EXHIBIT 10.130

              $12,000,000 CONVERTIBLE SECURED PROMISSORY NOTE DATED
             AUGUST 8, 1996 ISSUED BY THE HARTCOURT COMPANIES, INC.

                           PURCHASE AND SALE AGREEMENT



DATED:                                                           8, August 1996

PARTIES:

1.   "Hartcourt"

     The Hartcourt  Companies,  Inc., a corporation  organised under the laws of
     the United States, State of Utah.

2.   "NuOasis"

     NUOASIS  INTERNATIONAL INC., a corporation  organised under the laws of the
     Commonwealth of the Bahamas.

RECITALS:

1.1  NuOasis is the owner and  developer  of a  commercial  real estate  project
     located in mainland  China  commonly  known as the Peony Gardens  Property,
     more fully described in Schedule "1" annexed hereto (the "Property"); and,

1.2  Hartcourt wishes to purchase the Property.

OPERATIVE PROVISIONS:

1.   PURCHASE AND SALE

     1.1  Upon the terms and subject to the conditions of this Agreement, on the
          Closing  Date,  NuOasis  agrees to sell and  transfer  the Property to
          Hartcourt and Hartcourt agrees to purchase and accept the Property for
          the consideration set forth in this Agreement.

     1.2  In exchange for the Property,  Hartcourt  shall pay to NuOasis the sum
          of Twenty Two Million Dollars (USD22,000,000), hereinafter referred to
          as  the  "Purchase  Price",   consisting  of  a  Convertible   Secured
          Promissory  Note in the  principal  amount of Twelve  Million  Dollars
          (USD12,000,000)  in  the  form  annexed  hereto  as  Schedule  2  (the
          "Hartcourt Note") and the greater of Two Million (2,000,000) shares of
          Hartcourt  common stock or that number of shares of  Hartcourt  common
          stock   having  a  market   value   equal  to  Ten   Million   Dollars
          (USD10,000,000)  at Closing  (the  "Shares").  For the purpose of this
          Agreement, "Market Value" shall mean fifty percent (50%) of the thirty
          (30) days moving  average  closing  "bid" price for  Hartcourt  common
          stock  as  quoted  by  the  United  States  National   Association  of
          Securities Dealers Electronic Bulletin Board immediately preceding the
          Closing Date.

                                     - 1 -

<PAGE>


2.   CLOSING

     2.1  The  closing  of  the  delivery  and  transfer  of the  Property  (the
          "Closing") shall occur at the offices of Hartcourt on a date ("Closing
          Date") to be mutually  agreed upon by Hartcourt  and NuOasis after (i)
          exchange of all books, records, financial information,  documents, and
          other  materials  deemed  necessary to completion  of the  transaction
          contemplated  under this Agreement,  and (ii) completion of all review
          periods  provided for in this  Agreement.  Exchange of documents under
          this Agreement shall begin as soon as possible after execution hereof.
          In any case,  the Closing  Date shall be no later than 30th  September
          1996.

     2.2  At the Closing,  the following  transactions shall occur and documents
          shall  be   exchanged,   all  of  which   shall  be  deemed  to  occur
          simultaneously:

          2.2.1 NuOasis will deliver, or cause to be delivered, to Hartcourt:

               2.2.1.1 the documents  necessary to establish the interest in the
                    Property and to transfer  ownership of NuOasis' right, title
                    and  interest in and to the Property to  Hartcourt,  in form
                    and substance acceptable to Hartcourt;

               2.2.1.2 such other documents,  instruments,  and/or certificates,
                    if any,  as are  required  to be  delivered  pursuant to the
                    provisions  of  this  Agreement,  or  which  are  reasonably
                    determined by the parties to be required to  effectuate  the
                    transactions contemplated in this Agreement, or as otherwise
                    may be reasonably  requested by Hartcourt in  furtherance of
                    the intent of this Agreement.

               2.2.1.3 certificates or other conveyance  documents acceptable to
                    NuOasis transferring the Purchase Price to NuOasis;

     2.3  From time to time after the Closing,  upon the  reasonable  request of
          any party,  the party to whom the request is made shall  deliver  such
          other and further documents,  instruments,  and/or certificates as may
          be  necessary  to  more  fully  vest  in  the  requesting   party  the
          consideration  provided  for  in  this  Agreement  or  to  enable  the
          requesting  party to obtain the rights and  benefits  contemplated  by
          this Agreement.

                                     - 2 -

<PAGE>


3.   REPRESENTATIONS AND WARRANTIES OF HARTCOURT

     Hartcourt represents and warrants to NuOasis that:

     3.1  Hartcourt is a  corporation,  validly  existing  and in good  standing
          under the laws of the United States, State of Utah, with the power and
          authority  to  carry  on its  business  as now  being  conducted.  The
          execution and delivery of this Agreement and the  consummation  of the
          transaction contemplated in this Agreement have been, or will be prior
          to Closing,  duly  authorized by all  requisite  action on the part of
          Hartcourt.  This  Agreement  has been duly  executed and  delivered by
          Hartcourt and the Hartcourt  Note the Shares to be issued by Hartcourt
          hereunder will  constitute  validly  issued shares and a binding,  and
          enforceable obligation of the corporation.

     3.2  To the best of  Hartcourt's  knowledge  and belief,  the execution and
          performance of this Agreement will not violate,  or result in a breach
          of, or constitute a default in, any provisions of applicable  law, any
          agreement, instrument, judgment, order or decree to which Hartcourt is
          a party  or to which it is  subject  so as to give  rise to a claim by
          anyone  against the  Hartcourt  Note or Shares  which would in any way
          effect the enforceability or validity of this Agreement or Hartcourt's
          ability to conclude the transaction contemplated under this Agreement.

                                     - 3 -

<PAGE>


     3.3  The Shares. The Shares to be issued pursuant to this Agreement will be
          issued at Closing,  free and clear of liens,  claim, and encumbrances,
          and Hartcourt can issue such shares without the consent or approval of
          any person, firm, corporation, or government authority.

     3.4  Capitalization. The capitalization of Hartcourt is attached hereto and
          incorporated herein as Schedule "3".

     3.5  Financial Information. Hartcourt has provided NuOasis, or will provide
          prior to  Closing,  copies of its  Annual  Report  containing  audited
          financial statements for the years ending 31st December 1994 and 1995,
          and all other  information  included in such  reports or  delivered to
          NuOasis  pursuant  to this  Agreement,  shall  be  referred  to as the
          "Hartcourt   Financials".   Except  as  set  forth  in  the  Hartcourt
          Financials,  Hartcourt  has no  obligations  or  liabilities  (whether
          accrued,  absolute,  contingent,  liquidated or  otherwise,  including
          without limitation any tax liabilities due or to become due) which are
          not fully  disclosed and  adequately  provided for  excepting  current
          liabilities  incurred and obligations under agreements entered into in
          the  usual  and  ordinary  course  of  business  since the date of the
          Hartcourt Financials, none of which (individually or in the aggregate)
          are  material  except  as  expressly  indicated  there  use  is  not a
          guarantor or otherwise  contingently liable for any material amount of
          indebtedness.  Except as indicated in the Hartcourt Financials,  there
          exists no default under the  provisions of any  instrument  evidencing
          any indebtedness or of any agreement in relation thereto.

     3.6  Litigation.  To the best knowledge and belief of Hartcourt,  except as
          disclosed in the Hartcourt  Financials or pursuant to this  Agreement,
          there  is  neither  pending  nor  threatened,   any  action,  suit  or
          arbitration to which its Hartcourt property,  assets or business is or
          is likely to be subject and in which an unfavorable outcome, ruling or
          finding  will or is likely to have a  material  adverse  effect on the
          condition,  financial or otherwise,  or create a material liability on
          the part of Hartcourt,  or which would conflict with this Agreement or
          any action taken or to be taken in connection with it.

     3.7  Tax Matter. To the extent that its tax filings, liabilities, payments,
          or provisions for payment could give rise to a claim against or affect
          the right of ownership to the Shares, Hartcourt has filed or will file
          all federal, state, and local income, excise,  property, and other tax
          returns,  forms, or reports,  which are due or required to be filed by
          it and has paid, or made adequate  provision for payment of all taxes,
          interest,  penalty fee, assessment, or deficiencies shown to be due or
          claimed  to be due or which have or may become due on or in respect of
          such returns or reports.

                                     - 4 -

<PAGE>


     3.8  Contracts.  Except as disclosed pursuant to this Agreement,  or in the
          Hartcourt  Financials,  there are no  contracts,  actual or contingent
          obligations,  agreement,  franchises,  license  agreements,  or  other
          commitments  between Hartcourt third parties which are material to its
          business,  financial  condition,  or results of operation,  taken as a
          whole.  For purposes of the preceding  sentence,  the term  "material"
          refers to any  obligation  or  liability  which by its terms calls for
          aggregate payments of more than Ten Thousand Dollars (USD10,000).

     3.9  Material  Contract  Breaches:  Defaults.  To the  best of  Hartcourt's
          Knowledge and relief, it has not materially  breached,  nor has it any
          knowledge of any pending or threatened claims or any legal basis for a
          claim that it has materially breached,  any of the terms or conditions
          of any agreements, contracts, or commitments to which it is a party or
          is bound and which  might give rise to a claim by anyone  against  the
          Note or the  Shares,  and there is no event of default or other  event
          which,  with  notice  or  lapse of time or both,  would  constitute  a
          default in any material rise to a claim against the Note or the Shares
          in respect of which  Hartcourt has not taken adequate steps to prevent
          such a default from occurring.

                                     - 5 -

<PAGE>


     3.10 Securities Laws. Hartcourt is a public company and represents that, to
          the  best of its  knowledge,  except  as  disclosed  in the  Hartcourt
          Financials,  it has no existing  or  threatened  liabilities,  claims,
          lawsuits,  or basis for the same with respect to this  original  stock
          issuance to its founders, its initial public offering, or any dealings
          with its stockholders, the public, the brokerage community, the United
          States  Securities  And Exchange  Commission  ("SEC"),  any U.S. state
          regulatory  agencies,  or  other  person.  Hartcourt  is  currently  a
          non-reporting  company and is not required to file quarterly or yearly
          reports.  Hartcourt  is in the  process of filing its Form 10 with the
          SEC.  Hartcourt  is  currently  published in Standard and Poors and is
          cleared therefore for secondary trading in Standard and Poors approved
          states.

     3.11 Brokers.  Hartcourt  has agreed to pay a finder's  fee with respect to
          the transaction  contemplated in this Agreement to Asian International
          Development Ltd. ("AID"), its assignees or nominees,  and to Guangoong
          Investments Ltd. ("GIL"), its assignees or nominees in an amount to be
          negotiated.  To the best of Hartcourt's knowledge,  no other person or
          entity is  entitled,  or  intends  to claim  that it is  entitled,  to
          receive any fees or commissions in connection  with this  transaction,
          further  agrees  to  indemnify  and  hold  harmless   NuOasis  against
          liability  to AID,  GIL or any  broker  claiming  fees of any  kind or
          nature.

     3.12 Approvals.   Except  as  otherwise  provided  in  this  Agreement,  to
          Hartcourt's best knowledge and belief no  authorization,  consent,  or
          approval  of,  or  registration   or  filing  with  any   governmental
          authority,  or any other person, is required to be obtained or made by
          connection with  Hartcourt's  execution,  delivery,  or performance of
          this Agreement.

     3.13 Full  disclosure.   The  information  concerning  set  forth  in  this
          Agreement,  and in the  Hartcourt  Financials,  is,  to  the  best  of
          Hartcourt's  knowledge  and  belief,  complete  and  accurate  in  all
          material  respects  and does not  contain  any untrue  statement  of a
          material  fact or omit to state a material  fact  required to make the
          statements made, in light of the  circumstances  under which they were
          made, not misleading.

     3.14 Date of Representations  and Warranties.  Each of the  representations
          and  warranties of set forth in this  Agreement is true and correct at
          and as of the Closing  Date,  with the same force and effect as though
          made at and as of the Closing  Date,  except for changes  permitted or
          contemplated by this Agreement.

                                     - 6 -

<PAGE>



4.   REPRESENTATIONS AND WARRANTIES OF NUOASIS

     NuOasis represents and warrants to Hartcourt that:

     4.1  NuOasis  is the owner of the  Property  and will  certify  in form and
          substance acceptable to Hartcourt at Closing.

     4.2  NuOasis is a corporation  duly  incorporated,  validly existing and in
          good standing under the laws of the Commonwealth of Bahamas,  with the
          corporate  power and  authority  to carry on its business as now being
          conducted.  In addition,  NuOasis is duly  qualified to do business in
          each  jurisdiction in which the nature of its business  requires it to
          be so  qualified,  except to the extent that the failure to so qualify
          does not have a material  adverse  effect on the  business of NuOasis,
          taken as a whole. The execution and delivery of this Agreement and the
          consummation of the  transactions  contemplated in this Agreement have
          been,  or will be prior to Closing,  duly  authorized by all requisite
          corporate actions on the part of NuOasis,  to the extent, if any, that
          such  authorizations  are  necessary.  This  Agreement  has been  duly
          executed and delivered by NuOasis and constitutes the valid,  binding,
          and enforceable obligation of NuOasis.

     4.3  NuOasis has provided to  Hartcourt,  or will provide prior to Closing,
          appraisals,  construction costs and budgets, and all other information
          related to the Property in the possession of NuOasis, or available for
          NuOasis.  Such  information  shall  be  referred  to as the  "Property
          Reports".  All  financial  statements  and  reports  included  in  the
          Property  Reports and prepared by NuOasis,  are prepared in accordance
          with generally acceptable  accounting standards and present fairly the
          condition  of the  Property.  Except  as  indicated,  there  exists no
          default under the  provisions of any  instrument  evidencing  NuOasis'
          ownership  of the Property and NuOasis is not a guarantor or otherwise
          contingently  liable for any material amount of indebtedness  relating
          thereto.

     4.4  To the best knowledge and belief of NuOasis,  there is neither pending
          nor threatened,  any action,  suit,  arbitration,  proceeding (whether
          federal,  state,  local or foreign)  or claim to which  NuOasis or the
          Property  is  or  is  likely  to be  named  as a  party  in  which  an
          unfavorable  outcome,  ruling or  finding  will or is likely to have a
          material adverse effect on the condition,  financial or otherwise,  of
          the Property,  or create any material  liability on the part of owners
          of the Property,  or which would  conflict with this  Agreement or any
          action taken or to be taken in connection with it.

                                     - 7 -

<PAGE>

     4.5  To NuOasis's best knowledge and belief, no authorization,  consent, or
          approval  of,  or  registration  or  filing  with,  any   governmental
          authority  or any other  person is  required to be obtained or made by
          NuOasis in connection with the execution,  delivery, or performance of
          this Agreement.

     4.6  The information  concerning NuOasis set forth in this Agreement and in
          the  Property  Reports  is,  to the best of  NuOasis's  knowledge  and
          belief,  complete and  accurate in all material  respects and does not
          contain  any untrue  statement  of a material  fact or omit to state a
          material  fact required to make the  statements  made, in light of the
          circumstances under which they were made, not misleading.

5.   CONDITIONS PRECEDENT TO OBLIGATIONS OF NUOASIS

     All  obligations  of  NuOasis  under  this  Agreement  are  subject  to the
     fulfillment,  prior to or as of the Closing  Date, of each of the following
     conditions:

     5.1  The  representations  and  warranties  by Hartcourt  set forth in this
          Agreement  shall be true and  correct at and as of the  Closing  Date,
          with the same force and effect as though made at and as of the Closing
          Date, except for changes permitted or contemplated by this Agreement.

     5.2  Hartcourt  shall  have  performed  and  complied  with all  covenants,
          agreements,  and conditions required by this Agreement to be performed
          or complied with by it prior to or at the Closing.

     5.3  Hartcourt shall have taken all corporate and other action necessary to
          issue the Shares and the  Hartcourt  Note  constituting  the  Purchase
          Price to NuOasis pursuant to this Agreement.

     5.4  All  instruments  and documents  delivered to NuOasis  pursuant to the
          provisions of this Agreement  shall be satisfactory to NuOasis and its
          legal counsel.

6.   CONDITIONS PRECEDENT TO OBLIGATIONS OF HARTCOURT

     All  obligations  of  NuOasis  under  this  Agreement  are  subject  to the
     fulfillment,  prior to or as of the Closing  Date, of each of the following
     conditions:

                                     - 8 -

<PAGE>


     6.1  The  representations  and  warranties  by  NuOasis  set  forth in this
          Agreement  shall be true and correct with the same force and effect as
          though  made  at  and as of  the  Closing  Date,  except  for  changes
          permitted or contemplated by this Agreement.

     6.2  NuOasis  shall  have   performed  and  complied  with  all  covenants,
          agreements,  and conditions required by this Agreement to be performed
          or complied with by it prior to or at the Closing.

     6.3  NuOasis shall have taken all  corporate and other action  necessary to
          transfer NuOasis ownership and title to the Property to Hartcourt.

     6.4  Before  Closing,  NuOasis will have delivered the Property  Reports to
          Hartcourt.  NuOasis shall specifically  provide to Hartcourt schedules
          of all costs  related to the  Property as of 31st March,  1996 and all
          other  documents   necessary  to  substantiate  to  Hartcourt's   sole
          satisfaction  the agreed  value of not less than  Twenty  Two  Million
          Dollars  (USD22,000,000).  Upon  receipt  and  review of the  Property
          Reports,  Hartcourt  shall  have  fifteen(15)  business  days to raise
          objections to the information contained in the Property Reports, which
          shall  be  accomplished  by  submission  of a  written  list  of  such
          objections to NuOasis, and to conduct a valuation of the Property.  If
          there  are  objections,  or if  the  valuation  of  the  Property,  as
          determined by Hartcourt,  or a recognised independent appraiser acting
          for Hartcourt, is less than Twenty-Two Million Dollars(USD22,000,000),
          then  Hartcourt  shall have the  option to  terminate  this  Agreement
          without  penalty.  Alternatively,  Hartcourt  may  elect,  in its sole
          discretion, to waive objections and proceed with Closing.

     6.5  All instruments and documents  delivered to Hartcourt  pursuant to the
          provisions of this Agreement  shall be  satisfactory  to Hartcourt and
          its legal counsel. NuOasis shall provide to Hartcourt prior to Closing
          evidence satisfactory to Hartcourt that the representations of NuOasis
          herein and the  interest in the  Property is legally  created and duly
          enforceable.

7.   TERMINATION

     7.1  This Agreement may be terminated at any time prior to the Closing Date
          without liability on the part of either Hartcourt or NuOasis:

                                     - 9 -

<PAGE>


          7.1.1 by mutual consent of Hartcourt and NuOasis;

          7.1.2by  Hartcourt  or  NuOasis,  (unless  the  action  or  proceeding
               referred  to is  caused  by a breach  or  default  on the part of
               Hartcourt or NuOasis of any of their representations, warranties,
               or  obligations  under  this  Agreement),  if there  shall be any
               actual or threatened  action or proceeding by or before any court
               or any other  governmental  body which  shall  seek to  restrain,
               prohibit,  or invalidate the  transactions  contemplated  by this
               Agreement  and which,  in the  judgment of  Hartcourt or NuOasis,
               made in good faith and based  upon the  advice of legal  counsel,
               makes  it   inadvisable   to   proceed   with  the   transactions
               contemplated by this Agreement;

          7.1.3by  NuOasis  or  Hartcourt  (as the case may be) if, as  provided
               herein upon Hartcourt's  disapproval of the Value of the Property
               or  NuOasis'  disapproval  of  the  Value  of the  Shares  or the
               financial  condition of  Hartcourt,  including but not limited to
               its capitalisation, at any time prior to Closing.

8.   TERMINATION WITH CAUSE

     If this  Agreement is  terminated  for breach or otherwise  for cause,  the
     non-breaching  party shall be reimbursed by the other party of all expenses
     and costs related to this Agreement in the amount of Fifty Thousand Dollars
     (USD50,000).

9.   MISCELLANEOUS PROVISIONS

     9.1  All  representations,  warranties,  and covenants made by any party in
          this   Agreement   shall   survive  the  Closing   hereunder  and  the
          consummation  of the  transactions  contemplated  hereby for three (3)
          years from the Closing  Date.  Hartcourt and NuOasis are executing and
          carrying  out the  provisions  of this  Agreement  in  reliance on the
          representations, warranties, and covenants and agreements contained in
          this Agreement or at the Closing of the  transactions  herein provided
          for including any  investigation  upon which it might have made or any
          representations, warranty, agreement, promise, or information, written
          or oral,  made by the other  party or any other  person  other than as
          specifically set forth herein.

                                     - 10 -

<PAGE>


     9.2  All costs and expenses in the proposed sale and transfer  described in
          this Agreement shall be borne by the following manner:

          9.2.1each party has been  represented  by its own  attorney(s) in this
               transaction, shall pay the fees of its own attorney(s), except as
               may be expressly set forth herein to the contrary.

          9.2.2each party shall bear its reasonable  shares of all other Closing
               costs and expenses arising from this Agreement.

     9.3  At any time and from time to time,  after  the  effective  date,  each
          party will execute such additional instruments and take such action as
          may be  reasonably  requested by the other party to confirm or perfect
          title to any property transferred  hereunder or otherwise to carry out
          the intent and purposes of this Agreement.

     9.4  Any failure of any party to this  Agreement  to comply with any of its
          obligations,  agreements,  or  conditions  hereunder  may be waived in
          writing by the party to whom such  compliance is owed.  The failure of
          any  party  to  this  Agreement  to  enforce  at any  time  any of the
          provisions  of this  Agreement  shall in no way be  construed  to be a
          waiver of any such  provision  or a waiver of the right of such  party
          thereafter to enforce each and every such provision.  No waiver of any
          breach of or non-compliance  with this Agreement shall be held to be a
          waiver of any other or subsequent breach or non-compliance.

     9.5  All  notices and other  communications  hereunder  shall  either be in
          writing and shall be deemed to have been given if delivered in person,
          sent by overnight delivery service or sent by facsimile  transmission,
          to the parties hereto, or their designees, as follows:

          To Hartcourt:  The Hartcourt Companies, Inc.
                         19104 Norwalk Blvd.
                         Artesia, California 90703
                         Telephone: +1 310 403-1126
                         Facsimile: +1 310 403-1130

          To NuOasis:    NuOasis International Inc.
                         First Directors Limited
                         43 Elizabeth Avenue
                         Nassau, The Bahamas
                         Telephone:     +44 1624 815544
                         Facsimile:     +44 1624 815548

                                     - 11 -

<PAGE>


     9.6  The section and subsection headings in this Agreement are inserted for
          convenience  only and  shall  not  affect  in any way the  meaning  or
          interpretation of this Agreement.

     9.7  This  Agreement  may  be  executed   simultaneously  in  two  or  more
          counterparts,  each of which shall be deemed an  original,  but all of
          which together shall constitute one and the same instrument.

     9.8  Notwithstanding  that  this  Agreement  was  negotiated  and is  being
          contracted for in the Bahamas and any conflict-of-law provision to the
          contrary,  the  Agreement  shall  be  governed  by  the  laws  of  the
          Commonwealth of the Bahamas.

     9.9  This  Agreement  shall be binding upon the parties hereto and inure to
          the benefit of the parties,  their respective  heirs,  administrators,
          executors, successors, and assigns.

     9.10 This  Agreement  contains  the entire  agreement  between  the parties
          hereto and supersedes any and all prior agreements,  arrangements,  or
          understandings  between the parties  relating to the subject matter of
          this  Agreement.  No oral  understandings,  statements,  promises,  or
          inducements  contrary  to  the  terms  of  this  Agreement  exist.  No
          representations,  warranties,  covenants,  or  conditions,  express or
          implied, other than as set forth herein, have been made by any party.

     9.11 If any  part of this  Agreement  is  deemed  to be  unenforceable  the
          balance of the Agreement shall remain in full force and effect.

     9.12 This Agreement may be amended only by a written instrument executed by
          the parties or their respective successors or assigns.

     9.13 A facsimile,  telecopy or other  reproduction of this Agreement may be
          executed by one or more parties  hereto and such  executed copy may be
          delivered   by   facsimile   of   similar   instantaneous   electronic
          transmission device pursuant to which the signature of or on behalf of
          such  party can be seen,  and such  execution  and  delivery  shall be
          considered  valid,  binding and  effective  for all  purposes.  At the
          request of any party hereto,  all parties agree to execute an original
          of  this  Agreement  as  well  as any  facsimile,  telecopy  or  other
          reproduction hereof.

                                     - 12 -

<PAGE>


     9.14 Time  is of the  essence  of this  Agreement  and of  each  and  every
          provision hereof.

     IN WITNESS  WHEREOF,  the parties have executed this  Agreement the day and
year first above written.

THE HARTCOURT COMPANIES INC.


   /s/    Alan Phan
By:-------------------------------
   Name:     Alan Phan
   Title:    President

NuOASIS INTERNATIONAL INC.



By:-------------------------------
   Name:
   Title:

                                     - 13 -

<PAGE>


                                  SCHEDULE "1"

                                     to the
                           Purchase and Sale Agreement
                                 Dated July 1996

                                  THE PROPERTY

                                      1 - 1

<PAGE>


                                  SCHEDULE "2"

                                     to the
                           Purchase and Sale Agreement
                                 Dated July 1996

                       CONVERTIBLE SECURED PROMISSORY NOTE



THIS SECURITY AND THE SECURITIES  ISSUABLE UPON CONVERSION  HEREOF HAVE NOT BEEN
REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED (THE "ACT"),  BUT HAVE
BEEN ISSUED IN RELIANCE  UPON  REGULATION  S  PROMULGATED  BY THE UNITED  STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD
OR OTHERWISE  TRANSFERRED TO A "U.S.  PERSON" (AS DEFINED IN REGULATION S) OR TO
ANY PERSON WITH A UNITED STATES ADDRESS DURING THE RESTRICTED  PERIOD  FOLLOWING
ISSUANCE OF THE SECURITIES.  FOLLOWING  EXPIRATION OF THE RESTRICTED PERIOD, ANY
RESALE OR TRANSFER OF THE SECURITIES TO A U.S.  PERSON OR INTO THE UNITED STATES
MUST  BE  MADE  IN  ACCORDANCE  WITH  REGULATION  S,  PURSUANT  TO AN  EFFECTIVE
REGISTRATION  STATEMENT  UNDER  THE  ACT,  OR  PURSUANT  TO  AN  EXEMPTION  FROM
REGISTRATION UNDER THE ACT.

                                      2 - 1

<PAGE>


                       CONVERTIBLE SECURED PROMISSORY NOTE



U.S. $12,000,000                                            August 8, 1996
                                                            Artesia, California



         FOR VALUE  RECEIVED,  The  Hartcourt  Companies,  Inc.,  a  corporation
organised under the laws of the United States, State of Utah, with its principal
place of business in Artesia,  California  ("Maker"),  hereby promises to pay to
NuOasis  International,  Inc.,  a  company  organised  under  the  laws  of  the
Commonwealth  of the  Bahamas  ("Payee"or  "Holder")  the  principal  sum Twelve
Million Dollars  (US$12,000,000) with principal and accrued interest at the rate
of eight  percent  (8%) per annum due and payable 30 days after demand or August
31, 1997,  whichever  first occurs (the "Due Date").  This  Convertible  Secured
Promissory  Note (the  "Note") is issued by Maker  pursuant to the  Purchase and
Sale Agreement of even date (the "Purchase Agreement").

         To secure the payment of this Note,  Maker hereby  grants to the Holder
pursuant to a Security  Agreement  dated of even date between Maker and Holder a
security  interest  in the  property  set  forth  in  Exhibit  "A"  hereto  (the
"Collateral").  Upon  default,  the Holder may resort to any remedy  against the
Collateral  available  to a  secured  party  under  the  United  States  Uniform
Commercial  Code,  or laws of the  Peoples  Republic  of China.  Notwithstanding
anything to the contrary herein, this Note is without recourse. Payee and Holder
agree to look solely to the Collateral for satisfaction in the event of default.

         All  documents  and  instruments  now or  hereafter  evidencing  and/or
securing the indebtedness  evidenced  hereby or any part thereof,  including but
not limited to this Note and the Security  Agreement of even date, are sometimes
collectively referred to herein as the "Security Documents."

         All  agreements  in this  Note and all  other  Security  Documents  are
expressly  limited so that in no  contingency  or event  whatsoever,  whether by
reason of  acceleration  of maturity  of the  indebtedness  evidenced  hereby or
otherwise, shall the amount agreed to be paid hereunder for the use, forbearance
or detention of money exceed the highest lawful rate permitted under  applicable
usury laws. If, for any circumstance whatsoever, fulfillment of any provision of
this  Note or any  other  Security  Document  at the  time  performance  of such
provision shall be due shall involve exceeding any usury limit prescribed by law
which a court of competent  jurisdiction may deem applicable hereto,  then, ipso
facto, the obligations to be fulfilled shall be reduced to allow compliance with
such limit, and if, from any circumstance  whatsoever,  Payee shall ever receive
as interest an amount which would exceed the highest lawful rate, the receipt of
such excess shall be deemed a mistake and shall be canceled automatically or, if
theretofore  paid, such excess shall be credited against the principal amount of
the  indebtedness  evidenced  hereby to which the same may lawfully be credited,
and any  portion  of such  excess  not  capable  of being so  credited  shall be
refunded  immediately  to Maker.  Maker and Payee  affirm that the  indebtedness
evidenced  represents the partial  consideration for the Property being acquired
by Maker pursuant to the Purchase Agreement.

          Maker shall pay to Holder all  reasonable  costs,  expenses,  charges,
disbursements  and  attorneys'  fees  incurred by Holder  following  an Event of
Default in collecting,  enforcing or protecting  this Note or any other Security
Document,  whether incurred in or out of court, including appeals and bankruptcy
proceedings.



                                      2 - 2

<PAGE>


         If Maker utilizes the Collateral in any way to secure financing,  Maker
agrees to pay the net proceeds of such  financing to Holder to the extent of the
principal  balance of the Note,  and all  accrued  and unpaid  interest,  before
distributing any of such financing proceeds for other purposes.

CONVERSION FEATURES OF THE NOTE

         This Note is  convertible  into shares of the Maker's  common  stock as
hereinafter  provided.  At the election of Holder,  the Note is convertible into
the  greater  of that  number of shares of common  stock of Maker with a current
market value at the date of conversion equal to the unpaid principal balance due
on the Note.  "Market  Value"  for the  purpose  of this Note  shall  mean fifty
percent  (50%) of the moving  average  bid price of such shares for the ten (10)
business days immediately preceeding notice of conversion.

EXTENSION OF THE DUE DATE

         In the event the Maker hereof makes any principal reduction payments on
this Note on or before October 31, 1996, then the Due Date of this Note shall be
extended as follows:  For each One Million Dollars  (US$1,000,000)  of principal
reduction  payments  made on the Note,  the Due Date shall be extended by thirty
(30) days.

EVENTS OF DEFAULT

         Each of the following events or occurrences  shall constitute an "Event
of Default"  hereunder:  (a) if default is made in the  payment of any  monetary
amount payable hereunder, under the terms of any Security Document, or under the
terms of any other obligation of Maker to Payee hereunder,  within ten (10) days
following the date the same is due; (b) if default is made in the performance of
any other promise or obligation  described herein, in any Security Document,  or
in any other document  evidencing or securing any indebtedness of Maker to Payee
following ten (10) days prior notice to Maker of such default and the failure of
Maker to cure  such  default  within  ten (10) day  period;  (c) if Maker  shall
execute an assignment of any of its property for the benefit of creditors,  fail
to meet any obligations  herein  described,  be unable to meet its debts as they
mature,  suspend  its active  business or be  declared  insolvent  by any court,
suffer any  judgment  or decree to be rendered  against it in an amount  greater
than  US$10,000,  suffer a receiver  to be  appointed  for any of its  property,
voluntarily seek relief or have involuntary proceedings brought against it under
any  provision  now in force  or  hereinafter  enacted  of any law  relating  to
bankruptcy, or forfeit its charter, dissolve, or terminate its existence; (d) if
any writ of attachment,  garnishment or execution shall be issued against Maker;
(e) if any tax lien be assessed or filed  against  Maker;  (f) if any  warranty,
representation or statement made or furnished to Payee by or on behalf of Maker,
including but not limited to any  information  provided to Payee in  conjunction
with the Purchase Agreement.

          Upon the occurrence of any Event of Default, which is not cured within
ten (10) days  after  notice of such  default  is given by Holder or at any time
thereafter when any Event of Default may continue, Holder may, at its option and
in  its  sole  discretion,  declare  the  entire  balance  of  this  Note  to be
immediately due and payable,  and upon such declaration all sums outstanding and
unpaid under this Note shall become and be in default,  matured and  immediately
due and payable,  without presentment,  demand, protest or notice of any kind to
Maker or any other person, all of which are hereby expressly waived, anything in
this Note or any other Security Document to the contrary notwithstanding.

                                      2 - 3

<PAGE>



         Payee and Maker hereby agree to trial by court and irrevocably agree to
waive jury trial in any action or proceeding  (including  but not limited to any
counterclaim)  arising  out of or in any way related to or  connected  with this
Note or any other Security Document,  the relationship  created thereby,  or the
origination,  administration or enforcement of the indebtedness evidenced and/or
secured by this Note or any other Security Document.

         This  Note has been  delivered  to Payee and  accepted  by Payee in the
Commonwealth  of the  Bahamas  and shall be  governed  and  construed  generally
according to the laws of said  jurisdiction  except to the extent that creation,
validity,  perfection or enforcement of any liens or security interests securing
this Note are governed by the laws of another jurisdiction.  Venue of any action
brought pursuant to this Note or any other Security Document, or relating to the
indebtedness  evidenced  hereby  or the  relationships  created  by or under the
Security  Documents shall, at the election of the party bringing the action,  be
brought in a United States federal court of appropriate  jurisdiction located in
or having jurisdiction over the Maker. Maker and Payee each waives any objection
to the  jurisdiction of or venue in any such court and to the service of process
issued by such court and agrees that each may be served by any method of process
pursuant to the laws of the  Commonwealth  of the Bahamas or, if applicable,  as
described in the United States Federal Rules of Civil Procedure. Maker and Payee
each waives the right to claim that any such court is an  inconvenient  forum or
any similar defense.

         If, in any  jurisdiction,  any  provision  of this Note shall,  for any
reason, be held to be invalid,  illegal,  or unenforceable in any respect,  such
holding shall not affect any other  provisions of this Note, and this Note shall
be construed,  to the extent of such invalidity,  illegality or unenforceability
(and only to such  extent) as if any such  provision  had never  been  contained
herein. Any such holding of invalidity,  illegality or  unenforceability  in one
jurisdiction  shall not prevent valid  enforcement of any affected  provision if
allowed under the laws of another relevant jurisdiction.

         As used in this  Note,  the term  "person"  shall  include,  but is not
limited to, natural persons, corporations,  partnerships, trusts, joint ventures
and other legal entities,  and all combinations of the foregoing natural persons
or entities,  and the term "obligation" shall include any requirement to pay any
indebtedness and/or perform any promise, term, provision,  covenant or agreement
included or provided for in this Note or any other Security Document.

         This Note and any and all certificates issued in replacement thereof or
in exchange therefor,  will bear a restrictive  transfer legend in the following
form:

"THIS SECURITY AND THE SECURITIES  ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED (THE "ACT"),  BUT HAVE
BEEN ISSUED IN RELIANCE  UPON  REGULATION  S  PROMULGATED  BY THE UNITED  STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD
OR OTHERWISE  TRANSFERRED TO A "U.S.  PERSON" (AS DEFINED IN REGULATION S) OR TO
ANY PERSON WITH A UNITED STATES ADDRESS DURING THE RESTRICTED  PERIOD  FOLLOWING
ISSUANCE OF THE SECURITIES.  FOLLOWING  EXPIRATION OF THE RESTRICTED PERIOD, ANY
RESALE OR TRANSFER OF THE SECURITIES TO A U.S.  PERSON OR INTO THE UNITED STATES
MUST  BE  MADE  IN  ACCORDANCE  WITH  REGULATION  S,  PURSUANT  TO AN  EFFECTIVE
REGISTRATION  STATEMENT  UNDER  THE  ACT,  OR  PURSUANT  TO  AN  EXEMPTION  FROM
REGISTRATION UNDER THE ACT."

                                      2 - 4

<PAGE>


         Executed by the undersigned the year and day first above written.

                                        The Hartcourt Companies, Inc.
                                        a Utah corporation



                                        By:------------------------------------
                                           Name:
                                           Title:

                                      2 - 5

<PAGE>


                                   EXHIBIT "A"

                                     to the
                       Convertible Secured Promissory Note
                           dated August 8, 1996



                                 THE COLLATERAL

                                      A - 1

<PAGE>


                               SECURITY AGREEMENT



         THIS SECURITY AGREEMENT  ("Agreement") is executed as of this 8th day
of August,  1996,  by The  Hartcourt  Companies,  Inc.,  a  Utah  corporation
(hereinafter referred to as the "Debtor"),  with its principal place of business
located at 19104 South Norwalk Blvd.,  Artesia,  California  90703,  in favor of
NuOasis  International  Inc.,  a  corporation  organised  under  the laws of the
Commonwealth of the Bahamas, its successors and assigns (hereinafter referred to
as the "Secured Party").

          WHEREAS,  the  following  recitals of fact are a material part of this
Agreement; and,

         WHEREAS,  Secured  Party is  granting  credit to Debtor  pursuant  to a
Convertible  Secured  Promissory  Note (the "Note")  dated of even date which is
required to be secured by the property described in Exhibit "A" to the Note (all
of which documents and instruments  evidencing  and/or securing  indebtedness of
Debtor to Secured  Party are  collectively  referred to herein,  along with this
Agreement,  as the  "Security  Documents").  Secured Party is unwilling to grant
credit to Debtor unless  Debtor  grants to Secured  Party the security  interest
granted herein according to the terms and conditions hereof.

1.       In  consideration of the granting of credit to Debtor by Secured Party,
         Debtor hereby grants to Secured Party a security interest  (hereinafter
         referred to as the "Security  Interest")  in the property  described on
         Exhibit "A" attached  hereto and made a part hereof,  whether now owned
         or hereafter acquired,  including all proceeds and products thereof and
         additions  and  accessions  thereto  (hereinafter  referred  to as  the
         "Collateral").  This  Agreement  and the rights  hereby  granted  shall
         secure  the  following  (hereinafter  collectively  referred  to as the
         "Obligations"):

          A.   Principal  and  Interest.  The  principal  amount  of  Borrower's
               indebtedness to Secured Party with interest  thereon as specified
               in  the  Security  Documents  and  any  renewals,  extensions  or
               modifications thereof; and

          B.   Expenses.  The  expense  of  all  legal  proceedings,   including
               attorneys' fees, brought by the Secured Party to enforce the Note
               or this  Agreement  and all  other  costs  and  expenses  paid or
               incurred by the Secured Party in respect of or in connection with
               the Collateral; and

          C.   Performance.  The observance and performance by the Debtor of all
               of the terms,  provisions,  covenants and obligations on its part
               to be observed or  performed  under the Note and this  Agreement;
               and

          D.   Other. Any and all  indebtedness,  obligations and liabilities of
               any kind and  nature of the Debtor to  Secured  Party,  direct or
               indirect,  absolute  or  contingent,  due or to become  due,  now
               existing or hereafter arising.

                                      A - 2

<PAGE>



2.   DEBTOR'S WARRANTIES, COVENANTS AND AGREEMENTS

     Debtor hereby warrants, covenants and agrees that:

     A.   Purpose. The Collateral covered by this Agreement is used or purchased
          for  use  primarily  for  business  purposes.   Although  proceeds  of
          Collateral are covered by this Agreement,  this shall not be construed
          to mean that  Secured  Party  consents to any sale of the  Collateral,
          except in ordinary course of business.

     B.   Transfer of Collateral Prohibited.  Debtor will not, without obtaining
          the prior  written  consent of Secured  Party,  transfer or permit any
          transfer  of the  Collateral  or any part  thereof to be made,  or any
          interest  therein to be created by way of a sale  (except as permitted
          above), or by way of a grant of a security interest, or by way of levy
          or other judicial process.

     C.   Access and  Inspection.  Debtor will, at all reasonable  times,  allow
          Secured Party or its  representatives  free and complete access to all
          of the Debtor's records for such inspection and examination as Secured
          Party deems necessary. Debtor shall also upon request of Secured Party
          from time to time submit up-to-date  schedules of the items comprising
          the Collateral in such detail as Secured Party shall require.

     D.   Third Party  Claims.  Debtor at its cost and expense  will protect and
          defend this  Agreement,  all of the rights of Secured Party  hereunder
          and the  Collateral  against  the  claims  and  demands  of all  other
          parties.  Debtor  will  promptly  notify  Secured  Party of any  levy,
          distraint or other  seizure by legal  process or otherwise of any part
          of  the  Collateral,   and  of  any  threatened  or  filed  claims  or
          proceedings that might in any way affect or impair any of the terms of
          the Agreement.

     E.   Insurance.  Debtor at its expense  will  obtain and  maintain in force
          insurance policies including fire and flood insurance, covering losses
          or damage to the Collateral.  The insurance policies to be obtained by
          Debtor  shall be in form and  amounts  acceptable  to  Secured  Party.
          Secured Party is hereby  irrevocably  appointed  Debtor's  attorney in
          fact to endorse  any check or draft that may be payable to the Debtor,
          alone or jointly  with other  payees,  so that the  Secured  Party may
          collect the proceeds  payable for any loss under such  insurance.  The
          proceeds of such  insurance,  less any costs and expenses  incurred or
          paid by the Secured Party in the collection thereof,  shall be applied
          in Secured  Party's  sole  discretion  either  toward the costs of the
          repair or replacement of the items damaged or destroyed, or on account
          of any sums secured hereby, whether or not then due or payable.

     F.   Notices.  Debtor will give Secured Party  immediate  written notice of
          any change in location of Debtor's place of business.

3.   EVENTS OF DEFAULT

     The  occurrence  of any of the  following  events shall  constitute  and is
     hereby defined to be an "Event of Default":

     A.   Breach of  Security  Agreement  Any  failure  or neglect to observe or
          perform  any  of  the  terms,  provisions,   promises,  agreements  or
          covenants of this  Agreement  and the  continuance  of such failure or
          neglect after notice thereof to the Debtor; or

                                      A - 3

<PAGE>


     B.   Failure  to Pay.  Any  failure  of the  Debtor  to pay any  amount  of
          principal and/or interest,  or any other sum due under the Note within
          ten (10) days  following  the date such amount became due and payable;
          or

     C.   False Statements. Any warranty,  representation or statement contained
          in this  Agreement or otherwise made or furnished to the Secured Party
          by or on behalf  of the  Debtor  shall be or shall  prove to have been
          false when made or furnished; or

     D.   Destruction  or Demise of  Collateral.  Any loss,  theft,  substantial
          damage,  destruction of, or the attachment of an encumbrance to any of
          the Collateral, or the voluntary or involuntary transfer of any of the
          Collateral (and said Collateral is not immediately replaced,  restored
          or returned) or the transfer of possession  thereof to anyone,  or the
          sale,  creation  of  a  security  interest,  lien,  attachment,  levy,
          garnishment,  distraint,  or other  process  of, in or upon any of the
          Collateral,  and if such  attachment or other  similar  process is not
          bonded or released within thirty (30) days after levy.

     E    Breach of  Conversion  Rights.  If the Debtor  shall fail to honor the
          Secured Party's conversion rights under the Note following thirty (30)
          days prior notice to Debtor and following  Secured Party's  compliance
          with all the  procedures of Debtor for  conversion  and the failure of
          Debtor to either  tender the shares  issuable  upon  conversion  or to
          notify  Secured Party of  additional  third party  requirements  (i.e.
          transfer agent) within said thirty (30) day period.

4.   SECURED PARTY'S REMEDIES

     Upon the occurrence of any Event of Default hereunder,  Secured Party shall
     have the following rights and remedies:

     A.   Acceleration and Possession. Secured Party may, at its option, declare
          all or any part of the  Obligations  immediately  due and  payable and
          Debtor shall on demand by Secured Party deliver the  Collateral to the
          Secured Party. Secured Party may, without further notice or demand and
          without legal  process,  take  possession of the  Collateral  wherever
          found and, for this purpose,  may enter upon any property  occupied by
          or in the control of Debtor.

     B.   All  Remedies  Available.  Secured  Party may pursue any legal  remedy
          available to collect all sums secured  hereby and to enforce its title
          in and right to possession of the  Collateral,  and to enforce any and
          all other rights or remedies available to it, and no such action shall
          operate as a waiver of any other right or remedy of the Secured  Party
          under the terms hereof or under applicable law.

     C.   Waiver of Defenses.  Debtor waives any  requirements  of  presentment,
          protest,  notices  of  protest,  notices  of  dishonor,  and all other
          formalities.  Debtor  waives all  rights  and/or  privileges  it might
          otherwise have to require  Secured Party to proceed against or exhaust
          the Collateral encumbered hereby or the Note or to proceed against any
          guarantor of the  Obligations or to pursue any other remedy  available
          to Secured Party in any particular  manner or order under the legal or
          equitable  doctrine or principle of marshaling  and/or  suretyship and
          further  agrees that Secured  Party may proceed  against any or all of
          the Collateral encumbered hereby in the event of default in such order
          and manner as Secured Party in its sole discretion may determine.  Any
          Debtor that has signed  this  Agreement  as a surety or  accommodation
          party,  or that has subjected its property to this Agreement to secure
          the  indebtedness of another hereby  expressly  waives the benefits of
          the  provisions  of any laws which could delay,  defeat or render more
          costly the Secured Party's realization upon the Collateral, waives any
          defense arising by reason of any disability or other defense of Debtor
          or by  reason  of the  cessation  from  any  cause  whatsoever  of the
          liability  of  Debtor,  and  waives the  benefit  of any  statutes  of
          limitation affecting the enforcement hereof.

                                      A - 4

<PAGE>


     D.   Sale of  Collateral.  Secured  Party  may  sell all or any part of the
          Collateral  at public or private  sale either  with or without  having
          such  Collateral  at the place of sale,  and with  notice to Debtor as
          provided herein. The proceeds of such sale, after deducting  therefrom
          all  expenses  of Secured  Party in  taking,  storing,  repairing  and
          selling the  Collateral  (including  attorneys'  fees and court costs)
          shall be applied to the payment of any part or all of the  Obligations
          and any other  indebtedness  or liability of Debtor to Secured  Party,
          and any surplus thereafter  remaining shall be paid to any person that
          may be legally entitled thereto.  In the event of a deficiency between
          such net proceeds from the sale of Collateral  and the total amount of
          Obligations owing by Debtor,  Debtor will promptly upon demand pay the
          amount of such deficiency to Secured Party.

     E.   Secured Party as  Purchaser.  At any sale,  public or private,  of the
          Collateral or any part thereof,  made in the enforcement of the rights
          and remedies of Secured Party,  Secured Party may purchase any part or
          parts of the Collateral or all thereof offered at such sale.

     F.   Notice of Sale.  Secured Party shall give Debtor  reasonable notice of
          any sale or other  disposition  of the Collateral or any part thereof.
          Debtor  agrees  that  notice  shall  be  conclusively   deemed  to  be
          reasonable  and  effective if such notice is mailed by  registered  or
          certified mail postage prepaid,  to Debtor at Debtor's principal place
          of  business  at least  ten  (10)  days  prior  to such  sale or other
          dispositions.

     G.   Applicable  Law Remedies.  Secured Party shall have all the rights and
          remedies afforded a Secured Party under applicable law.

5.   MISCELLANEOUS PROVISIONS

     A.   Waivers and  Cumulative  Remedies.  No Event of Default  hereunder  by
          Debtor shall be deemed to have been waived by Secured  Party except by
          a writing to that effect  signed by Secured Party and no waiver of any
          such Event of Default  shall operate as a waiver of any other Event of
          Default on a future occasion,  or as a waiver of that Event of Default
          after  written  notice  thereof and demand by Secured Party for strict
          performance of this Agreement.  All rights, remedies and privileges of
          Secured Party hereunder shall be cumulative and not  alternative,  and
          shall, whether or not specifically so expressed,  inure to the benefit
          of the Secured Party, its successors and assigns,  and all obligations
          of the Debtor shall bind its successors and legal representatives.

                                      A - 5

<PAGE>


     B.   Debtor's  Possession  of  Collateral.  Until an Event of Default,  the
          Debtor may retain  possession of the  Collateral and may use it in any
          lawful  manner  not  inconsistent  with  this  Agreement  or with  the
          provisions of any policies of insurance thereon.

     C.   Waiver of Jury Trial.  Secured  Party and Debtor hereby agree to trial
          by court and irrevocably  waive jury trial in any action or proceeding
          (including but not limited to any  counterclaim)  arising out of or in
          any way related to or connected  with this  Agreement,  the Note,  the
          relationship  created thereby,  or the origination,  administration or
          enforcement  of the  indebtedness  evidenced  and/or  secured  by this
          Agreement.

     D.   Severability.  Whenever  possible,  each  provision of this  Agreement
          shall be interpreted in such manner as to be effective and valid under
          applicable  law,  but if any  provision  of this  Agreement  shall  be
          prohibited by or invalid under applicable law, such provision shall be
          ineffective to the extent of such  prohibition or invalidity,  without
          invalidating   the  remainder  of  such  provision  or  the  remaining
          provisions of this Agreement.

     E.   Written  Amendment  Required.  No  modification,  rescission,  waiver,
          release or amendment of any provision of this Agreement  shall be made
          except by a written agreement subscribed by Debtor and Secured Party.

     F.   Full Force and Effect.  This Agreement  shall remain in full force and
          effect until all of the  indebtedness  and any  extensions or renewals
          thereof shall be paid in full.

     G.   Successors and Assigns.  Secured Party and Debtor as used herein shall
          include the heirs,  executors  or  administrators,  or  successors  or
          assigns of those parties. The provisions of this Agreement shall apply
          to the parties  according to the context  hereof and without regard to
          the number or gender of words and expressions used herein.

     H.   Financing Statements. A carbon,  photographic or other reproduced copy
          of this Agreement and/or any financing statement relating hereto shall
          be sufficient for filing and/or  recording as a financing  statements.
          Notwithstanding the foregoing, Debtor shall provide, shall execute and
          shall cooperate with Secured Party in the execution and filing of such
          financing  statements,  documents and instruments as Secured Party may
          reasonably  request in order to perfect the security  interest granted
          to Secured  Party  hereunder or otherwise to carry out the purposes of
          this Agreement.

     I.   Governing Law. This Security  Agreement and the transaction  evidenced
          hereby shall be construed under the laws of the United States,  as the
          same may from time to time be in effect.

         IN WITNESS  WHEREOF,  this Agreement has been executed and delivered on
behalf of and in the name of Debtor on the date indicated above.

                                             The Hartcourt Companies, Inc.
                                             a Utah corporation



                                             By:-------------------------------
                                                Name:
                                                Title:

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                                  SCHEDULE "3"

                                     to the
                           Purchase and Sale Agreement
                                 Dated August 8, 1996

                                 CAPITALIZATION

DESCRIPTION OF SECURITIES

The authorized  capital stock of the Company  consists of 110,001,000  shares of
capital stock,  composed of 100,000,000 shares of common stock, par value $0.001
per share ("Common Stock"),  1,000 shares of Preferred Stock, par value $.01 per
share ("Original  Preferred  Stock"),  and 10,000,000 shares of Preferred Stock,
par value $.01 per share ("Class A Preferred Stock").

COMMON STOCK

         Voting  Rights.  Subject  to the voting  rights of holders of  Original
Preferred  Stock  described  below,  each  holder of  shares of Common  Stock is
entitled  to one  vote for  each  share of  Common  Stock  for the  election  of
directors and on each other matter  submitted to a vote of the  stockholders  of
the Company.  Until December 31, 2010,  holders of Common Stock, are entitled to
elect  two-fifths  (2/5) of the  authorized  number of  members  of the Board of
Directors.  The  holders of Common  Stock  have  exclusive  voting  power on all
matters at any time no Preferred Stock with superior voting rights is issued and
outstanding.

         Liquidation Rights. Upon liquidation,  dissolution or winding up of the
Company,  holders of shares of Common  Stock are  entitled  to share  ratably in
distributions  of any assets after  payment in full or provision for all amounts
due creditors and provision for any liquidation preference of any other class or
series of stock of the Company then outstanding.

         Dividends. Dividends may be declared by the Board of Directors and paid
from time to time to the holders of Common Stock in cash,  stock,  or otherwise,
as may be determine by the Board of Directors, out of the net profits or surplus
of the Company.

ORIGINAL PREFERRED STOCK

         Voting Rights. The holders of Original Preferred Stock are not entitled
to vote on any matters except those affecting the Original  Preferred Stock, the
election of directors (to the extent described below) and as otherwise  required
by law. Until December 31, 2010, holders of Original Preferred Stock,  voting as
a single  class,  are  entitled to elect  three-fifths  (3/5) of the  authorized
number of members of the Board of Directors.

         Liquidation  Rights.  In the event of any  liquidation,  dissolution or
winding up of the Company,  holders of Original  Preferred Stock are entitled to
be paid the full par value of the Original Preferred Stock, $.01 per share.

         Conversion  Rights.  The holders of shares of Original  Preferred Stock
are entitled to convert each share of Original Preferred Stock into 1,000 shares
of fully paid non-assessable Common Stock.

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          Dividends.The  holders of shares of Original  Preferred  Stock are not
entitled to receive any dividends. Class A Preferred Stock

         General.  The  10,000,000  shares of  authorized  and unissued  Class A
Preferred  Stock may be issued  pursuant  to  action by the  Company's  Board of
Directors and without  further  action by the Company's  stockholders  with such
designations,   powers,   preferences  and  other  rights  and   qualifications,
limitations  and  restrictions  thereof as the Board of Directors may designate,
including but not limited to: (i) the distinctive designation of each series and
the number of shares that will constitute such series; (ii) the dividend rate on
the shares of such series,  any  restriction,  limitation or condition  upon the
payment of such dividends,  whether  dividends shall be cumulative and the dates
on which  dividends  are payable;  (iii) the prices at which,  and the terms and
conditions on which,  the shares of such series may be redeemed,  if such shares
are redeemable;  (iv) any preferential amount payable upon shares of such series
may be converted into other securities, if such shares are convertible;  and (v)
the voting rights,  including the right to vote as a class on designated matters
such as, but not limited to, the merger,  consolidation or sale of substantially
all of the Company's  assets,  or the approval of designated action by a greater
than two thirds  (2/3)  affirmative  vote,  and if so, the terms and  conditions
thereof and any limitations thereon.

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