, the other party has the right to demand
         compensation as provided hereunder.

11-3.    If a dispute between First Party and Second Party should arise in the
         course of performing this contract, they shall seek a solution through
         negotiations. If negotiations fail, they shall apply to the Shanghai
         Arbitration Commissions for arbitration.

                                      28
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11-4.    There are four identical copies of this contract. First Party and
         Second Party each has two. All have equal legal effect.

Lessor (First Party):                       Lessee (Second Party):
Shanghai Jiayi Industrial Development       Oplink Communications (Shanghai)
Co., Ltd.                                   Co., Ltd. (Planned)

Address:                                    Address:
No. 925 Yecheng Road, Jiading Industrial
Zone, Shanghai

Representative/Agent:                       Representative/Agent: Wu Zhouling
Signature and seal: Yang [ILLEGIBLE]ping    Signature and seal: Zhou [ILLEGIBLE]

Date contract signed: August 18, 2000

Place where contract signed:

                                      29

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