Cooperative Agreement on Taishun Yucai Senior School


    EXHIBIT 10.1

     

     

    

      Dated
        the 28th
        day of December 2006

      


      


      


      


      Dong
        Shunsheng

      Zhang
        Xiaoxiao

      Xia
        Weilan

      Cai
        Daqin

      Xia
        Fengling

      Zeng
        Yunwo

       

      


      WENZHOU
        LIREN EDUCATION GROUP CO., LTD. 

      


      


      and

      


      


      AI-ASIA
        INFORMATION TECHNOLOGY (SHANGHAI) CO., LTD. 

      


      


       

      
        
          

        
COOPERATIVE AGREEMENT 

      ON
        TAISHUN YUCAI SENIOR SCHOOL 

      
        
 

      


      


       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      Table
        of Contents

       

      


      
        	
                1

              	
                Definitions

              	
                4

              
	
                2

              	
                Preconditions

              	
                8

              
	
                3

              	
                Assets
                  and Operation of Yucai

              	
                9

              
	
                4

              	
                Sale
                  and Purchase of the Sale Interests

              	
                9

              
	
                5

              	
                Management
                  Contract A and Management Contract B

              	
                10

              
	
                6

              	
                Representations
                  and Warranties

              	
                11

              
	
                7

              	
                Fees
                  and Taxes

              	
                13

              
	
                8

              	
                Registration
                  of the New Company

              	
                13

              
	
                9

              	
                Profit
                  Allocation of the New Joint Venture Company

              	
                13

              
	
                10

              	
                Management
                  of the New Joint Venture Company

              	
                14

              
	
                11

              	
                Business
                  Term of the New Joint Venture Company

              	
                14

              
	
                12

              	
                Confidentiality

              	
                14

              
	
                13

              	
                Breach
                  of the Agreement

              	
                14

              
	
                14

              	
                Dispute
                  Settlement

              	
                14

              
	
                15

              	
                Governing
                  Law and Jurisdiction

              	
                15

              
	
                16

              	
                Effectiveness

              	
                15

              
	
                17

              	
                Miscellaneous

              	
                15

              
	
                Schedule
                  1:

              	
                Amendments
                  of the Article of Association of Yucai

              	
                17

              
	
                Schedule
                  2:

              	
                Primary
                  Terms and Conditions of Letter of Warranty

              	
                18

              
	
                Schedule
                  3:

              	
                Acknowledged
                  Due Diligence Results & Financial Projections

              	
                19

              
	
                Schedule
                  4:

              	
                Primary
                  Terms and Conditions of Management Contract A

              	
                20

              
	
                Schedule
                  5:

              	
                Primary
                  Terms and Conditions of Management Contract B

              	
                21

              
	
                Schedule
                  6:

              	
                Assets
                  List and Property Right Certificate of Yucai

              	
                22

              
	
                Schedule
                  7:

              	
                Employee
                  Payroll and Students Roster of Yucai

              	
                23

              
	
                Schedule
                  8:

              	
                All
                  Licenses & Permits for Running Yucai

              	
                24

              
	
                Schedule
                  9:

              	
                Primary
                  Terms and Conditions of the Sale and Purchase Agreement

              	
                25

              
	
                Schedule
                  10:

              	
                Primary
                  Terms and Conditions of the Share Consideration

              	
                27

              


      


      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      


      THIS
        AGREEMENT
        is
        entered into on the 28th
        day of
        December 2006 in Wenzhou.

      


      BETWEEN:

      


      
        	(1)	
                Dong
                  Shunsheng, Zhang Xiaoxiao, Xia Weilan, Cai Daqin, Xia Fengling
                  and Zeng
                  Yunwo (described
                  as following and collectively referred to “Dong
                  Shunsheng and His Fellows”;
                  

              


      

      


      Dong
        Shunsheng,
        (Holder
        of PRC ID Number 330329621102001) of No. 117, Taishou Road, Taishun, Wenzhou,
        Zhejiang, People’s Republic of China;

      


      Zhang
        Xiaoxiao,
        (Holder
        of PRC ID Number 330329196505260020) of No. 117, Taishou Road, Taishun, Wenzhou,
        Zhejiang, People’s Republic of China;

      


      Xia
        Weilan,
        (Holder
        of PRC ID Number 330329630427002) of No. 117, Taishou Road, Taishun, Wenzhou,
        Zhejiang, People’s Republic of China;

      


      Cai
        Daqin,
        (Holder
        of PRC ID Number 330329296307181145) of No. 117, Taishou road, Taishun, Wenzhou,
        Zhejiang, People’s Republic of China;

      


      Xia
        Fengling,
        (Holder
        of PRC ID Number 330329700116002) of No. 117, Taishou Road, Taishun, Wenzhou,
        Zhejiang, People’s Republic of China;

      


      Zeng
        Yunwo,
        (Holder
        of PRC ID Number 330105671103001) of No. 117, Taishou Road, Taishun, Wenzhou,
        Zhejiang, People’s Republic of China;

      


      
        	(2)	
                Wenzhou
                  Liren Education Group Co., Ltd., a
                  limited liability company incorporated in Wenzhou with its registered
                  office at No. 117, Taishou Road, City Town, Taishun, Wenzhou, Zhejiangl
                  People’s Republic of China and legal representative of Dong
                  Shunsheng
                  (hereinafter “Liren”);
                  and

              


      

      


      
        	(3)	
                Ai-Asia
                  Information Technology (Shanghai) Co., Ltd.,
                  a wholly-owned foreign company with limited liability and registered
                  office at Room 628-14, Building 2, Guo Shou Jing Road, Zhangjiang
                  Hi-Tech
                  Park, Shanghai, People’s Republic of China and legal representative of
                  Zhou Bizheng. Currently it is in the process of changing its name
                  to
                  Hartcourt
                  Education Investment Management & Consulting (Shanghai) Co.,
                  Ltd.
                  (hereinafter “Hartcourt
                  Education”).

              


      

      


      WHEREAS:

      


      
        	
                1.

              	
                Taishun
                  Yucai Senior School (“Yucai”)
                  is a private school duly incorporated and validly existing and
                  has legally
                  obtained the “License for Sponsoring and Running Private School” (License
                  No. Private Education 3303293200603) and “Registration Certificate of
                  Private Non-Enterprise Unit” (Certificate TAI MIN ZHENG ZI No.
                  2000ó004)
                  in China;

              


      

      


      
        	
                2.

              	
                Dong
                  Shunsheng and His Fellows,
                  all
                  of whom are Chinese natural persons, co-founded Yucai as investors,
                  while
                  Liren acts as the sponsor of Yucai;

              


      

      


      
        	
                3.

              	
                Hartcourt
                  Education is a wholly-owned foreign company duly incorporated and
                  validly
                  existing with limited liability in
                  China;

              


      


      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      


      
        	
                4.

              	
                Liren
                  hereby agrees to sell its 51% sponsorship rights and interests
                  in Yucai
                  indirectly to Hartcourt Education, and Hartcourt Education agrees
                  to
                  purchase it; 

              


      

      


      
        	
                5.

              	
                Dong
                  Shunsheng and His Fellows have agreed that Hartcourt Education
                  is the sole
                  and exclusive provider of education & consulting management services
                  to Yucai except themselves.

              


      

      


      
        	
                6.

              	
                Yucai
                  signed the Memorandum of Understanding with Hartcourt Companies,
                  Inc, the
                  parent company of Hartcourt Education, on the restructuring and
                  co-sponsoring of Yucai on September 28,
                  2006.

              


      

      


      THEREFORE,
        IT IS HEREBY AGREED BY DONG SHENSHENG AND HIS FELLOWS, LIREN AND HARTCOURT
        EDUCATION AS FOLLOWS:

      


      
        	
                1.

              	
                DEFINITIONS

              


      

      


      In
        this
        Agreement (including the Schedules), unless the context otherwise defines,
        the
        following words and expressions in capital letters shall have the following
        meanings: 

       

      
        	
                “Dong
                  Shunsheng and His Fellows”

              	
                The
                  six Chinese natural persons of Dong Shensheng, Zhang Xiaoxiao,
                  Xia Weilan,
                  Cai Daqin, Xia Fengling and Zeng Yunwo. Dong Shunsheng and His
                  Fellows
                  were the investors of Yucai prior to the execution of the Agreement.
                  

              
	
                “Liren”

              	
                Wenzhou
                  Liren Education Group Co., Ltd. Liren was the sponsor of Yucai
                  prior to
                  the execution of the Agreement. 

              
	
                “Hartcourt
                  Education”

              	
                Ai-Asia
                  Information Technology (Shanghai) Co., Ltd. It is now in the process
                  of
                  changing its name to Hartcourt Education Investment Management
                  and
                  Consulting (Shanghai) Co., Ltd. Hartcourt Education is the wholly
                  owned
                  subsidiary of Hartcourt. 

              
	
                “Hartcourt”

              	
                The
                  Hartcourt Companies, Inc. is incorporated in State of Utah, United
                  States,
                  the shares of which are currently listed on the Over-the-Counter
                  Bulletin
                  Board (“OTCBB”)
                  of the United States. Hartcourt conducts and focuses its business
                  on the
                  education investment and management. 

              
	
                “Yucai”

              	
                Taishun
                  Yucai Senior School. Prior to the execution of the Agreement, Dong
                  Shunsheng and His Fellows are the investors of Yucai, while Liren
                  is the
                  sponsor of Yucai. 

              


      


      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      


      


      
        	
                “Investors
                  and Sponsors”

              	
                The
                  entity or individual which invested and/or sponsored Yucai pursuant
                  the
                  regulations of PRC law. 

              
	
                “New
                  Company”

              	
                A
                  limited liability company that Liren will newly establish. Dong
                  Shunsheng
                  and His Fellows will make the New Company become the sponsor of
                  Yucai.
                  

              
	
                “Board”

              	
                The
                  board of directors of Taishun Yucai School.

              
	
                “Related
                  natural persons”

              	
                Natural
                  persons that signed “Letter of Funding” and “Investment Agreement” with
                  the Board of Yucai. The following are generally agreed in such
                  documents:
                  Related Natural Persons would invest in Taishun Yucai Schools (Taishun
                  Yucai Senior School, Taishun Yucai Junior High School, Taishun
                  Yucai
                  Primary School, Taishun Yucai Kindergarten), and become the “Investors” of
                  the schools in respect hereof. Such Related Natural Persons can
                  draw down
                  at not less than 15% dividend at the end of each anniversary year
                  for the
                  three years following the investing date.

              
	
                “Teaching
                  Facility and Assets of Yucai”

              	
                Buildings,
                  equipments and lands, etc. that Yucai applies for its teaching
                  activities.
                  

              
	
                “Financial
                  Due Diligence”

              	
                The
                  Financial Due Diligence conducted by KRC Business & Financial Advisors
                  as entrusted by Hartcourt Education prior to December 20, 2006
                  on Yucai’s
                  financial standing as of October 22, 2006, and the results of which
                  were
                  taken as the financial document for Yucai to change its existing
                  sponsor
                  to the New Company. Detailed Financial Due Diligence results are
                  set out
                  in the Schedule 3. 

              
	
                “Financial
                  Projections”

              	
                In
                  relation to the year ending on December 31, 2007, 2008 and 2009,
                  the
                  Financial Projection on Yucai conducted by KRC Business & Financial
                  Advisors as entrusted by Hartcourt Education prior to December
                  20, 2006.
                  Detailed Financial Projections is set out in the Schedule 3.
                  

              


      


      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      


      


      
        	
                “Letter
                  of Warranty”

              	
                The
                  Letter of Warranty made by Dong Shunsheng and His fellows to Hartcourt
                  Education and the New Company, to covenant the commitment to Hartcourt
                  Education and the New Company in respect of the Teaching Facility
                  and
                  Assets of Yucai. The primary terms and conditions of the Letter
                  of
                  Warranty are set out in Schedule 2. 

              
	
                “Management
                  Contract A”

              	
                The
                  management contract executed by Hartcourt Education, Dong Shunsheng
                  and
                  His Fellows and Yucai to agree that Hartcourt Education’s responsibility
                  on education management of Yucai and providing consulting service
                  as such.
                  In exchange for that, Yucai shall pay management fee to Hartcourt
                  Education, with Dong Shunsheng and His Fellows assuming the guarantee
                  liability. 

              
	
                “Management
                  Fee A”

              	
                The
                  management fee defined in aforesaid Management Contract A includes
                  the
                  base management fee and performance management fee, the amount
                  and
                  calculation of which as set out in Clause 5.2. 

              
	
                “Management
                  Contract B”

              	
                The
                  management contract executed by Dong Shunsheng and His Fellows
                  and Yucai
                  to agree on the offering of education management and consulting
                  service by
                  Dong Shunsheng and His Fellows to Yucai. In exchange of that, Yucai
                  shall
                  pay management fee to Dong Shunsheng and His Fellows. 

              
	
                “Management
                  Fee B”

              	
                The
                  management fee defined in aforesaid Management Contract B, the
                  amount and
                  calculation of which as set out in Clause 5.5.

              
	
                “Original
                  Contracts”

              	
                Any
                  contract entered into by Dong Shunsheng and His Fellows and Yucai
                  before
                  the execution of this Agreement. 

              
	
                “Sale
                  Interests”

              	
                51%
                  of the entire interest in the registered capital of the New Company
                  to be
                  sold by Liren to Hartcourt Education.


              


      


      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      


      


      
        	
                “Agreement
                  for Sale and Purchase of 

                Certain
                  Interest in the Registered 

                Capital
                  of the New Company”

              	
                The
                  agreement executed by Liren and Hartcourt Education on the sale
                  and
                  purchase of 51% of the entire interest in the registered capital
                  of the
                  New Company.

              
	
                “Consideration”

              	
                The
                  total consideration payable by Hartcourt Education of which includes
                  US$2,000,000 cash and 5,500,000 new Hartcourt Restricted Shares
                  of Common
                  Stock. 

              
	
                “Restricted
                  Shares of Hartcourt Common Stock”

              	
                The
                  ordinary restricted shares of common stock with par value of US$0.001
                  each
                  in the capital of Hartcourt to be allotted and issued in the name
                  of
                  Liren’s nominees. Trading symbol: U.S. HRCT.OB, Frankfurt
                  900009.

              
	
                “Delivery
                  Date of the Sale Interests in the 

                New
                  Company”

              	
                The
                  delivery date of the 51% sale interests in the New Company, on
                  which,
                  pursuant to the PRC law, 51% control of the New Company has changed
                  from
                  Liren to Hartcourt Education. Delivery Date of Sale Interests in
                  the New
                  Company shall be within 30 business days upon obtaining all necessary
                  consents permits and approval from relevant Governmental Agency
                  on Foreign
                  Investment.

              
	
                “Consideration
                  Shares Trading Date”

              	
                The
                  date on which the restricted shares of Hartcourt common stock as
                  share
                  consideration are permitted to be freely traded at the stock exchange.
                  The
                  date shall be the first trading date after one anniversary of the
                  date
                  when Hartcourt issues the consideration shares to the nominees
                  of Liren.
                  

              
	
                “Governmental
                  Education Approval Authority”

              	
                The
                  original education approval authority of Yucai.

              
	
                “Governmental
                  Agency on Foreign Investment”

              	
                Relevant
                  PRC Administrative authority on Foreign Economic &
                  Trade.

              
	
                “Consideration
                  Payment Dates”

              	
                The
                  dates on which Hartcourt Education pays cash consideration and
                  issues
                  Restricted Shares of Hartcourt Common Stock to Liren. 

              
	
                “Net
                  Profit”

              	
                Net
                  Profit = total audited revenue - total audited expenses (all based on U.S.
                  GAAP and audited by independent auditor)


              


      


      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      


      
        	
                2.

              	
                PRECONDITIONS

              


      

      


      
        	
                2.1

              	
                Liren
                  shall establish the New Company before January 31, 2007 and change
                  the
                  sponsor of Yucai to the New Company through amending the Article
                  of
                  Association of Yucai etc, pursuant to the regulations of PRC law.
                  The
                  amendment of the Article of Association of Yucai is set out in
                  Schedule 1.
                  

              


      

      


      
        	
                2.2

              	
                Dong
                  Shunsheng and His Fellows shall present a Letter of Warranty to
                  Hartcourt
                  Education and the New Company, agrees that within twenty years
                  upon which,
                  provided that the Teaching Facility and Assets that are currently
                  being
                  used by Yucai ceases to be so, including but not limit to the changes
                  of
                  the purpose of land usage and obligee of the land and real properties,
                  and
                  which causes that Yucai cannot pay the Management Fee A to Hartcourt
                  Education pursuant to Management Contract A, in this regards, Dong
                  Shunsheng and His Fellows shall indemnify Hartcourt Education against
                  all
                  the losses incurred, including but not limit to the Management
                  Fee A.
                  Moreover, Dong Shunsheng and His Fellows shall provide Teaching
                  Facility
                  and Assets comparable to current property area in use to Yucai
                  free of any
                  charges and obligations. In the event of any loss to the New Company
                  or
                  Yucai, caused by the Letter of Funding and Investment Agreement
                  duly
                  signed by the Board of Yucai and Related Natural Persons, Dong
                  Shunsheng
                  and His Fellows shall fully indemnify against all the losses and
                  liabilities; Whenever Dong Shunsheng and His Fellows obtain reasonable
                  profit/returns from Yucai, they shall assign the profit/returns
                  to the New
                  Company in full amount; Dong Shunsheng and His Fellows agree that
                  Hartcourt Education and the New Company will audit the accounts
                  of Yucai
                  periodically, including without limitation, account vouchers, account
                  books and audit report, etc. The aforesaid warranties made by Dong
                  Shunsheng and His Fellows shall be secured by all their equity
                  interests
                  in Liren in pledge. The primary terms and conditions of the Letter
                  of
                  Commitment are set out in Schedule 2.


              


      

      


      
        	
                2.3

              	
                Hartcourt
                  Education has entrusted independent professionals to perform financial
                  due
                  diligence and financial projection on Yucai. Hartcourt Education,
                  Liren as
                  well as Dong Shunsheng and His Fellows hereby acknowledge the results
                  of
                  the due diligence in writing. Acknowledged results of financial
                  due
                  diligence and financial projection are set out in Schedule 3.
                  

              


      

      


      
        	
                2.4

              	
                Yucai,
                  Dong Shunsheng and His Fellows and Hartcourt Education shall duly
                  execute
                  the Management Contract A, covenanting that Hartcourt Education
                  shall
                  provide education management and consulting services to Yucai,
                  while Yucai
                  shall pay Management Fee A to Hartcourt Education each year. In
                  this
                  regards, Dong Shunsheng shall assume the liability of guarantee.
                  The
                  primary terms and conditions of Management Contract A are set out
                  in
                  Schedule 4. 

              


      

      


      
        	
                2.5

              	
                As
                  at the date of this Agreement, Dong Shunsheng and His Fellows have
                  presented all the Original Contracts duly signed with Yucai to
                  Hartcourt
                  Education, and a Termination Contract has been entered into between
                  Dong
                  Shunsheng and His Fellows and Yucai to terminate all previously
                  executed
                  Original Contracts by all parties. 

              


      

      


      
        	
                2.6

              	
                Yucai
                  and Dong Shunsheng and His Fellows shall enter into Management
                  Contract B
                  in respect thereof to covenant education management and consulting
                  services that Dong Shunsheng and His Fellows shall provide to Yucai
                  and
                  Yucai shall pay Management Fee B to Dong Shunsheng and His Fellows
                  each
                  year for the services rendered. The primary terms and conditions
                  of
                  Management Contract B are set out in Schedule 5.
                  

              


      

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      


      
        	
                3.

              	
                ASSETS
                  AND OPERATIONS OF YUCAI

              


      

      


      
        	
                3.1

              	
                Prior
                  to the Sale and Purchase of the Sale Interests, total amount of
                  operating
                  assets of Yucai, including but not limit to land use right, real
                  property,
                  automobiles, computers, teaching appliances, desks and chairs,
                  lab
                  equipment and facilities and property lease agreements, shall be
                  not less
                  than RMB40,000,000, and net assets of not less than RMB20,000,000.
                  Assets
                  list and Property Right Certificate of Yucai are set out in Schedule
                  6.
                  

              


      

       

      
        	3.2	
                Prior
                  to the Sale and Purchase of the Sale Interests, total number of
                  faculty of
                  Yucai shall be not less than 150 persons, among which full-time
                  teachers
                  of not less than 90 persons, and teachers with senior high school
                  qualifications of not less than 90 persons; and total number of
                  students
                  on campus of not less than 1,700 persons. Employee Payroll and
                  Students
                  Roster of Yucai are set out in Schedule 7.


              


      

      


      
        	
                3.2

              	
                All
                  licenses and permits for running Yucai are set out in Schedule
                  8.
                  

              


      

      


      


      
        	
                4

              	
                SALE
                  AND PURCHASE OF THE SALE
                  INTERESTS

              


      

      


      
        	
                4.1

              	
                Within
                  30 business days upon the Preconditions are satisfied and the
                  prerequisites are met in respect of the Assets and Operations of
                  Yucai
                  referred to in Clause 3, Liren and Hartcourt Education shall sign
                  and
                  execute an Agreement for Sale and Purchase of Certain Interest
                  in the
                  Registered Capital of the New Company. Subject to the terms and
                  conditions
                  of the agreement, Liren shall sell its 51% equity interest in the
                  New
                  Company to Hartcourt Education. The primary terms and conditions
                  of the
                  Agreement for Sale and Purchase of Certain Interest in the Registered
                  Capital of the New Company are set out in Schedule 9.
                  

              


      

      


      
        	
                4.2

              	
                The
                  Consideration for the sale and purchase of the Sale Interests shall
                  be an
                  aggregate of US$2,000,000 cash and 5,500,000 Restricted Shares
                  of
                  Hartcourt Common Stock, based on the assets of Yucai, the capital
                  injected
                  to the New Company from Liren and the financial projections each
                  year in
                  the future years. 

              


      

      


      
        	
                4.3

              	
                Hartcourt
                  Education shall credit the Consideration to the accounts designated
                  by
                  Liren. 

              


      

      


      
        	
                4.4.

              	
                Since
                  the Delivery Date of the Sale Interests in the New Company, Hartcourt
                  Education shall take over the 51% control of the New Company from
                  Liren as
                  shareholder pursuant to the
                  Agreement.

              


      

      


      
        	
                4.5.

              	
                Hartcourt
                  Education shall credit the Consideration to the nominees designated
                  by
                  Liren, satisfied as details
                  hereunder:-

              


      

      


      
        	  	(1)	
                Within
                  30 business days upon the Delivery Date of the Sale Interest in
                  the New
                  Company, Hartcourt Education shall issue and allot the Consideration
                  of
                  total 5,500,000 Restricted Shares of Hartcourt Common Stock to
                  the
                  nominees designated by Liren. Hartcourt and Hartcourt Education
                  shall
                  jointly guarantee the average closing price of the 3 days immediately
                  prior to the Consideration Shares Trading Date at not less than
                  US$0.50
                  per share, otherwise, Hartcourt shall, within 10 business days
                  from the
                  Consideration Shares Trading Date, credit additional cash or issue
                  and
                  allot to the nominees additional new Restricted Shares of Hartcourt
                  Common
                  Stock to make it up. The primary terms and conditions of issuance
                  of
                  Restricted Shares of Hartcourt Common Stock and Consideration Shares
                  Trading Date are set out in Schedule 10.


              


      


      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      


      
        	
              	(2)	
                Within
                  30 business days upon the Delivery Date of the Sale Interests in
                  the New
                  Company, Hartcourt Education shall credit US$1,000,000 cash Consideration
                  to the accounts designated by
                  Liren;

              


      

      


      
        	
              	(3)	
                Before
                  July 31, 2007, Hartcourt Education shall credit US$500,000 cash
                  Consideration to the accounts designated by
                  Liren;

              


      

      


      
        	
              	(4)	
                Before
                  January 31, 2008, Hartcourt Education shall credit US$500,000 cash
                  Consideration to the accounts designated by Liren.
                  

              


      

      


      


      
        	
                5.

              	
                MANAGEMENT
                  CONTRACT A AND B

              


      

      


      
        	
                5.1

              	
                Hartcourt
                  Education shall provide education management and consulting services
                  to
                  Yucai, detailed as follows:-

              


      

      


      
        	 	
                (1)

              	
                Assisting
                  to prepare and amend the corporate governance system, financial
                  management
                  policy of Yucai, etc.;

              


      

      


      
        	 	
                (2)

              	
                Assisting
                  to introduce the overseas advanced teaching model and
                  methodology;

              


      

      


      
        	 	
                (3)

              	
                Assisting
                  Yucai to upgrade its financial management, and assign financial
                  expert to
                  instruct and manage the financial department of
                  Yucai;

              


      

      


      
        	 	
                (4)

              	
                Assist
                  to set up the employment guide and coordination committee for graduates,
                  and assign experts to instruct and coordinate the graduates employment;
                  

              


      

      


      
        	 	
                (5)

              	
                To
                  offer the overseas exchange opportunity for students of Yucai as
                  it may
                  practically need; 

              


      

      


      
        	 	
                (6)

              	
                To
                  offer the overseas training opportunity for faculty of Yucai as
                  it may
                  practically need;

              


      

      


      
        	 	
                (7)

              	
                Assisting Yucai
                  to make material strategic decisions and the implementation procedures
                  in
                  detail;

              


      

      


      
        	 	
                (8)

              	
                Assisting
                  to manage Yucai and the New Company in fully compliance with the
                  regulations and rules of the United States Securities Exchange
                  Commission,
                  and offer the consulting service in the aspect of corporate governance,
                  legal, financial management, audit,
                  etc.;

              


      

      


      
        	 	
                (9)

              	
                To
                  provide other related consulting services as it may be required
                  by Yucai.
                  

              


      

      


      
        	
                5.2

              	
                Yucai
                  will pay the Management Fee A to Hartcourt Education, detailed
                  as
                  follows:-

              


      

      


      
        	 	
                (1)

              	
                Yucai
                  shall pay the annual Base Management Fee of RMB500,000 cash to
                  Hartcourt
                  Education prior to February 1 of that year;


              


      

      


      
        	 	
                (2)

              	
                Yucai
                  shall pay the annual Performance Management Fee of RMB3,825,000
                  cash to
                  Hartcourt Education prior to December 31 of that year, depending
                  on its
                  operating results;

              


      


      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      


      
        	
              	(3)	
                Dong
                  Shunsheng and His Fellows shall jointly guarantee that the Net
                  Profit of
                  Yucai can meet at least the payment of the Management Fee A specified
                  in
                  Clause 5.2.(1) and 5.2.(2) in the year of 2007, 2008 and 2009,
                  and in the
                  event of the Net Profit less than the Management Fee A, Dong Shunsheng
                  and
                  His Fellows shall make up the discrepancy to Hartcourt Education
                  before
                  December 31 of each year in respect thereof. The Management Fee
                  A shall be
                  paid fully depending on Yucai’s actual performance afterwards.
                  

              


      

      


      
        	
                5.3

              	
                The
                  Management Contract A shall have 20 years term, and effective from
                  the
                  date when Hartcourt Education legally obtains the 51% equity interest
                  in
                  the New Company. Yucai and Hartcourt Education may otherwise discuss
                  the
                  renewal as such term expires. 

              


      

      


      
        	
                5.4

              	
                Dong
                  Shunsheng shall provide the education management and consulting
                  services
                  to Yucai, detailed as follows:-

              


      

      


      
        	 	
                (1)

              	
                In
                  charge of making and implementing the general management and financial
                  management policy, etc. of Yucai and providing consulting services
                  in
                  practice;

              


      

      


      
        	 	
                (2)

              	
                In
                  charge of making and implementing the routine teaching management
                  of
                  Yucai, and assigning expert (the Principal) to instruct and lead
                  the
                  management work of Yucai;

              


      

      


      
        	 	
                (3)

              	
                In
                  charge of making and implementing teaching model and methodology
                  of Yucai
                  and providing consulting services in
                  practice;

              


      

      


      
        	 	
                (4)

              	
                To
                  provide consulting services in respect of the financial
                  management;

              


      

      


      
        	 	
                (5)

              	
                Assisting
                  Hartcourt Education to make material strategic decision of Yucai
                  and the
                  implementation procedure, as well as the consulting services as
                  it may
                  require. 

              


      

      


      
        	
                5.5

              	
                Yucai
                  shall pay Management Fee B to Dong Shunsheng and His Fellows, detailed
                  as
                  follows:-

              


      

      


      
        	 	
                (1)

              	
                Yucai
                  shall pay the Management Fee B to Dong Shunsheng and His Fellows
                  each year
                  of (i) RMB3,675,000 cash, or (ii) Net Profit minus Management Fee
                  A,
                  whichever is lower, before December 31 of that year for 2007, 2008
                  and
                  2009; The Management Fee B shall be paid fully depending on Yucai’s actual
                  performance afterwards.

              


      

      


      
        	
                5.6

              	
                The
                  Management Contract B shall have 20 years term, effective from
                  the date
                  when Hartcourt Education legally obtains the 51% equity interest
                  in the
                  New Company. Yucai and Dong Shunsheng and His Fellows may otherwise
                  discuss the renewal as such term expires.


              


      

      


      
        	
                6

              	
                REPRESENTATIONS
                  AND WARRANTS

              


      

      


      
        	
                6.1

              	
                Dong
                  Shunsheng and His Fellows herby jointly represents and warrants
                  as
                  follows:-

              


      

      


      
        	 	
                (1)

              	
                Liren
                  shall be the actual beneficial owner of the 51% Sale Interests
                  in the
                  registered capital of the New Company and have full rights, interests,
                  and
                  control in this 51% interest.

              


      


      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      


      
        	 	
                (2)

              	
                Dong
                  Shunsheng and His Fellows jointly assure that no third-party interest
                  has
                  been put against the Sale Interests such as pledge, lien, etc.
                  from the
                  incorporation of the New Company till the Delivery Date of the
                  Sale
                  Interests in the New Company, and no conflicts or disputes in respect
                  of
                  any interest stand thereon.

              


      

      


      
        	 	
                (3)

              	
                Dong
                  Shunsheng and His Fellows jointly assure that under no circumstances,
                  without the written consent from Hartcourt Education, they shall
                  not sign
                  and execute any documents on behalf of the New Company from its
                  incorporation date till Delivery Date of the Sale Interests in
                  the New
                  Company.

              


      

      


      
        	 	
                (4)

              	
                Dong
                  Shunsheng and His Fellows guarantee that Yucai shall pay the Management
                  Fee A referred to in Clause 5 of this Agreement to Hartcourt Education
                  in
                  full amount with priority. Should Yucai fail to pay the aforesaid
                  management fee in full amount, Dong Shunsheng and His Fellows shall
                  make
                  up the discrepancy to Hartcourt Education before December 31 of
                  that year
                  in respect thereof. 

              


      

      


      
        	 	
                (5)

              	
                No
                  false investment or capital withdrawal happens to Yucai, otherwise,
                  Dong
                  Shunsheng and His Fellows shall take full responsibility and liabilities
                  and indemnify Yucai and Hartcourt Education for all the loss incurred;
                  all
                  the risks and losses before Hartcourt Education obtaining the 51%
                  equity
                  interests in the New Company, except otherwise expressly acceptable
                  by
                  Hartcourt Education, shall be borne by Dong Shunsheng and His Fellows,
                  and
                  provided any losses caused herewith to Yucai or Hartcourt Education,
                  Dong
                  Shunsheng and His Fellows shall assume the liabilities to indemnify.
                  

              


      

      


      
        	 	
                (6)

              	
                Dong
                  Shunsheng and His Fellows guarantee that the “Letter of Funding” and
                  “Investment Agreement” duly signed by the Board and Related Natural
                  Persons and presented to Hartcourt Education are all complete and
                  no
                  omittance or alike, provided any losses caused due to the abovementioned
                  documents or similar herewith to Yucai, Dong Shunsheng and His
                  Fellows
                  shall assume all the liabilities and indemnify Yucai and Hartcourt
                  Education for all the losses incurred.


              


      

      


      
        	 	
                (7)

              	
                As
                  of the date of the Agreement, Dong Shunsheng and His Fellows shall
                  not,
                  directly or indirectly, sponsor or participate in sponsoring any
                  education
                  institutions that might potentially be competitive to Yucai in
                  Zhejiang
                  province. 

              


      

      


      
        	6.2	
                Liren
                  hereby represents and warrants as
                  follows:-

              


      

      


      
        	 	
                (1)

              	
                Liren
                  shall be the actual beneficial owner of the 51% Sale Interests
                  in the
                  registered capital of the New Company and have full rights, interests,
                  and
                  control in this 51% interest.

              


      

      
        	 	
                (2)

              	
                Liren
                  assure that no third-party interest has been put against the Sale
                  Interests such as pledge, lien, etc. from the incorporation of
                  the New
                  Company till the Delivery Date of the Sale Interests in the New
                  Company,
                  and no conflict and dispute in respect of any interest stands
                  thereon.

              


      

      
        	 	
                (3)

              	
                Liren
                  assure that under no circumstances, without the written consent
                  from
                  Hartcourt Education, it shall not sign and execute any documents
                  on behalf
                  of the New Company from its incorporation date till Delivery Date
                  of the
                  Sale Interests in the New Company.

              


      

      
        	 	
                (4)

              	
                As
                  of the date of the Agreement, Liren shall not, directly or indirectly,
                  sponsor or participate in sponsoring any education institution
                  that might
                  potentially be competitive to Yucai in Zhejiang province.
                  

              


      


      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      


      
        	6.3	
                Hartcourt
                  Education hereby represents and warrants as
                  follows:-

              


      

      


      
        	 	
                (1)

              	
                Hartcourt
                  Education is a duly incorporated and validly existing
                  company.

              


      

      


      
        	 	
                (2)

              	
                Hartcourt
                  Education has the corporate powers and authority to sign and execute
                  this
                  Agreement. 

              


      

      


      
        	 	
                (3)

              	
                Hartcourt
                  Education agrees to completely fulfill the obligations as specified
                  in
                  Management Contract A, and any losses resulted from the non-fulfillment
                  of
                  such obligations by Hartcourt Education shall be borne by itself,
                  and it
                  shall indemnify Yucai and Dong Shunsheng and His Fellows for all
                  the
                  losses incurred hereof. 

              


      

      


      
        	 	
                (4)

              	
                Hartcourt
                  Education guarantees to pay the Consideration of the Sale Interests
                  in
                  full when due.

              


      

      


      
        	 	
                (5)

              	
                Hartcourt
                  Education guarantees that all the documents presented to Dong Shunsheng
                  and His Fellows are true, and in the event of any losses caused
                  by the
                  untrue documents, Hartcourt Education shall assume the liabilities
                  and
                  indemnify Yucai and Dong Shunsheng and His Fellows for the losses
                  incurred
                  hereof. 

              


      

       

      
        	
                7

              	
                FEES
                  AND TAXES

              


      

      


      
        	 	
                (1)

              	
                Liren
                  shall bear all the expenses or fees involved in the incorporation
                  of the
                  New Company and undertake all the possible taxes.
                  

              


      

      


      
        	 	
                (2)

              	
                Liren
                  and Yucai shall assume the respective share of the expenses incurred
                  for
                  the Sale Interests in the New Company and be obliged to pay taxes
                  due and
                  payable. 

              


      

      


      
        	
                8

              	
                THE
                  REGISTRATION OF THE OWNERSHIP CHANGE OF THE NEW
                  COMPANAY

              


      

      


      
        	 	
                (1)

              	
                Liren
                  shall complete all the formalities and procedures with Commercial
&
                  Industrial Bureau on the incorporation of the New Company within
                  15
                  business days of the date of the
                  Agreement;

              


      

      
        	 	
                (2)

              	
                Dong
                  Shunsheng and His Fellows, Liren are liable for changing the sponsor
                  of
                  Yucai to the New Company before the Delivery Date of the Sale Interests
                  in
                  the New Company, including but not limit to, obtain the permits
                  from the
                  Governmental Education Approval
                  Authority;

              


      

      
        	 	
                (3)

              	
                In
                  respect of registration of the ownership change with Commercial
&
                  Industrial Bureau related to the Sale Interests, Dong Shunsheng
                  and His
                  Fellows and Liren shall cooperate with the New Company to complete
                  it
                  before the Delivery Date of the Sale Interests in the New Company,
                  Hartcourt Education shall provide necessary assistance
                  thereto.

              


      

      


      
        	9	
                PROFIT
                  ALLOCATION OF THE NEW JOINT VENTURE
                  COMPANY

              


      

      


      
        	
                9.1

              	
                After
                  Hartcourt Education controls the 51% equity interests in the New
                  Company,
                  the net profit, after deducting all the expenses as per the accounting
                  standards, shall be allocated to Liren and Hartcourt Education
                  based on
                  their respective equity percentage in the New Company.
                  

              


      

      



      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      


      
        	
                10

              	
                MANAGEMENT
                  OF THE NEW JOINT VENTURE
                  COMPANY

              


      

      


      
        	
                10.1

              	
                After
                  Hartcourt Education controls the 51% equity interest in the New
                  Company,
                  the New Company will become a sino-foreign joint venture; the Chairman
                  of
                  the Board and finance controller of the New Company will be appointed
                  by
                  Hartcourt Education, while the general manager of which will be
                  appointed
                  by Liren. The Board of the New Joint Venture Company shall comprise
                  of 5
                  directors, among which Hartcourt Education is entitled to nominate
                  and
                  appoint 3 directors, and Liren is entitled to nominate and appoint
                  2
                  directors.

              


      

      


      
        	
                10.2

              	
                After
                  Hartcourt Education controls the 51% equity interest in the New
                  Company,
                  the Chairman of the Board and the Principal of Yucai will still
                  be
                  appointed by Liren, while the finance controller of which will
                  be
                  appointed by Hartcourt Education. The Board of Yucai shall comprise
                  of 5
                  directors, among which Hartcourt Education is entitled to nominate
                  and
                  appoint 3 directors, and Liren is entitled to nominate and appoint
                  2
                  directors. 

              


      

      


      
        	11	
                BUSINESS
                  TERM OF THE NEW JOINT VENTURE COMPANY 

              


      

      


      
        	
                11.1

              	
                After
                  Hartcourt Education controls the 51% equity interest in the New
                  Company,
                  the business term of the new joint venture company shall be 50
                  years.
                  

              


      

      


      
        	
                12

              	
                CONFIDENTIALITY

              


      

      


      
        	
                12.1

              	
                Dong
                  Shunsheng and His Fellows, Liren and Hartcourt Education undertakes
                  the
                  responsibilities to keep all the known information and documents
                  in
                  connection with this Agreement strictly
                  confidential;

              


      

      


      
        	
                12.2

              	
                Except
                  legally required by relevant governmental authority or securities
                  supervisory administration in respect hereof, without the consent
                  of all
                  its counterparties, no party shall divulge anything to any third
                  party
                  other than the parties in this Agreement.


              


      

      


      
        	
                13

              	
                BREACH
                  OF THE AGREEMENT

              


      

      


      
        	
                13.1

              	
                Any
                  party of Dong Shunsheng and His Fellows, Liren and Hartcourt Education,
                  when fails to fulfill its obligations specified in this Agreement
                  without
                  legal reasons, shall assume the liabilities of breach to non-breaching
                  party.

              


      

      


      
        	
                14

              	
                DISPUTE
                  SETTLEMENT

              


      

      


      
        	14.1	
                Any
                  dispute, controversy or claim arising out of or relating to this
                  Agreement, shall be settled by negotiation and discussion between
                  Dong
                  Shunsheng and His Fellows, Liren and Hartcourt Education in good
                  faith.
                  This negotiation and discussion shall start immediately after one
                  party
                  sending out the written notice to the other parties in this
                  regards.

              


      

      


      
        	14.2	
                In
                  the event that the dispute, controversy or claim cannot be solved
                  within
                  90 days of the aforesaid written notice, this dispute, controversy
                  or
                  claim, as any parties requires, and after informing the other parties,
                  shall be submitted and settled by China International Economic
                  and Trade
                  Arbitration Commission, Shanghai Branch. Arbitration Rules will
                  be final,
                  and will be binding on Dong Shunsheng, Liren and Hartcourt Education.
                  

              


      

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      


      
        	15	
                GOVERNING
                  LAW AND JURISDICATION

              


      

      


      
        	
                15.1

              	
                This
                  Agreement shall be governed, construed and interpreted in accordance
                  with
                  the laws of the People’s Republic of
                  China.

              


      

      


      
        	16	
                EFFECTIVENESS

              


      

      


      
        	
                16.1

              	
                This
                  Agreement will be effective immediately upon duly signed by Dong
                  Shunsheng
                  and His Fellows, Liren and Hartcourt Education or their authorized
                  representative.

              


      

      


      
        	
                17

              	
                MICELLANEOUS 

              


      

      


      
        	
                17.1

              	
                The
                  headings of the Clause in this Agreement are for reference only
                  and shall
                  not be construed as the interpretation of this Agreement.
                  

              


      

      


      
        	
                17.2

              	
                This
                  Agreement will be in eight original copies, one copy with each
                  party, and
                  each copy shall be deemed as equally authentic.


              


      

      


      
        	
                17.3

              	
                This
                  Agreement will supersede all previous agreements, arrangements,
                  memorandum
                  of understandings between the parties hereto upon signed and executed
                  by
                  all parties. 

              


      

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      

        IN
          WITNESS
          whereof
          this Agreement has been duly executed by all parties hereto the day and
          year
          first above written.


      

      


      SIGNED
        by

      

        /S/
          DONG
          SHUNSHENG

      

      DONG
        SHUNSHENG

      


      


      SIGNED
        by

      

        /S/
          ZHANG
          XIAOXIAO

      

      ZHANG
        XIAOXIAO

      


      


      SIGNED
        by

      

        /S/
          XIA
          WEILAN

      

      XIA
        WEILAN

      


      


      SIGNED
        by

      

        /S/
          CAI
          DAQIN

      

      CAI
        DAQIN

      


      


      SIGNED
        by

      

        /S/
          XIA
          FENGLING

      

      XIA
        FENGLING

      


      


      SIGNED
        by

      

        /S/
          ZENG
          YUNWO

      

      ZENG
        YUNWO

      


      


      SIGNED
        by

      for
        and
        on behalf of 

      

        /S/
          WENZHOU
          LIREN EDUCATION GROUP CO., LTD

      

      WENZHOU
        LIREN EDUCATION GROUP CO., LTD

      


      


      SIGNED
        by

      for
        and
        on behalf of 

      

        /S/
          AI-ASIA
          INFORMATION TECHNOLGOY (SHANGHAI) CO., LTD

      

      AI-ASIA
        INFORMATION TECHNOLGOY (SHANGHAI) CO., LTD


      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      


      Schedule
        1:  Amendments
        of the Article of Associations of Yucai


      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      


      Schedule
        2:  Primary
        Terms and Conditions of Letter of Warranty

      


      
        	1	
                Within
                  twenty years upon the Letter of Warranty, provided that the Teaching
                  Facility and Assets that are currently being used by Yucai ceases
                  to be
                  so, including but not limit to the changes of the purpose of land
                  usage
                  and obligee of the land and real properties, and which causes that
                  Yucai
                  cannot pay the Management Fee A to Hartcourt Education pursuant
                  to
                  Management Contract A, in this regards, Dong Shunsheng and His
                  Fellows
                  shall indemnify Hartcourt Education against all the losses incurred,
                  including but not limit to the Management Fee A. Moreover, Dong
                  Shunsheng
                  and His Fellows shall provide Teaching Facility and Assets comparable
                  to
                  current property area in use to Yucai free of any charges and
                  obligations;

              


      

      


      
        	
                2

              	
                In
                  the event of any loss to the New Company or Yucai, caused by the
                  Letter of
                  Funding and Investment Agreement duly signed by the Board of Yucai
                  and
                  Related Natural Persons, Dong Shunsheng and His Fellows shall fully
                  indemnify against all the losses and
                  liabilities;

              


      

      


      
        	
                3

              	
                Whenever
                  Dong Shunsheng and His Fellows obtain reasonable profit/returns
                  from
                  Yucai, they shall assign the profit/returns to the New Company
                  in full
                  amount;

              


      

      


      
        	
                4

              	
                Dong
                  Shunsheng and His Fellows agree that Hartcourt Education and the
                  New
                  Company will audit the accounts of Yucai periodically, including
                  without
                  limitation, account vouchers, account books and audit report, etc.
                  

              


      

      


      
        	
                5

              	
                The
                  aforesaid warranties made by Dong Shunsheng and His Fellows shall
                  be
                  secured by all their equity interests in Liren in pledge.
                  

              


      


      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      


      Schedule
        3:  Acknowledged
        Due Diligence Results & Financial Projections

       


      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      


      Schedule
        4:Primary
        Terms and Conditions of Management Contract A

      


      
        	1	
                Hartcourt
                  Education shall provide education management and consulting service
                  to
                  Yucai, detailed as follows:-

              


      

      


      
        	 	
                (1)

              	
                Assisting
                  to prepare and amend the corporate governance system, financial
                  management
                  policy of Yucai, etc.;

              


      

      
        	 	
                (2)

              	
                Assisting
                  to introduce the overseas advanced teaching model and
                  methodology;

              


      

      
        	 	
                (3)

              	
                Assisting
                  Yucai to upgrade its financial management, and assign financial
                  expert to
                  instruct and manage the financial department of
                  Yucai;

              


      

      
        	 	
                (4)

              	
                Assist
                  to set up the employment guide and coordination committee for graduates,
                  and assign the expert to instruct and coordinate the graduates
                  employment;
                  

              


      

      
        	 	
                (5)

              	
                To
                  offer the overseas exchange opportunity for students of Yucai as
                  it may
                  practically need; 

              


      

      
        	 	
                (6)

              	
                To
                  offer the overseas training opportunity for faculty of Yucai as
                  it may
                  practically need;

              


      

      
        	 	
                (7)

              	
                Assisting Yucai
                  to make material strategic decisions and the implementation procedures
                  in
                  detail;

              


      

      
        	 	
                (8)

              	
                Assisting
                  to manage Yucai and the New Company in fully compliance with the
                  regulations and rules of the United States Securities Exchange
                  Commission,
                  and offer the consulting service in the aspect of corporate governance,
                  legal, financial management, audit,
                  etc.;

              


      

      
        	 	
                (9)

              	
                Providing
                  other related consulting service as it may be required by Yucai.
                  

              


      

      


      
        	2	
                Yucai
                  will pay the Management Fee A to Hartcourt Education, detailed
                  as
                  follows:-

              


      

      


      (1) 
        Yucai
        shall pay the annual Base Management Fee of RMB500,000 cash to Hartcourt
        Education prior to February 1 of that year;

      (2) 
        Yucai
        shall pay the annual Performance Management Fee of RMB3,825,000 cash to
        Hartcourt Education prior to December 31 of that year, depending on its
        operating results; 

      (3) 
        Dong
        Shunsheng and His Fellows shall jointly guarantee that the Net Profit of
        Yucai
        can meet at least the payment of the Management Fee A specified in Clause
        5.2.(1) and 5.2.(2) in the year of 2007, 2008 and 2009, and in the event
        of the
        Net Profit less than the Management Fee A, Dong Shunsheng and His Fellows
        shall
        make up the discrepancy to Hartcourt Education before December 31 of each
        year
        in respect thereof. The Management Fee A shall be paid fully depending on
        Yucai’s actual performance afterwards. 

      


      
        	3	
                Other
                  expenses that Yucai shall bear, detailed as
                  follows:-

              


      

      


      All
        Expenses for Overseas student exchange of Yucai and overseas training for
        Yucai’s faculty shall be borne by Yucai;

      The
        actual management expenses for Yucai incurred by Hartcourt Education, shall
        also
        be borne by Yucai. 

      


      
        	4	
                The
                  Management Contract A shall have 20 years term, and effective from
                  the
                  date when Hartcourt Education legally obtains the 51% equity interest
                  in
                  the New Company. Yucai and Hartcourt Education may otherwise discuss
                  the
                  renewal as such term expires. 

              


      


      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

      


      Schedule
        5:  Primary
        Terms and Conditions of Management Contract B

       

      
        	
                1

              	
                Dong
                  Shunsheng shall provide the education management and consulting
                  service to
                  Yucai, detailed as follows:-

              


      

      


      
        	 	
                (1)

              	
                In
                  charge of making and implementing the general management and financial
                  management policy, etc. of Yucai and providing consulting service
                  in
                  practice;

              


      

      


      
        	 	
                (2)

              	
                In
                  charge of making and implementing the routine teaching management
                  of
                  Yucai, and assigning expert (the Principal) to instruct and lead
                  the
                  management work of Yucai;

              


      

      


      
        	 	
                (3)

              	
                In
                  charge of making and implementing teaching model and methodology
                  of Yucai
                  and providing consulting service in
                  practice;

              


      

      


      
        	 	
                (4)

              	
                To
                  provide consulting service in respect of the financial
                  management;

              


      

      


      
        	 	
                (5)

              	
                Assist
                  Hartcourt Education to make material strategic decision of Yucai
                  and the
                  implementation procedure, as well as the consulting service as
                  it may
                  require. 

              


      

      


      
        	
                2

              	
                Yucai
                  shall pay Management Fee B to Dong Shunsheng and His Fellows, detailed
                  as
                  follows:-

              


      

      


      Yucai
        shall pay the Management Fee B to Dong Shunsheng and His Fellows each year
        of
        (i) RMB3,675,000 cash, or (ii) Net Profit - Management Fee A, whichever is
        lower, before December 31 of that year for 2007, 2008 and 2009; The Management
        Fee B shall be paid fully depending on Yucai’s actual performance
        afterwards.

      


      
        	
                3

              	
                The
                  Management Contract B shall have 20 years term, effective from
                  the date
                  when Hartcourt Education legally obtains the 51% equity interest
                  in the
                  New Company. Yucai and Dong Shunsheng and His Fellows may otherwise
                  discuss the renewal as such term expires.


              


      


      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      


      Schedule
        6:  
Assets
        List and Property Right Certificates of Yucai

      



      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      


      Schedule
        7:              
Employee
        Payroll and Students Roster of Yucai

       


      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      


      Schedule
        8: 
All
        Licenses & Permits for Sponsoring and Running Yucai

      



      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      


      Schedule
        9:             
Primary Terms and Conditions of the Sale and Purchase
        Agreement

      

        
          	
                  1

                	
                  Liren
                    will sell its 51% equity interest in the New Company to Hartcourt
                    Education. 

                
	 	 
	
                  2

                	
                  The
                    Consideration for the sale and purchase of the Sale Interests
                    Shall be an
                    aggregate of US$2,000,000 cash and 5,500,000 Restricted Shares
                    of
                    Hartcourt Common Stock, based on the assets of Yucai, the capital
                    injected
                    to the New Company from Liren and the financial projections each
                    year in
                    the future.

                
	 	 
	
                  3

                	
                  Hartcourt
                    Education shall credit the Consideration to the accounts designated
                    by
                    Liren.

                
	 	 
	
                  4

                	
                  The
                    Delivery Date of the Sale Interests in the New Company shall
                    be within 30
                    business days upon obtaining the offcial approval from Governmental
                    Agency
                    on Foreign Investment; and Since the Delivery Date of the Sale
                    Interests
                    in the New Company, Hartcourt Education shalll take over the
                    51% control
                    of the New Company from Liren as shareholder pursuant to the
                    Agreement.
                    

                
	 	 
	
                  5

                	
                  Hartcourt
                    Education shall credit the Consideration to the nominees designated
                    by
                    Liren in four installments, satisfied as details
                    hereunder:-

                


        

      

      


      
        	 	
                (1)

              	
                Within
                  30 business days upon the Delivery Date of the Sale Interest in
                  the New
                  Company, Hartcourt Education shall issue and allot the Consideration
                  of
                  total 5,500,000 Restricted Shares of Hartcourt Common Stock to
                  the
                  nominees designated by Liren. Hartcourt and Hartcourt Education
                  shall
                  jointly guarantee the average closing price of the 3 days immediately
                  prior to the Consideration Shares Trading Date at not less than
                  US$0.50
                  per share, otherwise, Hartcourt shall, within 10 business days
                  from the
                  Consideration shares Trading Date, credit additional cash or issue
                  and
                  allot to the nominees additional new Restricted Shares of Hartcourt
                  Common
                  Stock to make it up. 

              


      

      
        	 	
                (2)

              	
                Within
                  30 business days upon the Delivery Date of the Sale Interests in
                  the New
                  Company, Hartcourt Education shall credit US$1,000,000 cash Consideration
                  to the accounts designated by
                  Liren;

              


      

      
        	 	
                (3)

              	
                Before
                  July 31, 2007, Hartcourt Education shall credit US$500,000 cash
                  Consideration to the accounts designated by
                  Liren;

              


      

      
        	 	
                (4)

              	
                Before
                  January 31, 2008, Hartcourt Education shall credit US$500,000 cash
                  Consideration to the accounts designated by Liren.
                  

              


      

      


      
        	6	
                After
                  Hartcourt Education controls the 51% equity interest in the New
                  Company,
                  the New Company will become a sino-foreign joint venture; the Chairman
                  of
                  the Board and finance controller of the New Company will be appointed
                  by
                  Hartcourt Education; The Board of the New Joint Venture Company
                  shall
                  comprise of 5 directors, among which Hartcourt Education is entitled
                  to
                  nominate and appoint 3 directors, and Liren is entitled to nominate
                  and
                  appoint 2 directors. 

              


      

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      
        	7	
                After
                  Hartcourt Education controls the 51% equity interest in the New
                  Company,
                  the Chairman of the Board and the Principal of Yucai will still
                  be
                  appointed by Liren, while the finance controller of which will
                  be
                  appointed by Hartcourt Education. The board of Yucai shall comprise
                  of 5
                  directors, among which Hartcourt Education is entitled to nominate
                  and
                  appoint 3 directors, and Liren is entitled to nominate and appoint
                  2
                  directors. 

              


      

      


      
        	8	
                After
                  Hartcourt Edcuation controls the 51% equity interest in the New
                  Company,
                  the Net Profit shall be allocated to Liren and Hartcourt Education
                  based
                  on their respective equity percentage in the New Company.
                  

              


      

      


      
        	9	
                The
                        business term of the New Joint Venture Company shall be 50
                  years.
                  

              


      


      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      


      Schedule
        10:  Primary
        Terms and Conditions of the Share Consideration

       

       

      27