Section 1

                                  Introduction

1.1      " School-To-School Link " Project Initiated By The Ministry Of
         Education

         In order to accelerate the modernization of education in China through
         the promotion of the use of computers and information technology ( IT )
         courses in elementary / secondary schools , the Ministry of Education
         initiated the " School-To-School Link " project in November, 2000. The
         objective of this project is to facilitate approximately 90% of all the
         elementary / secondary schools in China to be connected to the National
         and local Education Resources Centers through the Web and Distance
         Learning Satellite Network within 5 to 10 years. This will enable
         teachers and students alike to share the use of education resources on
         the Web, thus enhancing the quality of elementary / secondary school
         education.

         In order to coordinate the " School-To-School Link " project, Tengtu
         has made enormous investment the development of the " Tengtu distance
         Learning Satellite Network". This Network is able to facilitate the
         elementary / secondary schools to access superior education resources
         and knowledge of information technology through the linkage with the
         National and local Education Resources Centers now being proposed by
         the Ministry of Education.

1.2      Further Extension Of " Operation Morning Sun "

         Through " Operation Morning Sun ", the Audio / Visual Education Office
         ( AVEO ) and the National Center for Audio / Visual Education ( NCAVE
         ), under the Ministry of Education, and Tengtu have jointly established
         approximately 4,0000 IT-based elementary / secondary schools in China
         in calendar year 2000. These schools were equipped with standard
         Microsoft System Platform Software and other IT-based software,
         including Digital Classroom, Campus Network, Teaching Resources
         Database, etc., thus providing a software environment required for the
         conduction of IT courses.

--------------------------------------------------------------------------------

SchoolToSchoolNet                                                          Pg. 1


<PAGE>



         Although Digital Classroom and Campus Network facilitate the teachers
         and students of a school to share its internal resources and introduce
         information technology education, but it is only through the sharing of
         the national or regional education resources that the best possible
         IT-based education can be provided. For this purpose, Tengtu and many
         top universities in the National have jointly developed the Tengtu
         Distance Learning Satellite Network, which allows the elementary /
         secondary schools to be connected to the education resources through
         their Campus Networks and Digital Classrooms. By virtue of the Distance
         Learning Resources Database, the Campus Network can fully bring into
         play the functions of IT-based electronic teaching, thus realizing the
         combination of distance learning and traditional classroom education.

         In order to allow the elementary / secondary schools to provide
         IT-based education with the above features, Tengtu and the NCAVE will
         be cooperating to implement a further extension to the " Operation
         Morning Sun " -- the " School-To-School link " Project. The main
         objective of this Project is to establish a " Satellite-Based Broadband
         National Audio / Visual Education System Network ", which is formed by
         the National ( Central ) Education Resources Center in Beijing, the
         Local Education Resources Centers in key provinces / regions, the
         Education Resources Database, the Distance Learning Satellite
         Communications Network, and the participating schools.

--------------------------------------------------------------------------------
SchoolToSchoolNet                                                          Pg. 2


<PAGE>


                                    Section 2

         Contributions To The Extended " Operation Morning Sun " Project

2.1      Contribution from Tengtu Tian Di Network Co. Ltd. RMB - 80 Million
         ( U.S. $ 10 Million )

         (1)   To establish the " National Broadband Education Resources Center
               " and modify the Satellite Transmission System Platform -- RMB 20
               Million.

         (2)   To establish 8 to 10 " Local Broadband Education Resources
               Centers "-- RMB 20 Million.

         (3)   Production of the Education Resources Database which mainly
               consists of the broadband multimedia contents for the elementary
               / secondary school foundation education and adult education --
               RMB 30 Million.

         (4)   Donation of satellite reception hardware to 10,000 schools -- RMB
               10 Million.

2.2      Contribution from NCAVE under the Ministry of Education

         (1)   To provide the utilization rights of the existing satellite
               transmission system platform and channels.

         (2)   To provide more than 4M of satellite information channels.

         (3)   Adequate CERNET bandwidth.

         (4)   To provide the teaching resources and utilization rights of the
               TV channels of the China Education TV Station.

         (5)   To provide the education resources and evaluation / examination
               system of the Central Audio / Visual Education University.

         (6)   To provide policy-support documents and administrative support
               from the Ministry of Education.

--------------------------------------------------------------------------------
SchoolToSchoolNet                                                          Pg. 3

<PAGE>


                                    Section 3

                                    Ownership

Tengtu will gradually increase its registered capital to RMB 85-Million and
transfer 15% of the ownership to the National Center for Audio / Visual
Education of the Ministry of Education.

For the 8 to 10 " Local Broadband Education Resources Centers " which Tengtu
will jointly establish with the Local Education Committees, Tengtu will invest
RMB 20 Million for the development of the Education Resources Database,
Operating System and Application Software. This will enable Tengtu to secure a
51% majority ownership and operating rights.

--------------------------------------------------------------------------------
SchoolToSchoolNet                                                          Pg. 4


<PAGE>


                                    Section 4

                          Marketing and Operating Plan


4.1      Marketing ( Business Model )

         (1)   Products to be promoted to schools

         Product & Service              Price (RMB)                    Remarks

         1.    Satellite Reception System Including Satellite Receiver, HF Head,
               Ku-Band Antenna and application software

         2.    Tengtu Customer Terminal Application Software

         -------------------------------     ----------    ---------------------
                   Total Price               6,800         To be donated to each
                                                           school user by Tengtu
         -------------------------------     ----------    ---------------------
         3. Tengtu Education                 1,000         30G capacity
             Resources Database              per year
         -------------------------------     ----------    ---------------------
         4. Installation fee for             2,000
             satellite receiving station
         -------------------------------     ----------    ---------------------
         5. Charges for Distance             5,000
             Learning Resources              per year
             Information
         -------------------------------     ----------    ---------------------

         2)    It is forecasted that there will be 10,000 and 20,000 school
               users in calendar year 2001 and 2002 respectively.

--------------------------------------------------------------------------------
SchoolToSchoolNet                                                          Pg. 5


<PAGE>


         3)    NCAVE will promote the products to the Audio / Visual Education
               Offices at the provincial and city levels. These local offices
               will coordinate with the potential school users under their
               jurisdiction.

4.2      Operating Plan

         (1)   Near-Term Objectives

               -    To complete the establishment of the networks of the "
                    National Broadband Education Resources Center " and 8 to 10
                    " Local Broadband Education Resources Centers " before the
                    end of calendar year 2001.

               -    The local network connection of 10,000 schools with the "
                    National Education Resources Center " through the satellite
                    to be completed before the end of 2001.

               -    Launch a new series of marketing plans.

               -    Develop and produce various application systems software and
                    Education Resources Database.

         (2)  Long-Term Objectives

               -    To explore the family-based educational information market.

               -    To enable the Ministry of Education to provide the entire
                    Nation with a combination of school and home education
                    through the Web-based distance learning facilities.

               -    To explore the added-value and e-business markets.

--------------------------------------------------------------------------------
SchoolToSchoolNet                                                          Pg. 6


<PAGE>


                                    Section 5

                Financial Project For Calendar Years 2001 & 2002

5.1      ASSUMPTION

         The following assumptions are made:

         (1)   Revenue mainly comes from school subscribers, and there are
               10,000 and 20,000 school users in calendar years 2001 and 2002
               respectively.

         (2)   Each school is charged RMB 5,000 for the provision of Information
               Services and RMB 1,000 for the access to the Resources Database.
               Resources Database is only charged one time at the first year of
               subscription.

         (3)   Investment in fixed assets in year 2001 is RMB 30 Million.

5.2      PROFIT / LOSS ANALYSIS

                                                        Year
                                            2001                       2002
                                            RMB       (Million)         RMB
                                        -----------                 ------------
           Projected Revenue                 60                          170
                                        -----------                 ------------
           Projected Expenditure
           Wages                             2 ( 60 Staff )        5 (100 staff)
           Maintenance                       0.5                    1
           Establishment of Software         5                      7
           Resources
           Donation of Satellite Receivers  30                     60
           Other Expenditure                 2                      4
           Product Cost                      1.5                    3
           Procurement of Copy Rights       10                     14
           Depreciation of Fixed Assets      6                      6
           -------------------------------- ----------------      --------------
           Total Expenditure                57                    100
                                            ----------------      --------------
           Gross Profit                      3                     70
                                           (US$375,000)        (US$8.75 Million)
                                           ===============     =================

--------------------------------------------------------------------------------
SchoolToSchoolNet                                                          Pg. 7

         [Chart-Structural Diagram Of Satellite-Based Broadband Audio /
                        Visual Education System Network]

<PAGE>

                                   Appendix 1

        Satellite-Based Broadband Audio / Visual Education System Network

1.       OVERALL SYSTEM INTRODUCTION

          [Chart-Broadband Audio / Visual Education Resources Center -
                           Operating Network Diagram]

         Tengtu uses the satellite channels of the National Center for Audio /
         Visual Education (NCAVE) as the information downloading channel, and
         the CERNET ( China Education Research Information Network ) as the
         auxiliary communications channel to form the Communications System of
         the National Education Resources Center (NERC) Web Site.

         The NERC Web Site is established in Beijing. Through the
         thousand-megahertz Ethernet, this Center will become the Central Web
         Site which is connected to the

--------------------------------------------------------------------------------
SchoolToSchoolNet                                                          Pg. 8


<PAGE>


         CERNET through optical fibers to form a closed high-speed fiber optics
         star network in order to realize information exchange between the
         National Center Web Site and the Local Education Resources Center (
         LERC ). The satellite channels are used as carriers for the downloading
         of data.

         The LERC's will be established in cities where there are large
         populations, and low-cost broadband connection facilities are
         available. Virtual LAN'S ( local-Area-Networks ) for schools and
         Resources Centers are established through the local broadband
         city-networks. With the satellite channels as the educational
         information carriers, the LERC's will then become a low-cost and
         interactive electronic educational system with broadband internet
         connection.

         The above network structure allows the NERC, LERC's and schools to form
         a 3-layer close- network environment to implements an entire
         Satellite-Based, Broadband, IT-Based Audio / Visual Education Network
         System.

2.       NATIONAL EDUCATION RESOURCES CENTER (NERC)

         The NERC is the central Web site of the Satellite-Based Broadband Audio
         / Visual Education system and is established in Beijing. This National
         Center Web site fully utilizes the Education Resources of the Ministry
         of Education, the Tengtu Education Resources Database and the Distance
         Learning System as the core resources. It also utilizes the Tengtu
         commercial Web site platform software and various education / teaching
         application software to function as the central Web site of the Audio /
         Visual Education System linking the Local Education Resources Centers.

         The National Center Web Site offers the Education Information
         Management System, Education information Enquiry System, School
         Information Application System; and information for teacher's
         application, student's application, parent's application, teaching
         resources, etc. Their relationship is illustrated in the following
         diagram:

                                     [chart]

--------------------------------------------------------------------------------
SchoolToSchoolNet                                                          Pg. 9

<PAGE>


         Function of the National Education Resources Center include:

         (1)   Organization of Education Resources - Local Education Resources
               Centers upload their local teaching resources through the CERNET
               backbone networks to the Central Web site which processes the
               received data into systematic education resources through the
               database management software.

         (2)   Provides ASP ( Microsoft's Active Server Pages ) services to
               allow schools to develop their own Web sites.

         (3)   Other functions:

               -    educational information announcement platform - for the
                    broadcasting of educational information and educational
                    policies by the Ministry of Education.

               -    Video Conferencing.

               -    Virtual Teaching Community - Provides studying elementary /
                    secondary s students with on-campus and off-campus computer
                    education services.

4.       LOCAL EDUCATION RESOURCES CENTER ( LERC )

         Each of the local Education Resources Centers is located in a selected
         key Province / Region. A LERC functions as the central hub serving all
         the local schools, in the same Province / Region, connected to the
         Audio / Visual Education system. The Local Center, in turn, is linked
         to the National Education Resources Center through the Tengtu Distance
         Learning Satellite Network. All the resources from the National
         Education Resources Center will be installed in the Resources Server of
         the Local Resources Center, with the contents being updated by the
         former Center at regular intervals. The LERC is necessary to upload its
         locally produced teaching materials to the NERC and LERS's in other
         Provinces / Regions periodically for the sake of sharing of resources.

         Functions of the Local Education Resources Center

         (1)   Organization and Uploading of Teaching Resources - A LERC
               collects and organizes its educational materials into local
               resources; and then upload for sharing and exchange with the
               entire Nation.

         (2)   Teaching Resources for Schools - Combining and organizing the
               local and central teaching resources to allow school users to
               share a rich pool of teaching resources.

--------------------------------------------------------------------------------
SchoolToSchoolNet                                                         Pg. 10


<PAGE>


         (3)   Other Functions:

               3.1  Educational Information Announcement Platform - Allows the
                    Ministry of Education to broadcast educational informational
                    and policies to Local Education Committees and schools
                    through the Web.

               3.2  Video Conference system - Allows the Ministry of Education
                    to conduct real- time and interactive remote video
                    conferences with Local Education Committees.

               3.3  Virtual Teaching Community - Provides studying elementary /
                    secondary students with on-campus and off-campus computer
                    education services.

               3.4  Video-On-Demand - Teachers and students can view on-line
                    real-time video educational information or download the
                    relevant documents.

               3.5  Web-based Examination System

               3.5.1 Management of Exam Question Database.

               3.5.2 Web-based examination for students.

               3.6  Course Preparation System for Teachers

                    Teachers can utilize the electronic teaching / education
                    resources stored in the Center's Materials Database to
                    prepare the teaching materials for relevant courses.

               3.7  Web-based Academic Subjects Teaching / Research Center

                    Provides teachers with the means of engaging academic
                    exchanges and discussions with other teachers.

               3.8  Software Downloading

--------------------------------------------------------------------------------
SchoolToSchoolNet                                                         Pg. 11



<PAGE>