10.4 Employment Agreement with Dr. Alan V. Phan

                              Employment Agreement

         EMPLOYMENT  AGREEMENT  dated as of July 1,  1999 by and  between  ENOVA
HOLDINGS,  INC.,  a  Nevada  corporation,   PEGO  SYSTEMS,  INC.,  a  California
corporation,  (collectively  referred to as the  "Company") and Dr. Alan V. Phan
(the "Executive).

         WHEREAS, the Company is in the business of environmental consulting and
the manufacturing of certain related environmental products (the "Business");

         WHEREAS, the Executive is an experienced executive in the Business; and

         WHEREAS,   the  Company  and  the  Executive  desire  to  establish  an
employment relationship with each other.

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
covenants hereinafter set forth, the parties hereto agree as follows:

1.   Employment. The Company agrees that the Company shall employ the Executive,
     and the Executive  accepts  employment  with the Company,  on the terms and
     conditions set forth herein.

2.   Term. The term of employment (the  "Employment  Term") under this Agreement
     shall commence as of the date hereof and continue, subject to the terms and
     conditions of this  Agreement,  for a period of thirty-six (36) months from
     such date.

3.   Position. The Company shall employ the Executive for the Employment Term as
     its Chairman of the Board to perform when and where  necessary  such duties
     relating to the overall  operation  of the Company as may from time to time
     be assigned to the Chairman by the Board of Directors. The Executive agrees
     to accept  such  employment  and to devote  his best  efforts in and to the
     faithful  performance of his duties hereunder to the exclusion of all other
     employment,  subject to the general  direction  and control of the Board of
     Directors of the Company.  The parties  agree that  Executive  shall not be
     required to relocate.

     Elected  to Board.  The  Company  shall use its best  efforts  to cause the
     Executive  to be elected to the Board of  Directors  of the  Company at the
     next Annual Meeting of Shareholders of the Company.

4.   Compensation.

     a.   In  consideration  of the services to be rendered by the Executive for
          his duties pursuant to Section 3 of this Agreement, including, without
          limitation,  any  services  rendered by the  Executive  as a director,
          officer or  employee  of the  Company  or of any of its  subsidiaries,
          divisions or affiliated companies, and in full payment for the due and
          faithful  performance  of said  services,  the  Company  shall pay the
          Executive and the  Executive  agrees to accept a salary at the rate of
          $120,000,  per year (the "Base  Compensation").  In case the executive
          does not take  compensation in cash, the Company will issue restricted
          common shares for compensation earned, calculated at the closing price
          on January 1, discounted by 50%, for the year compensation is earned.

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     b.   Payments to the Executive of his Base Compensation  hereunder shall be
          made  periodically on the dates established by the Company for payment
          of other  executive  employees,  but not less  frequently  than once a
          month.  All  payments  under  this  agreement  shall be subject to all
          deductions and withholdings as required by law.

     c.   The  Executive  shall be  entitled  to  reimbursement  for  reasonable
          expenses incurred by him in connection with his employment  hereunder,
          upon the presentation of proper vouchers  therefore in accordance with
          the usual  procedures of the Company.  Such expenses  shall not exceed
          $1,000 per month without the authorization of the Board.

     d.   The Executive  shall be entitled to participate in and receive medical
          and  dental  benefits  for  the  Executive  and his  dependent  at the
          Company's expense,  in accordance with the provisions of the Company's
          benefits plan or program currently in effect. The Company will provide
          the Executive (i) a life insurance policy in the amount of $1,000,000;
          (ii) three weeks  vacation  benefit  annually;  (iii) a long-term  and
          short-term  disability  coverage in accordance  with the provisions of
          any of  the  Company's  employee  benefit  plans  or  programs  now or
          hereafter in effect,  to the same extent that employees of the Company
          in  positions  similar  to that of the  Executive  have  the  right to
          participate in such plans and programs.

     e.   The  Executive  shall be  entitled  during the  Employment  Term to an
          automobile allowance equal to $650 per month.

          The Executive  shall be entitled during the Employment Term to receive
          membership  dues for  business  and  professional  associations.  Such
          expenses shall not exceed $2,500 annually without the authorization of
          the Board.

5.   Termination.  The  employment  of the  Executive  may be  terminated by the
     Company upon the occurrence of any of the following events:

     a.   Subject  to  Section  7(a)  below,  the  Company  may  terminate  such
          employment  at any time without good cause upon written  notice to the
          Executive;

     b.   Such  employment  shall  terminate  automatically  on the death of the
          Executive;

     c.   The Company may terminate  Executive's  employment at any time for any
          reason or no reason upon giving a written notice to the Executive.  In
          such event,  the Company shall pay to Executive an amount equal to six
          months Base Compensation.  For purposes of this Agreement "good cause"
          shall include the following circumstances:

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          i.   If there is a repeated  and  demonstrable  failure on the part of
               the  Executive  to  perform   material   duties  of   Executive's
               management position in a competent manner and where the Executive
               fails to  substantially  remedy the failure  within a  reasonable
               period of time after  receiving  written  notice of such  failure
               from the Company  (three  written  notices shall be sufficient to
               establish "repeated and demonstrable" failure);

          ii.  If the Executive is convicted of a criminal offense;

          iii. If the  Executive  or any  member of his or his  spouse's  family
               makes any personal  profit at the expense of the Company  without
               prior written consent of the Company.

          iv.  If the  Executive  fails to fully  observe the  fiduciary  duties
               appropriate to his position; and

          v.   If the Executive  disobeys  reasonable  instructions given in the
               course of  employment  by the Board of  Directors  of the Company
               that  are  not  inconsistent  with  the  Executive's   management
               position  and not remedied by the  Executive  within a reasonable
               period  of  time,   after   receiving   written  notice  of  such
               disobedience.  A "reasonable  period of time" shall be determined
               in good faith by the Board (with the  Executive  not  voting,  if
               Executive  is then a member of the Board),  but in no event shall
               such period be more than thirty (30) days.

     d.   The Executive may terminate his employment  hereunder upon thirty days
          written notice to the Company.

6.   Payments  on  Termination;  Change  of  Control.  Upon  termination  of the
     Executive's  employment  for  any  reason,  the  Company  shall  pay to the
     Executive,  or if  the  termination  is as a  result  of the  death  of the
     Executive,  to his  personal  representative,  any accrued  but  previously
     unpaid  Basic   Compensation   prorated  to  the  effective  date  of  such
     termination.

     In the event the Company terminates the Executive's employment without good
     cause,  the Company shall make severance  payments equal to and in the same
     manner as the Executive's Basic  Compensation in effect at the time of such
     termination  for the remaining term of this  Employment  Agreement.  To the
     extent Executive  receives  compensation  from any form of employment after
     such  termination  for any  part of the  period  during  which  termination
     payments are being made to the  Executive by the Company,  Executive  shall
     immediately  so inform the Company,  and the  termination  payment  payable
     pursuant to this subparagraph will be reduced at the rate of $0.75 for each
     dollar of compensation so received by the Executive.

     In the event the Company  terminates the  Executive's  employment with good
     cause in the first year, the severance amount would be equal to Executive's
     base salary for 12 months;  if Executive's  employment is terminated in the
     second year,  the severance  amount will be equal to his base salary for 18
     months;  and if  Executive's  employment has been in effect for longer than
     two years,  the  severance  amount  will equal 24 months of base pay at the
     time of termination.  In addition,  the Company shall provide and Executive
     shall receive (i) his base salary accrued  through the date of termination;
     (ii) all  accrued  vacation  pay and  accrued  bonuses,  if any, to date of
     termination;  (iii)  any  bonus  which  would  have  been  paid but for the
     termination, prorated through the date of termination, based upon Company's
     performance and in accordance with the terms,  provisions and conditions of

<PAGE>

     any Company  incentive  bonus plan in which  Executive  may be designated a
     participant;  (iv) for a period of 12 months after the date of termination,
     at the Company's  expense,  coverage to Executive  under the Company's life
     insurance and disability insurance policies;  coverage to Executive and his
     dependents medical and dental insurance under the Company's health plan; if
     any of the  Company's  medical and dental,  life  insurance,  or disability
     insurance  plans are not  continued  or if  Executive  is not  eligible for
     coverage  hereunder  because  of the  termination  of his  employment,  the
     Company shall pay the amount  required for  Executive to obtain  equivalent
     coverage; (v) reasonable  outplacement services;  (vi) office,  secretarial
     support,  and  access to  equipment  and  supplies  for a period of six (6)
     months  after  termination.  Also upon  termination  of  employment  by the
     Company without good cause,  all equity options,  restricted  equity grants
     and similar  rights held by the Executive with respect to securities of the
     Company  shall  automatically  become  vested and shall become  immediately
     exercisable.

7.   Covenant Not to Compete.

     a.   The  Executive  agrees that during the  Employment  Term, he will not,
          directly or indirectly, have any ownership interest of five percent or
          more in a corporation,  firm, trust,  association or other entity that
          is in competition with the Company.

          The Executive  shall not,  during the Employment  Term and at any time
          within one year after the  termination  his employment with Company by
          the Executive or by the Company with cause,  in any manner,  engage or
          become  interested  in  (as  owner,  stockholder,  partner,  director,
          officer,  employee,  consultant  or otherwise)  any business  which is
          competitive  with the business  conducted by the Company or any of its
          affiliates at the time of the termination of his employment hereunder.
          This Section 8 shall not apply if the Company  terminates  Executive's
          employment without cause. The Executive's  ownership of less than five
          percent of the stock of a publicly owned company, which competes, with
          the Company shall not be  considered a violation of the  provisions of
          this Section 8(b).

     b.   Without  limiting  the rights of the  Company  hereunder,  the parties
          agree  that in the  event the  Executive  violates  (in  other  than a
          willful violation) any of the provisions of the Section 8, the Company
          may  give  the  Executive  30  days  notice  of  such   violation  and
          opportunity to cure it; in the event the violation is not cured within
          such 30-day period,  such violation will be grounds for termination of
          this Agreement and the Executive's  employment hereunder for cause, in
          addition  to  any  other  remedies  available  to the  Company.  It is
          expressly understood that the limitations  contained in this Section 8
          shall be in addition to, and not in substitution of, any provisions of
          a  separate   non-competition   agreement  entered  into  between  the
          Executive and the Company.  To the extent any provision  herein is not
          consistent  with  such  non-competition   agreement,   the  terms  and
          provisions of the non-competition agreement shall apply.

8.   Inventions.

     a.   For  purposes  of the  Agreement,  "Invention"  shall mean any and all
          machines,  apparatuses,  compositions  of matter,  methods,  know-how,
          processes, designs, configurations, uses, ideas, concepts, or writings
          of any kind, discovered,  conceived,  developed, made, or produced, or
          any improvements to them, and shall include, but not be limited to the
          definition of an invention contained in the United Sates Patent Laws.

<PAGE>

     b.   The  Executive   understands  and  agrees  that  all  Inventions,   or
          trademarks or copyrights relating thereto,  which reasonably relate to
          the  business of the Company  and which are  conceived  or made by him
          during his employment by the Company either alone or with others,  are
          the  sole  and  exclusive  property  of  the  Company.  The  Executive
          understands and agrees that all Inventions,  trademarks, or copyrights
          described  above in this  Section  9(a)  are the  sole  and  exclusive
          property  of the  Company  whether or not they are  conceived  or made
          during regular working hours.

     c.   The Executive agrees that he will disclose  promptly and in writing to
          the Company all Inventions within the scope of this Agreement, whether
          he considers  them to be patentable or not,  which he, either alone or
          with others, conceives or makes (whether or not during regular working
          hours).  The  Executive  hereby  assigns  and agrees to assign all his
          right,  title,  and interest in and to those Inventions that relate to
          the business of the Company and agrees not to disclose any of these to
          others without the written consent of the Company,  except as required
          by the conditions of his employment.

     d.   The  Executive  agrees that he will at any time during his  employment
          hereunder,  or after  this  Employment  Agreement  terminates,  on the
          request of the Company,  (i) execute specific  assignments in favor of
          the Company,  or its nominee, of any of the Inventions covered by this
          Agreement,  (ii)  execute  all papers and  perform all lawful acts the
          Company   considers   necessary  or  advisable  for  the  preparation,
          application  procurement,  maintenance,  enforcement,  and  defense of
          patent  applications  and  patents  of the United  States and  foreign
          countries for these  Inventions,  for the perfection or enforcement of
          any trademarks or copyrights relating to such Inventions,  and for the
          transfer of any interest the Executive may have, and (iii) execute any
          and all papers and lawful documents required or necessary to vest sole
          right,  title, and interest in the Company or its nominee of the above
          Inventions,  patent  applications,   patents,  or  any  trademarks  or
          copyrights  relating  thereto.  The  Executive  will, at the Company's
          expense, execute all documents (including those referred to above) and
          do all other acts necessary to assist in the  preservation  of all the
          Company's interests arising under this Agreement.

9.   Secrecy.

     a.   For purposes of this Agreement,  "proprietary  information" shall mean
          any  information  relating to the business of the Company that has not
          previously been publicly  released by duly authorized  representatives
          of the Company and shall include (but shall not be limited to) Company
          information encompassed in all computer code, software, notes, written
          concepts,  drawings,  designs, plans,  proposals,  marketing and sales
          plans,  financial  information,  costs, pricing information,  customer
          information,  and all  methods,  concepts,  or ideas in or  reasonably
          related to the business of the Company.

     b.   The  Executive  agrees to regard  and  preserve  as  confidential  all
          proprietary  information pertaining to the Company's business that has
          been or may be  obtained  by the  Executive  prior  to or  during  his
          employment  by the  Company  (whether  before,  during  or  after  the
          Employment Term hereof), whether he has such information in his memory
          or in writing or other  physical  form. The Executive will not use for
          his benefit or  purposes,  nor disclose to others,  either  during the
          Employment Term or thereafter, except as required by the conditions of
          his employment hereunder,  any proprietary  information connected with
          the business or developments of the Company.

<PAGE>

     c.   The  Executive  agrees not to remove from the premises of the Company,
          except as an employee of the Company in pursuit of the business of the
          Company  or  any  of  its  subsidiaries,  or  except  as  specifically
          permitted in writing by the Company, any document or object containing
          or  reflecting  any  proprietary   information  of  the  Company.  The
          Executive  recognizes  that all such  documents  and objects,  whether
          developed by him or by someone else, are the exclusive property of the
          Company. A breach of this provision shall be considered good cause for
          termination.  Upon  termination of his employment  hereunder,  for any
          reason,  the Executive shall  forthwith  deliver up to the Company all
          proprietary information,  including,  without limitation, all lists of
          customers,  correspondence,  accounts, records and any other documents
          or  property  made or held by him or under his  control in relation to
          the business or affairs of the Company or its affiliates,  and no copy
          of any such proprietary information shall be retained by him.

10.  Injunctive Relief. The Executive acknowledges that in the event of a breach
     or threatened  breach by the Executive of any of the provisions of Sections
     8, 9 or 10, monetary damages will not adequately compensate the Company and
     the Company  shall be entitled to an injunction  restraining  the Executive
     from the  commission of such breach,  in addition to any other  remedies or
     rights the Company may have.

11.  Notices. Any notice required or permitted to be given hereunder shall be in
     writing and shall be delivered  by prepaid  registered  or certified  mail,
     return  receipt  requested.  Such duly mailed  notice shall be deemed given
     when dispatched. The address for mailed notices shall be:

     a.   For the Executive:

                           Dr. Alan V. Phan
                           1904 Norwalk Blvd.
                           Artesia, CA 90701

     b.   For the Company:

                           Enova Holdings, Inc. and/or Pego Systems, Inc.
                           1196 East Willow Street
                           Long Beach, CA 90806
                           Telephone: (562) 426-1321
                           Facsimile:  (562) 490-0633

          with a copy to:  The Hartcourt Companies, Inc.
                           1904 Norwalk Blvd.
                           Artesia, CA  90701
                           Attn:  Mr. Alan V. Phan
                           Facsimile:  (562) 403-1130

          Any party may  notify  the other  parties  in  writing  of a change of
          address by serving notice in the manner provided in this Section.

<PAGE>

12.  No  Conflicting  Agreements.  Except as set  forth  herein,  the  Executive
     represents  and warrants  that neither the  execution  and delivery of this
     Agreement  nor the  performance  of his duties  hereunder  violates or will
     violate the  provisions of any agreement to which he is a party or by which
     he is bound.

13.  Governing  Law;  Entire  Agreement.   This  Agreement  shall  be  construed
     according  to the laws of the  State of  California,  and  constitutes  the
     entire  understanding  between the parties,  superseding  and replacing all
     prior  understandings  and  agreements  relating to employment  between the
     Company  and  the   Executive  and  the  parties  shall  cause  such  other
     agreements,  if any, to be terminated.  This Agreement cannot be changed or
     terminated except by an instrument in writing signed by each of the parties
     hereto.

14.  Amendments.  If any provision of this Agreement or the application  thereof
     shall for any reason be invalid or  unenforceable,  such provision shall be
     limited  only to the extent  necessary  in the  circumstances  to make such
     provision  valid and  enforceable  and its partial or total  invalidity  or
     unenforceability  shall in any event not affect the remaining provisions of
     this Agreement which shall continue in full force and effect.

              IN  WITNESS  WHEREOF,  the  undersigned  have  duly  executed  and
delivered this Agreement as of the date first above written.


ENOVA HOLDINGS, INC. / PEGO SYSTEMS, INC.

By________________________________
     President & CEO

EXECUTIVE:

By________________________________
     Dr. Alan V. Phan