IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE NED L. SHERWOOD and ZS EDU, L.P.

, Directly and Derivatively on Behalf of ChinaCast Education Corporation, Plaintiff, v. RON CHAN TZE NGON, MICHAEL J. SANTOS, JUSTIN TANG, and ANTONIO SENA Defendants, and CHINACAST EDUCATION CORPORATION, Nominal Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

C.A. No. 7106-VCP

VERIFIED AMENDED COMPLAINT Plaintiffs Ned L. Sherwood (Sherwood) and ZS EDU, L.P. (ZS EDU), by their undersigned attorneys, bring this action on their own behalf and derivatively on behalf of Nominal Defendant ChinaCast Education Corporation (ChinaCast or the Company) against Defendants Ron Chan Tze Ngon, Michael J. Santos, Justin Tang, and Antonio Sena (together, the Individual Defendants), and allege upon personal knowledge as to themselves, and upon information and belief as to all other allegations herein, as follows: NATURE OF THE ACTION 1. This is the outrageous story of the three rogue Director Defendants who,

desperate to hold onto control of ChinaCast, have taken the unlawful step of casting aside tens of millions of stockholder votes for Plaintiff Sherwood and his competing slate at the recent Annual Stockholders Meeting. After realizing that the Sherwood slate would win the election by a substantial margin, they threw out the slates stockholder votes on the grounds that the

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Sherwood proposal and nominees were improper because of ChinaCasts advance notice bylaws. Defendants actions directly contravene the clear language of this Courts December 20, 2011 Order and Memorandum Opinion mandating that the ChinaCast Annual Stockholders Meeting would be moved from December 22, 2011 to January 20, 2012 so that stockholders would have the chance to vote on Mr. Sherwoods slate of nominees (along with managements slate). The Director Defendants blatant disenfranchisement of the stockholders, taken in violation of this Courts Order and Memorandum Opinion, should not be countenanced. 2. Plaintiffs seek a declaration that Defendants have breached their fiduciary duties

of loyalty, good faith, and due care; a declaration that Plaintiff Sherwood, Derek Feng, and Daniel Tseung were validly elected to ChinaCasts Board of Directors (Board); an order maintaining the status quo; and an order holding Defendants in contempt of court with sanctions against Defendants. 3. Defendants disenfranchisement gambit arose only because they lost the election.

Since this Courts ruling on December 20, 2011, the Director Defendants have been running an aggressive campaign to defeat the Sherwood slate. They have repeatedly urged stockholders to vote for their slate of nominees and against Sherwood and his slate. ChinaCast and Defendant Chan have issued numerous press releases and have filed supplemental proxy materials, and Defendants Chan and Santos and others at managements direction have met with stockholders throughout the United States to solicit support for their slate and to attack the Sherwood slate, actions that make clear that Defendants have deemed this a contested election. 4. The Director Defendants, by running such a campaign, recognized that they were

in a contested election against Mr. Sherwood and his slate. Indeed, at the Annual Stockholders Meeting on January 10, 2012, the ballot that was made available to attendees included the

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Sherwood nominees. In other words, the ballot prepared by the Director Defendants themselves allowed stockholders to vote for Mr. Sherwood and his nominees. 5. However, once the Annual Stockholders Meeting began, it became evident that

Mr. Sherwood and his nominees had won three seats on the Board by a substantial margin. 6. Not willing to respect either the vote of the stockholders or this Courts December

20, 2011 Order and Memorandum Opinion, the Director Defendants summarily announced without allowing any discussion that they deemed improper Mr. Sherwood, his slate, and the proposals, citing Sections 2.2 and 3.3 of the Companys bylaws. In doing so, the Director Defendants acted in blatant disregard of this Courts clear and unequivocal Order and Memorandum Opinion. In that Order, this Court issued a temporary restraining order (TRO) which moved the date of the Annual Stockholders Meeting for the express purpose of allowing Plaintiff Sherwood to solicit proxies in support of his slate of nominees. The Court specifically stated that the TRO enable[d] Plaintiffs [Sherwood and ZS EDU] to solicit proxies for their competing short slate of directors at the Annual Meeting notwithstanding Defendants contrary construction of Section 3.3 of the Companys bylaws. 7. The Director Defendants disregard for both the vote of the stockholders and this

Courts Order and Memorandum Opinion is chilling and must be corrected. 8. Plaintiffs seek a declaration that Defendants have breached their fiduciary duties

of loyalty, good faith, and due care; a declaration that Plaintiff Sherwood, Derek Feng, and Daniel Tseung were validly elected to ChinaCasts Board; an order maintaining the status quo; and an order holding Defendants in contempt of court with sanctions against Defendants.

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PARTIES 9. Plaintiff Sherwood beneficially owns 3,400,629 shares of ChinaCast common

stock, representing approximately 7% of ChinaCasts outstanding common stock. Sherwood has been a director of ChinaCast since December 11, 2009. Until September 25, 2011, Sherwood also served on the Audit Committee and Nominating and Corporate Governance Committee of ChinaCast. 10. Plaintiff ZS EDU is a Delaware limited partnership that beneficially owns

2,625,488 of the 3,400,629 shares of ChinaCast common stock beneficially owned by Plaintiff Sherwood. Plaintiff Sherwood is a member of the general partner of ZS EDU. 11. Nominal Defendant ChinaCast is a corporation incorporated under the laws of

Delaware with its principal place of business at Suite 08, 20F, One International Financial Centre, 1 Harbour View Street, Central, Hong Kong. ChinaCast is a leading provider of postsecondary education and e-learning services in China. 12. Defendant Chan has been a director and Chairman of the Board of Directors of

ChinaCast since 2007. Chan also has been the CEO of ChinaCast since its combination with ChinaCast Communications Holdings Limited in 2007. 13. Defendant Santos has been a director of ChinaCast since 2009. He also is the

President of ChinaCasts International division. 14. 15. Defendant Justin Tang has been a director of ChinaCast since 2007. Defendant Antonio Sena joined ChinaCast in 2004 and currently serves as Chief

Financial Officer. 16. Defendants Chan, Santos, and Tang, as directors of the Company, and Defendant

Sena, as an officer of the Company, collectively owe fiduciary duties to the stockholders of the

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Company, including Plaintiffs, and owe to the stockholders duties of loyalty, disclosure, good faith, fair dealing, and due care. As senior officers of the Company, Defendants Chan and Santos owe the same fiduciary duties to the Companys stockholders as they do as directors. BACKGROUND 17. On November 14, 2011, ChinaCast filed its definitive proxy statement for its 2011

Annual Stockholders Meeting (hereinafter, Proxy Statement), naming Plaintiff Sherwood as a candidate for reelection to the Board. The Company also set the Annual Stockholders Meeting for December 2, 2011, at 9:00 a.m. Beijing Standard Time (December 1, 2011 at 8:00 p.m. U.S. Eastern Standard Time), to be held in Beijing. 18. Via press release on November 30, 2011, the Company announced that it had

postponed its Annual Stockholders Meeting to December 17, 2011 at 9:00 a.m. Beijing Standard Time (December 16, 2011 at 8:00 p.m. U.S. Eastern Standard Time). 19. On December 8, 2011, in a supplemental proxy statement (hereinafter, Proxy

Supplement), the Board disclosed that it had removed Sherwood from the Companys slate of nominees and had withdrawn its support for Sherwood given Sherwoods alleged improper behavior, as detailed in the Proxy Supplement. It also publicly announced the second postponement of the Annual Stockholders Meeting, from December 17, 2011, until December 21, 2011 at 9:00 a.m. Beijing Standard Time (December 20, 2011 at 8:00 p.m. U.S. Eastern Standard Time). 20. On December 9, 2011, Sherwood sent a letter to the Board regarding his intention

to solicit proxies in favor of a slate of directors that he would nominate at the Annual Stockholders Meeting. In order to run a competing slate of directors and comply with filing

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requirements under the SEC rules, Sherwood sought relief from this Court to delay the Annual Stockholders Meeting. 21. On December 12, 2011, Sherwood filed a Verified Complaint against ChinaCast

and Defendants Chan, Santos, and Tang, asserting, among other things, that ChinaCasts proxy materials contained false and misleading statements about Sherwood. In the Verified Complaint, Plaintiff Sherwood asserted that his removal from the Companys slate was retaliatory in nature and resulted from his opposition to various actions taken by other Board members, including a slowdown of the Companys publicly announced share buyback program. Thus, Sherwood asserted that the Companys Proxy Statement filed on December 8, 2011, which accused him of various improprieties, failed to disclose the true reason the Board removed him from its slate: to silence an independent voice. Concurrently with his Verified Complaint, Plaintiffs filed for a TRO that, if granted, would enjoin ChinaCast from going forward with the scheduled Annual Stockholders Meeting so that ChinaCast stockholders could consider: (1) additional disclosures that corrected the false and misleading statements about Plaintiff Sherwood in ChinaCasts Proxy Statement; and (2) Plaintiff Sherwoods competing slate of nominees. PROCEDURAL HISTORY 22. On December 20, 2011, this Court ruled that Plaintiffs had met the requirements

of a TRO: that the Verified Complaint asserted at least a colorable disclosure claim; that irreparable harm would result absent a TRO; and that the balance of harms weighed in favor of injunctive relief. This Court temporarily enjoined Defendants from holding the Annual Stockholders Meeting for twenty days, until January 10, 2012 at 9:00 a.m. Beijing Standard Time (January 9, 2012 at 8:00 p.m. U.S. Eastern Standard Time).

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23.

This Court moved the date of the Annual Stockholders Meeting for the express

purpose of allowing Plaintiff Sherwood enough time to solicit proxies in support of his slate of nominees. This Court recognized that SEC rules would have effectively prevented Plaintiffs from soliciting proxies in connection with an Annual Stockholders Meeting held on the scheduled date, and it was persuaded that Sherwood adequately pled that the ChinaCast stockholders would be irreparably harmed absent an injunction because they would be prevented from considering a competing slate of directors. 24. This Court explicitly rejected Defendants argument that Section 3.3 of the

Companys bylaws (the advance notice provision) precluded Plaintiff from nominating his opposing slate of director nominees. This Court ordered that: Plaintiffs may solicit proxies for their competing short slate of directors at the Annual [Stockholders] Meeting notwithstanding Defendants contrary construction of Section 3.3 of the Companys bylaws. 25. Noting that the Companys Board did not inform Plaintiff Sherwood that he was

removed from the Companys slate of nominees until after the opportunity for a meaningful and transparent proxy contest had passed, this Court commented that Defendants arguments about the Companys advance notice bylaw are particularly shortsighted. This Court explained that while provisions such as the advance notice provision are designed to establish orderly meetings and election contests and to give fair warning to the corporation to have sufficient time to respond to stockholder nominations, the purpose of an orderly process and response time is to benefit the stockholders by providing them ample time to thoughtfully consider nominations and receive full information and competing arguments. Here, Defendants seek to use the relatively unique circumstances of this case to frustrate that purpose.

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26.

This Court noted further that the interest of the ChinaCast stockholders tipped the

balance of equities in favor of Plaintiff Sherwood, given the importance of the stockholder franchise under Delaware law: The corporate election process, if it is to have any validity, must be conducted with scrupulous fairness and without any advantage being conferred or denied to any candidate or slate of candidates. In the interests of corporate democracy, those in charge of the election machinery of a corporation must be held to the highest standards in providing and conducting corporate elections. Defendants have not simply expressed their disagreement with Sherwoods positions or dissatisfaction with his personal behavior; they have also excluded him from merely running for election. 27. This Court explained that by removing Plaintiff Sherwood from ChinaCasts slate

of nominees less than two weeks before the scheduled Annual Stockholders Meeting and effectively precluding him from running a competing slate of nominees, Defendants Chan, Santos, and Tang failed to comport with the scrupulous fairness required of corporate elections. This Court moved the Annual Stockholders Meeting so that there would be a free and open election, which included Plaintiff Sherwoods slate: Plaintiffs may solicit proxies for their competing short slate of directors at the Annual Meeting notwithstanding Defendants contrary construction of Section 3.3 of the Companys bylaws. FACTUAL ALLEGATIONS 28. A mere three weeks after this Court reprimanded Defendants for their actions in

violating the scrupulous fairness required of corporate elections by excluding Plaintiff Sherwood from merely running for election, Defendants have now taken the extraordinary step of preventing stockholders votes for Mr. Sherwods slate from being counted. The result is that

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the stockholders have been disenfranchised because their votes, which have elected the Sherwood slate, have been thrown out. 29. When it became abundantly clear at the delayed start of the Annual Stockholders

Meeting that stockholders would elect Plaintiff Sherwoods three nominees by a substantial margin, ChinaCast senior management and its advisors, without Board consultation or approval, unilaterally ordered a 14-hour recess to delay the completion of the Annual Stockholders Meeting, thereby throwing out all stockholder votes properly cast in favor of Sherwoods nominees and proposals. Flouting this Courts Order of December 20, 2011, Defendants have unquestionably disenfranchised ChinaCasts stockholders in a desperate attempt retain control of the Board. A. 30. Defendants Actions Demonstrated Their Recognition of Sherwood and his Slate as Validly-Nominated Director Nominees Since December 9, 2011, Defendants have known about and acknowledged that

Plaintiff Sherwood and his competing slate were running for election to the ChinaCast Board. In at least twelve separate public announcements during the past month, the Company and Defendant Chan have urged ChinaCast stockholders to vote for managements slate and/or against Sherwoods slate. 31. Indeed, the possibility of Sherwoods competing slate being elected was so real

and so threatening to Defendants that Defendant Chan, in a gross breach of his fiduciary duties to ChinaCast stockholders, publicly announced on December 14, 2011 that if the Sherwood slate were elected, the entire ChinaCast management team would resign. Chan even went so far as to convince four executives, as well as Defendants Santos and Sena, to sign statements that they would not work for the Company, were Sherwood to obtain control of the Board.

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32.

Further, Defendants Chan, Santos, and others at their behest have been on a

weeks-long road show across the United States, meeting with large ChinaCast investors in an unsuccessful attempt to convince them to vote for managements slate and against Sherwoods slate. They also have been calling stockholders seeking their votes. Such actions have taken up an extraordinary amount of time and Company assets. 33. Defendants also filed a twenty-page investor presentation with ISS Proxy

Advisory Services on December 27, 2011 setting forth detailed arguments urging stockholders to vote for Defendants slate of six director nominees and against Plaintiff Sherwoods slate, and explicitly characterizing Plaintiff Sherwood and his nominees as the Dissidents nominees. Defendants acknowledged that Mr. Sherwoods pursuit of a costly proxy contest could result in the removal of current key management executives and members of the [Special Committee], and expressed a concern that the Sherwood nominees would create a hung Board. Thus, Defendants publicly recognized that they were in the midst of a heated election contest with Plaintiff Sherwood and his nominees. 34. Defendants actions during the past month constitute evidence that, in the days

leading up to the Annual Stockholders Meeting, Defendants considered Plaintiff Sherwood to be a legitimate, competing director nominee with a high probability of being elected to the Board, along with the other nominees on his slate. In other words, Defendants considered this to be a contested election. In fact, Defendants believed their competition to be so steep so as to require massive expenditures of Company money and time spent lobbying stockholders in person in the United States and over the telephone. Indeed, until the very moment before the Annual Stockholders Meeting when they realized that Sherwoods slate had garnered enough votes to win, Defendants consistently, and with increasing urgency, acknowledged Sherwood and his

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nominees as strong competitors in the election race. Suddenly, once the votes were counted at the start of the Annual Stockholders Meeting, Defendants refused to even recognize Sherwood and his slate as having been properly nominated. B. 35. Defendants Engage in Blatant Breaches of Fiduciary Duty During the Annual Stockholders Meeting On January 8, 2012, the Board voted by unanimous written consent to allow

Defendant Sena to be the Acting Chairman during the Annual Stockholders Meeting, if Defendant Chan were unable to attend the Annual Stockholders Meeting in person. Little did the Board, or at least Mr. Sherwood, know, however, that Defendant Chan would be unable to chair the Annual Stockholders Meeting because he was campaigning in the United States, on the day of the meeting in an eleventh-hour attempt to get votes. 36. Further, the Board, or at least Mr. Sherwood, was never told that Defendants

Chan, Santos, Tang, and Sena, as well as their legal advisors, had hatched a last-minute scheme to subvert the will of the stockholders and the order of this Court whereby Defendant Sena would collect Sherwoods proxies before the start of the Annual Stockholders Meeting, would conveniently use those proxies to declare a quorum, and then, in the next breath, would deem improper the nominees and proposals properly brought by Plaintiff Sherwood on the very grounds rejected by this Court and recess the Annual Stockholders Meeting. 37. In an attempt to plan for and ensure an orderly and fair meeting and election

process, counsel for Plaintiffs sent a letter to counsel for Defendants on January 3, 2012, requesting confirmation of a series of reasonable requests to allow Plaintiff Sherwood to be heard fairly and fully during the Annual Stockholders Meeting. Plaintiff Sherwood, through his counsel, informed Defendants of the following, among other things, in this letter: Sherwood stated that his representatives would attend the Annual Stockholders Meeting; he requested an

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opportunity to address stockholders concerning his proposals; he asked for confirmation from Defendants counsel that the Company would not adjourn the Annual Stockholders Meeting if a quorum were present; he stated that because the Annual Stockholders Meeting involved a contested solicitation, he requested confirmation that the Company would retain IVS Associates, Inc. (IVS) as independent inspectors of election to tabulate the votes cast in person or by proxy; and he sought confirmation that the Company would take reasonable and appropriate steps to ensure that the stockholders are treated fairly and equally in connection with the tabulation and proxies by IVS. 38. On January 6, 2012, Defendants counsel responded in writing, assuring Plaintiff

Sherwood that he was permitted to bring up to five guests to the Annual Stockholders Meeting and that he was permitted to present his proposals and to address the stockholders for three minutes about these proposals, as long as he agreed in writing to the Rules of Conduct governing the Annual Stockholders Meeting. 39. Having been assured by the Company that Sherwood would be recognized during

the Annual Stockholders Meeting as a proper nominee, Sherwood sent Mr. Scott S. Winter of Innisfree M&A Incorporated to Beijing, at great cost, to attend the Annual Stockholders Meeting. On January 10, 2012, the Company induced Sherwoods proxy solicitor (Mr. Winter) to arrive at the Annual Stockholders Meeting and, before the commencement of the meeting, to hand his proxies to the inspector of elections so that Defendants could establish a quorum and hold the Annual Stockholders Meeting. 40. On January 10, 2012 at 9:22 p.m. Beijing Standard Time (January 9, 2012 at 8:22

a.m. U.S. Eastern Standard Time), Defendant Sena, as Acting Chairman, called the Annual Stockholders Meeting to order. The IVS inspector of elections handed out a paper ballot to those

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in attendance (the Stockholder Ballot). Item 1 of the Stockholder Ballot contains a section titled Nominees Proposed by Ned Sherwood, in which stockholders can indicate their votes (For, Withhold, or Abstain) with respect to Derek Feng and Ned Sherwood. Item 1 contains a footnote indicating: [i]f you would like to vote on Daniel Tseungs election, his name is under the Companys slate of nominees even though he was nominated by both the Company and Mr. Sherwood. Items 5 and 6 on the Stockholder Ballot are preceded by a header stating the following Proposals were made by Ned Sherwood and not the Company. This Stockholder Ballot evidences Defendants mindset that Plaintiff Sherwood and his slate were proper nominees, which they communicated to stockholders on the Stockholder Ballot. 41. After Defendant Sena opened the Annual Stockholders Meeting, he asked

whether there was a proxy solicitor in attendance on behalf of Sherwood and asked whether the solicitor would like to put forward the nominations and proposals of Sherwoods slate of nominees. At that point, Mr. Winter addressed those in attendance at the Annual Stockholders Meeting in less than three minutes. He properly put forward the nominations and proposals of Plaintiff Sherwood and his nominees. 42. Defendant Sena then declared that Mr. Winter did not properly bring those

proposals under Articles 2.2 and 3.3 of the Companys bylaws. Defendant Sena then declared that the Company would retain the stockholder votes for inspection, at which point Mr. Winter objected promptly to this manipulation. Mr. Winter was immediately silenced by an unidentified attendee to the Annual Stockholders Meeting, who took over the role of Chairman of the meeting without identifying himself, his role, or his purpose for attending the meeting. The Rules of Conduct governing the Annual Stockholders Meeting expressly required that [i]n order to speak at the meeting, you must be either a stockholder of record on October 24, 2011 or must be named

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in a proxy by a stockholder of record as of October 24, 2011. It remains a mystery who this unidentified attendee was and why he was permitted to violate the Rules of Conduct established for the meeting. 43. Nevertheless, the unidentified attendee then stated that the Annual Stockholders

Meeting would be adjourned until 11:59 p.m. on January 10, 2012 (Beijing Standard Time). Mr. Winter (Sherwoods proxy solicitor) then objected to the adjournment and moved for a vote on it. The unidentified attendee silenced Mr. Winter yet again, stating that the Company would not engage in a legal discussion of the merits of the adjournment and was reserv[ing] its rights pursuant to some fictitious authority to do so. Then, realizing his mistake in using the word adjournment, the unidentified attendee stated that he was calling a recess of the Annual Stockholders Meeting, not an adjournment, and that he would not take a vote on a recess, even though Mr. Winter requested that he do so. 44. The unidentified attendee stated that the recess was required because the

Company had received a proxy from an unnamed investment advisor fund purporting to withdraw its votes for Defendants slate. The unidentified attendee declared that in so doing, this institutional stockholder had violated its fiduciary duty to its shareholders as a registered investment advisor. He said that this stockholders failure to vote for any issues might indicate a technical issue. Ironically, after Defendant Sena had disenfranchised all stockholders who had voted for the Sherwood slate by deeming improper Sherwoods nominees and proposals, this unidentified attendee stated, on behalf of Defendants, that the recess was needed so that this institutional stockholder could clarify its intentions and exercise its right to express its vote, a right that the Company had stolen from Plaintiff Sherwood just moments earlier.

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45.

The unidentified attendee then concluded the Annual Stockholders Meeting by

stating that the polls would remain open until 11:59 p.m. on January 10, 2012 (Beijing Standard Time), that a recess would ensue until that time, and that the meeting was officially in recess. The Company also issued a press release stating that ChinaCast had recessed its Annual Stockholders Meeting until 11:59 p.m. on January 10, 2012 (Beijing Standard Time), providing absolutely no reasons or justification for doing so. C. 46. Sherwood Promptly Notifies the Board of His Objects to Defendants Conduct During the Annual Stockholders Meeting Within hours of Defendants and their advisors egregious display at the Annual

Stockholders Meeting, Plaintiff Sherwood wrote a letter to the Board notifying it of Defendant Chans and Senas violations of this Courts December 20, 2011 Order and their breaches of fiduciary duty in manipulating the corporate election machinery and disenfranchising stockholders. 47. In his letter to the Board dated yesterday, Plaintiff Sherwood exposed Defendants

offensive and illegal conduct during the Annual Stockholders Meeting for what it was a blatant attempt to disenfranchise the stockholders and keep control of the Board. 48. In the interest of all ChinaCast stockholders, Plaintiff Sherwood urges this Court

to hold Defendant ChinaCast and the Individual Defendants in contempt of Court for their manipulation of election machinery and their disenfranchisement of ChinaCast stockholders. D. 49. Defendants Wrongful Actions Continue During the Conclusion of the Annual Stockholders Meeting At approximately 12:04 a.m. on January 11, 2012 Beijing Standard Time (11:04

a.m. on January 10, 2012 U.S. Eastern Standard Time), Defendant Sena reconvened the Annual Stockholders Meeting. He opened the meeting and then declared that business had ended. This portion of the Annual Stockholders Meeting lasted approximately one minute. 15
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DEMAND IS FUTILE 50. Plaintiffs have not made any demand on the Board of ChinaCast to institute this

action because doing so would be futile. The Individual Defendants dominate the Board. Moreover, the Individual Defendants have demonstrated a pattern of misconduct, including breaching their duty of loyalty and being beholden to the CEO and Chairman of the Board, such that they would be incapable of responding appropriately to any demand for ChinaCast to institute this action. The wrongful acts complained of herein demonstrate overt breaches of fiduciary duty, excusing demand as a matter of law. In addition, the wrongful acts are not the product of a valid exercise of business judgment and cannot be ratified by the Board. 51. Further, the Individual Defendants approved the wrongs alleged herein to have

occurred and they are therefore not disinterested parties. Each of the Individual Defendants exhibited a sustained and systemic failure to fulfill his fiduciary duties, which could not have been an exercise of good faith business judgment and amounted to gross negligence and extreme recklessness. Additionally, each of the Individual Defendants has engaged in a course of conduct demonstrating a history of blind allegiance to ChinaCast management, further demonstrating his self-interest and lack of independence, making demand futile. 52. In order to bring this suit, the Individual Defendants would be forced to sue

themselves and persons with whom they have extensive business and personal entanglements, which they will not do, thereby excusing demand. 53. And, if the Individual Directors were to bring this derivative action against

themselves, they would thereby expose their own misconduct, which underlies allegations contained herein, which admissions would impair their defense of this and any future lawsuits. In essence, they would be forced to take positions contrary to the defenses they will likely assert

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in this action and future actions. This they will not do, especially in circumstances of fiduciary breaches as egregious as those at issue in this action. Thus, demand would be futile. 54. Moreover, given the specific facts alleged herein, each of the Individual

Defendants faces a substantial likelihood of liability for breach of their fiduciary duties, which further excuses demand. COUNT I (Direct Claim for Breach of Fiduciary Duties Against the Individual Defendants) 55. Plaintiffs repeat and reallege the allegations set forth in paragraphs 1 through 54

as if fully set forth herein. 56. The Individual Defendants owe the utmost fiduciary duties to Plaintiffs as

ChinaCast stockholders, as well as to all ChinaCast stockholders, and these fiduciary duties include the duties of loyalty, good faith and due care. 57. The Individual Defendants have breached their fiduciary duties of loyalty, good

faith and due care in disenfranchising stockholders in the following ways: a. consistently acknowledging Sherwood and his nominees as strong competitors in the election race, collecting Sherwoods proxies to declare a quorum, and then, deeming improper the nominees and proposals properly brought by Plaintiff Sherwood; b. improperly silencing objections to the illegal conduct invoking the advance bylaw notice provision to prevent a competing slate from being presented; c. illegally calling for a recess of the Annual Stockholders Meeting without reason or justification in order to manipulate the outcome of the election; and 17
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d. failing to count properly submitted stockholder votes for any of Sherwoods director nominees. 58. As a result of the Individual Defendants breaches of fiduciary duty, Plaintiffs

have been damaged. 59. The Court should therefore issue a declaration that Defendants have breached

their fiduciary duties of loyalty, good faith and due care. The Court should also grant an injunction prohibiting Defendants from continuing to commit such breaches. COUNT II (Direct Claim for Breach of Fiduciary Duties Against the Individual Defendants) 60. Plaintiffs repeat and reallege the allegations set forth in paragraphs 1 through 59

as if fully set forth herein. 61. 62. Plaintiffs bring this claim derivatively on behalf of ChinaCast. The Individual Defendants owe the utmost fiduciary duties to Plaintiffs as

ChinaCast stockholders, as well as to all ChinaCast stockholders, and these fiduciary duties include the duties of loyalty, good faith and due care. 63. The Individual Defendants have breached their fiduciary duties of loyalty, good

faith and due care in disenfranchising stockholders in the following ways: a. consistently acknowledging Sherwood and his nominees as strong competitors in the election race, collecting Sherwoods proxies to declare a quorum, and then, deeming improper the nominees and proposals properly brought by Plaintiff Sherwood; b. improperly silencing objections to the illegal conduct invoking the advance bylaw notice provision to prevent a competing slate from being presented; 18
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c. illegally calling for a recess of the Annual Stockholders Meeting without reason or justification in order to manipulate the outcome of the election; and d. failing to count properly submitted stockholder votes for any of Sherwoods director nominees. 64. As a result of the Individual Defendants breaches of fiduciary duty, Plaintiffs

have been damaged. 65. Plaintiffs are excused from making a demand on the ChinaCast Board because

doing so would be futile, as set forth in paragraphs 50 to 54 above. 66. The Court should therefore issue a declaration that Defendants have breached

their fiduciary duties of loyalty, good faith and due care. The Court should also grant an injunction prohibiting Defendants from continuing to commit such breaches. COUNT III (Declaratory Judgment Declaring The Valid Election of Ned Sherwood, Derek Feng, and Daniel Tseung to ChinaCasts Board) 67. Plaintiffs repeat and reallege the allegations set forth in paragraphs 1 through 66

as if fully set forth herein. 68. Based upon the overwhelming number of stockholder votes for Sherwoods

nominees, the Court should confirm the stockholder vote and issue a declaration that Ned Sherwood, Derek Feng, and Daniel Tseung were validly elected to ChinaCasts Board. 69. Defendants impermissibly deemed improper the nominees and proposals properly

brought by Plaintiff Sherwood and illegally called a recess when they realized that Sherwoods slate had garnered enough votes to win.

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70.

Defendants should not be permitted to disenfranchise stockholders by refusing

counting any votes for Sherwoods slate and certifying an outcome contrary to the will of the stockholders. 71. Plaintiffs are entitled to a declaration that Ned Sherwood, Derek Feng, and Daniel

Tseung were validly elected to ChinaCasts Board. COUNT IV (Finding Defendants in Contempt of Court and Imposing Sanctions) 72. Plaintiffs repeat and reallege the allegations set forth in paragraphs 1 through 71

as if fully set forth herein. 73. As set forth more fully in Plaintiffs Expedited Motion to Hold Defendants in

Contempt of Court and for Sanctions, the defendants have violated the Courts TRO by invoking Sections 2.2 and 3.3 of the Companys bylaws as a basis to deem improper the nominees and proposals properly before the Annual Stockholders Meeting. 74. Defendants actions are in direct violation of the spirit and letter of this Courts

December 20, 2011 TRO which specifically ordered that Plaintiffs be enable[d] [] to solicit proxies for their competing short slate of directors at the Annual Meeting notwithstanding Defendants contrary construction of Section 3.3 of the Companys bylaws. 75. The Court should therefore find Defendants in contempt of this Courts TRO and

impose the sanctions set forth in Plaintiffs Expedited Motion to Hold Defendants in Contempt of Court and for Sanctions. PRAYER FOR RELIEF WHEREFORE, Plaintiffs respectfully request that the Court enter its order and judgment as follows: A. Declaring that the Individual Defendants have breached their fiduciary duties; 20
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B.

Declaring that that Ned Sherwood, Derek Feng, and Daniel Tseung were validly

elected to ChinaCasts Board; C. D. Finding Defendants in contempt of this Courts TRO and imposing sanctions; Ordering that the Company compensate Plaintiffs for the expenses of solicitation

and all costs and expenses incurred as a result of Defendants misconduct alleged herein; and E. Granting such other and further relief as the Court may deem just and proper.

OF COUNSEL: Adam H. Offenhartz Brian M. Lutz Mary Kay Dunning Abraham Shaw Gibson, Dunn & Crutcher LLP 200 Park Avenue New York, New York 10166 (212) 351-4000

/s/ Raymond J. DiCamillo________________ Raymond J. DiCamillo (#3188) Kevin M. Gallagher (#5337) Susan M. Hannigan (#5342) Richards Layton & Finger, P.A. 920 N. King Street Wilmington, Delaware 19801 (302) 651-7700 Attorneys for Plaintiffs Ned L. Sherwood and ZS EDU, L.P.

Dated: January 10, 2012

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