CAPITAL COMMERCE LTD.
2B Mansion House, 143 Main Street, Gibraltar
Telephone: 350.76173 Fax: 350.70135
On 28 July 1997, Capital Commerce, Ltd. (an Isle of Man Corporation), does hereby enter into this agreement
with The Harcourt Companies, Inc. (a Utah Corporation), to provide free trading securities for the purchase of
Pego Industries and the creation of ECS (a Nevada Corporation. to be a wholly owned subsidiary of Hartcourt).
The free trading securities to be provided by Capital Commerce shall be from its trading portfolio, in the amount
of no less than US $6.000,000.00 as follows:
Capital Commerce Ltd. does hereby agree to provide the following, free trading securities from its portfolio, to
used by HRCT as equity capital:
In exchange for the above referenced securities Hartcourt agrees to issue a class 'A' convertible, preferred stock,
in the amount of $4,000,000.00 bearing interest at 9% per annum, interest payable in equal monthly amounts of
US$ 30,000.00 per month, for a term of ten (10) years.
In exchange for the securities in the amount of US $2,000.000.00, Hartcourt agrees to a class 'B' convertible
preferred stock, bearing interest at 9% per annum, interest payable in equal monthly installments of US $15,000
per month, for a term of (10) years.
At any time during the 10 years term referenced herein. Hartcourt shall have the right to call the preferred class
'A' or class 'B' securities provided to Capital Commerce in exchange for US$4.000.000 for the class 'A'
securities and US$2,000,000 for the class 'B' shares, plus any interest accrued to that date. Harcourt shall have
the right to exchange all or any portion of the portfolio shares herein, for any other shares of equal or greater
value owned by Capital Commerce.
All preferred shares issued by Hartcourt shall be fully assignable and transferable on the books of the Company,
and shall further be non-assessable.
At the end of the 10 year term, Capital Commerce, its assigns or nominees, may elect to renew the conve