ARTICLES OF AMENDMENT
                                       OF
                            ARTICLES OF INCORPORATION
                                       OF
                          THE HARTCOURT COMPANIES, INC.
                      DESIGNATING SERIES B PREFERRED STOCK

         Alan Phan and Frederic  Cohn,  certify that they are the  President and
Secretary,  respectively,  of The Hartcourt Companies,  Inc., a Utah corporation
(hereinafter referred to as the "Corporation" or the "Company");  that, pursuant
to the Articles of Incorporation, as amended, and Section 16-10a-602 of the Utah
Business  Corporation  Act,  the Board of Directors  of the  Corporation  acting
without  shareholder  approval,   which  is  not  required  under  such  Section
16-10a-602  adopted the  following  amendment  to Article IV of the  Articles of
Incorporation on October __, 1997:

         The  following  is  hereby  appended  to the end of  Article  IV of the
Articles of Incorporation:

                      SERIES B CONVERTIBLE PREFERRED STOCK

         1. Creation of Series B Convertible  Preferred  Stock.  There is hereby
created a series of preferred  stock,  consisting of 2,000 shares and designated
as the Series B Convertible  Preferred  Stock (the "Series B Preferred  Stock"),
having the voting powers,  preferences,  relative,  participating,  optional and
other  special  rights  and the  qualifications,  limitations  and  restrictions
thereof that are set forth below.

         2.  Dividend  Provisions.  In the  event  the  Corporation  declares  a
dividend payable to shareholders of Common Stock of the Corporation, the holders
of shares of Series B Convertible Preferred Stocks shall be entitled to receive,
out  of any  funds  at the  time  legally  available  therefor,  dividends  (the
"Dividends")  at a rate equal to the amount which such holders would be entitled
to  receive,  if such  holders  of  Series B  Convertible  Preferred  Stock  had
converted  their shares into Common Stock of the Company as set forth in Section
5(a)(1)(B)  on the  business  day  immediately  prior to the record date for the
payment of such  dividend.  Each share of Series B Convertible  Preferred  Stock
shall rank on a parity with each other share of Series B  Convertible  Preferred
Stock and Series A Convertible Preferred Stock with respect to Dividends.

         3. Redemption Provisions. The Series B Preferred Stock shall be subject
to  redemption,  at any time at the option of the  Corporation,  at a redemption
price equal to $1,000 per share plus accrued and unpaid dividends to the date of
redemption. Such redemption shall be effected by the Corporation on no less than
ten day's written  notice to the holders of the Series B Preferred  Stock,  such
notice to be deemed given when delivered by person or by facsimile transmission,
provided such delivery is followed by delivery by overnight  courier or personal
delivery within two business days thereof,  provided,  however, that such notice
and  redemption  will be  terminated  and of no force or  effect  in the event a
holder submits a Notice of Conversion prior to the date of redemption.


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         4. Liquidation Provisions. In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the Series B
Preferred  Stock shall be entitled to receive an amount equal to  $1,000.00  per
share,  plus  accrued  but  unpaid   dividends.   After  the  full  preferential
liquidation  amount has been paid to, or determined and set apart for, all other
series of Preferred Stock hereafter authorized and issued, if any, the remaining
assets of the Corporation  available for  distribution to shareholders  shall be
distributed  ratably to the holders of the common stock. In the event the assets
of  the  Corporation   available  for   distribution  to  its  shareholders  are
insufficient to pay the full preferential  liquidation amount per share required
to be paid to the holders of the  Corporation's  Series B Preferred  Stock,  the
entire  amount  of assets  of the  Corporation  available  for  distribution  to
shareholders shall be paid up to their respective full liquidation amounts first
to the Series B Preferred  Stock and the Series A Convertible  Preferred  Stock,
all pari passu, all of which amounts shall be distributed  ratably among holders
of each such series of  Preferred  Stock,  and the holders of common stock shall
receive nothing.  A reorganization  or any other  consolidation or merger of the
Corporation  with or into any other  corporation,  or any  other  sale of all or
substantially all of the assets of the Corporation,  shall not be deemed to be a
liquidation,  dissolution or winding up of the Corporation within the meaning of
this Section 4, and the Series B Preferred  Stock shall be entitled  only to (i)
the right  provided in any  agreement or plan  governing the  reorganization  or
other  consolidation,  merger or sale of  assets  transaction,  (ii) the  rights
contained in the Utah General  Corporation Law and (iii) the rights contained in
other Sections hereof.

         5.       Conversion Provisions.  The holders of shares of Series
B Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):

                  (a)      Right to Convert.

                           (1) Each share of Series B  Preferred  Stock shall be
                  convertible,  at the option of its holder, upon 75 days notice
                  at any time,  into either (A) a number of shares of fully-paid
                  and  non-assessable  shares of common stock of Pego (the "Pego
                  Common Stock") equal to .0150% of the total outstanding shares
                  of Pego  Common  Stock of Pego  Systems,  Inc.,  a  California
                  corporation  and  wholly  owned   subsidiary  of  the  Company
                  ("Pego")  (the  "Pego  Conversion  Rate")  or (B) a number  of
                  shares of fully paid and  non-assessable  Common  Stock of the
                  Corporation at the  conversion  rate (the  "Conversion  Rate")
                  equal to $1,000  divided by the Market Price.  For purposes of
                  this  Section  5(a)(1),  Market Price shall be the closing bid
                  price of the Common Stock on the Conversion  Date, as reported
                  by the  Electronic  Bulletin  Board  sponsored by the National
                  Association  of Securities  Dealers,  the closing bid price on
                  the  NASDAQ  Small Cap  Market,  if the  Common  Stock is then
                  trading on the NASDAQ SmallCap

                                                         2

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                  Market or the last sale price of the Common Stock on any stock
                  exchange or NASDAQ National Market System, if the Common Stock
                  is then  trading  on such  exchange  or  NASDAQ/NMS.  The Pego
                  Conversion  Rate  shall be  determined  based on the number of
                  shares  of  Pego  Common  Stock  then  outstanding  on a fully
                  diluted  basis,  after giving effect to the  conversion of all
                  outstanding  convertible  securities  and the  exercise of all
                  options or warrants to purchase Pego Common  Stock;  provided,
                  however, that on and after the Public Date the Pego Conversion
                  Rate shall be determined  based on the number of fully diluted
                  shares of Pego Common Stock outstanding as of the Public Date,
                  after  giving  effect  to the  conversion  of all  convertible
                  securities  and the  exercise  of all  options or  warrants to
                  purchase Pego Common Stock  Outstanding as of the Public Date.
                  For purposes of this Section 5(a)(1),  the "Public Date" shall
                  be the  earlier  of (x)  the  date  on  which  a  registration
                  statement  filed by Pego under the  Securities  Act of 1933 or
                  the  Securities  Exchange Act of 1934, or successor  statutes,
                  has become effective,  whether by acceleration or by operation
                  of law,  or (y) the first  date on which a class of the common
                  stock of Pego first trades on an inter-dealer quotation system
                  or any stock exchange.

                           The holder shall notify the Corporation, by facsimile
                  notice to the Corporation at (310) 403-1130, copy by overnight
                  courier at 19104 S.  Norwalk  Boulevard,  Artesia,  California
                  90701 of the  holder's  intent  to  convert  (the  "Notice  of
                  Conversion")  in the form set forth in Section 5(a)(3) hereof,
                  executed by the holder of the  Preferred  Share(s)  evidencing
                  such holder's intention to convert these Preferred Share(s) or
                  a  specified   portion  (as  above   provided)   hereof,   and
                  accompanied,   if  required  by  the  Corporation,  by  proper
                  assignment   thereof  in  blank.   Such  conversion  shall  be
                  effectuated  by  surrendering   the  Preferred  Shares  to  be
                  converted.

                           The date on which notice of conversion shall be given
                  shall be the date on which the  holder  has  delivered  to the
                  Corporation,  by  facsimile  or hand  delivery,  the Notice of
                  Conversion duly executed to the  Corporation.  The Corporation
                  shall cause its transfer agent or the Pego transfer  agent, as
                  the case may be, to complete the issuance of securities within
                  ten  (10)   business   days  of  receipt  of  such  Notice  of
                  Conversion,  provided  that the  Corporation  has received the
                  Series B Preferred Stock certificates which are the subject of
                  the conversion on or prior to such tenth business day.

                           (2) No less than 10 (or multiple  thereof)  shares of
                  Series B Preferred  Stock may be converted at any one time. No
                  fractional  shares  of  common  stock  shall  be  issued  upon
                  conversion of the Series B Preferred Stock.

                                                         3

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                  In lieu of fractional shares, the Corporation shall pay cash.

                           (3)      The Notice of Conversion shall read
                  substantially as follows:

                           The   undersigned   holder   (   the   "Holder")   is
                  surrendering  to  The  Hartcourt   Companies,   Inc.,  a  Utah
                  corporation   (the  "Company"),   one  or  more   certificates
                  representing shares of Series B Convertible Preferred Stock of
                  the Corporation (the "Preferred Stock") in connection with the
                  conversion  of all or a portion of the  Preferred  Stock into:
                  Check applicable box

                  [ ]      shares of Common Stock, $.01 par value per share,
                           of the Corporation (the "Common Stock")

                  [ ]      shares of Common Stock, $.001 par value per share,
                           of Pego (the "Pego Common Stock")

                           1. The Holder  understands  that the Preferred  Stock
                  was issued by the  Corporation  pursuant to the exemption from
                  registration  under the United States  Securities Act of 1933,
                  as amended (the  "Securities  Act"),  provided by Section 4(2)
                  thereof.

                           2. The Holder represents and warrants that all offers
                  and sales of the Common  Stock or Pego Common  Stock issued to
                  the Holder upon such  conversion of the Preferred  Stock shall
                  be made (a)  pursuant to an effective  registration  statement
                  under the Securities  Act, (b) in compliance with Rule 144, or
                  (c) pursuant to some other exemption from registration.

                  Number of Shares of Preferred Stock being converted:

                  Number of Shares to be issued:

                  Conversion Date:


                  Delivery Instructions for certificates of Common Stock or Pego
                  Common  Stock  and  for  new  certificates   representing  any
                  remaining shares of Preferred Stock:






                                                            NAME OF HOLDER:



                                                      (Signature of Holder)

                                                         4

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                           (4)  Upon  receipt  of  the   original   certificates
                  representing  the Series B Preferred  Stock,  the  Corporation
                  shall issue, or cause to be issued,  and deliver to the holder
                  the  appropriate  number of  shares  of  Common  Stock or Pego
                  Common Stock no later than ten (10) business days  thereafter.
                  If the  Corporation  fails to issue such Common  Stock or Pego
                  Common Stock within ten (10) business days  following the date
                  of  receipt  of the  original  certificates  representing  the
                  Series B Preferred Stock,  the Corporation  shall promptly pay
                  the following payments to such holder.



                                                         5

<PAGE>


<TABLE>
<CAPTION>

                  Number of Business Days
                  After Receipt of Series B
                  Preferred Stock                                                       Payment

<S>                              <C>                                                            <C>       
                                 11                                                             $      500
                                 12                                                                  1,000
                                 13                                                                  1,500
                                 14                                                                  2,000
                                 15                                                                  2,500
                                 16                                                                  3,000
                                 17                                                                  3,500
                                 18                                                                  4,000
                                 19                                                                  4,500
                                 20                                                                  5,000
                                 20                                                            Additional $1,000/day
</TABLE>

         To the extent that the failure of the  Corporation  to issue the Common
Stock or Pego Common Stock pursuant to Section 5(a) is due to the unavailability
of  authorized  but unissued  shares of Common  Stock,  the  provisions  of this
Section  5(a)(4)  shall not apply but instead the  provision of Section  5(f)(2)
shall apply.

         The  Corporation  shall pay any  payments  incurred  under this Section
5(a)(4)  immediately  available  funds  within 7 business  days from the date of
issuance of the applicable  Common Stock,  or Pego Common Stock.  Nothing herein
shall limit a holder's  right to pursue  actual  damages  for the  Corporation's
failure to issue and deliver  shares of Common Stock or Pego Common Stock to the
holder  in  accordance  with the terms of these  Articles  of  Amendment  of the
Articles of Incorporation.

                  (b)      Adjustments to Conversion Rate.

                           (1) Reclassification,  Exchange and Substitution.  If
                  the common  stock of either the  Corporation  or Pego (each of
                  which may be  referred to in this  Section 5 as the  "Issuer")
                  issuable on conversion  of the Series B Preferred  Stock shall
                  be changed  into the same or a  different  number of shares of
                  any other  class or  classes  of  stock,  whether  by  capital
                  reorganization,   reclassification,  reverse  stock  split  or
                  forward stock split or stock dividend or otherwise (other than
                  a subdivision or  combination  of shares  provided for above),
                  the holders of the Series B Preferred  Stock  shall,  upon its
                  conversion,  be  entitled  to  receive,  in lieu of the Issuer
                  common stock which the holders  would have become  entitled to
                  receive but for such change,  a number of shares of such other
                  class or classes  of stock  that  would  have been  subject to
                  receipt by the holders if they had  exercised  their rights of
                  conversion of the Series B Preferred Stock immediately  before
                  that change.

                           (2)      Reorganizations, Mergers, Consolidations or
                  Sale of Assets.  If at any time there shall be a capital
                  reorganization of the Issuer's common stock (other than

                                                         6

<PAGE>



                  a subdivision,  combination,  reclassification  or exchange of
                  shares provided for elsewhere in this Section (b) or merger of
                  the  Issuer  into  another  corporation,  or the  sale  of the
                  Issuer's  properties  and assets as, or  substantially  as, an
                  entirety  to  any  other  person),  then,  as a part  of  such
                  reorganization, merger or sale, lawful provision shall be made
                  so that the  holders of the  Series B  Preferred  Stock  shall
                  thereafter  be  entitled  to receive  upon  conversion  of the
                  Series B  Preferred  Stock,  the  number of shares of stock or
                  other  securities  or  property  of  the  Issuer,  or  of  the
                  successor  corporation  resulting  from such merger,  to which
                  holders of the common stock deliverable upon conversion of the
                  Series B  Preferred  Stock  would have been  entitled  on such
                  capital  reorganization,  merger  or  sale  if  the  Series  B
                  Preferred  Stock had been  converted  immediately  before that
                  capital  reorganization,  merger  or sale to the end  that the
                  provisions of this paragraph (b)(2)  (including  adjustment of
                  the  Conversion  Rate  then in  effect  and  number  of shares
                  purchasable  upon conversion of the Series B Preferred  Stock)
                  shall be applicable after that event as nearly equivalently as
                  may be practicable.

                  (c) No Impairment.  The Corporation  will not, by amendment of
         its  Articles  of  Incorporation  or  those  of  Pego  or  through  any
         reorganization,   recapitalization,   transfer   of   assets,   merger,
         dissolution,  or any other voluntary action, avoid or seek to avoid the
         observance  or  performance  of any  of the  terms  to be  observed  or
         performed  hereunder by the Corporation,  but will at all times in good
         faith assist in the carrying out of all the  provisions of this Section
         5 and in the  taking  of  all  such  action  as  may  be  necessary  or
         appropriate in order to protect the Conversion Rights of the holders of
         the Series B Preferred Stock against  impairment.  So long as shares of
         Series B Preferred Stock are outstanding, the Corporation may not waive
         or amend any term of these  Articles of  Amendment  of the  Articles of
         Incorporation.

                  (d) Certificate as to Adjustments. Upon the occurrence of each
         adjustment or  readjustment  of the  Conversion  Rate for any shares of
         Series B Preferred Stock, the Corporation at its expense shall promptly
         compute such  adjustment or  readjustment  in accordance with the terms
         hereof and  prepare  and  furnish to each  holder of Series B Preferred
         Stock effected  thereby a certificate  setting forth such adjustment or
         readjustment and showing in detail the facts upon which such adjustment
         or  readjustment  is based.  The  Corporation  shall,  upon the written
         request at any time of any holder of Series B Preferred Stock,  furnish
         or cause to be  furnished  to such  holder a like  certificate  setting
         forth (i) such adjustments and readjustments,  (ii) the Conversion Rate
         in effect at the time,  and (iii) the number of shares of Common  Stock
         or Pego Common Stock and the amount, if any, of other property which at
         the time would be received upon the conversion of such holder's  shares
         of Series B Preferred Stock.

                                                         7

<PAGE>




                  (e) Notices of Record Date. In the event of the  establishment
         by  the  Corporation  of a  record  of the  holders  of  any  class  of
         securities for the purpose of determining  the holders  thereof who are
         entitled to receive any dividend  (other than a cash dividend) or other
         distribution,  the  Corporation  shall mail to each  Holder of Series B
         Preferred  Stock at least twenty (20) days prior to the date  specified
         therein, a notice specifying the date on which any such record is to be
         taken for the purpose of such dividend or  distribution  and the amount
         and character of such dividend or distribution.

                  (f)      Reservation of Stock Issuable Upon Conversion.

                                    (1)   The   Corporation   shall,   and   the
                           Corporation shall cause Pego to, at all times reserve
                           and keep available out of their respective authorized
                           but unissued  shares of common stock,  solely for the
                           purpose of effecting the  conversion of the shares of
                           the  Series B  Preferred  Stock,  such  number of its
                           shares of their respective common stock as shall from
                           time to time be sufficient  to effect the  conversion
                           of  all  then  outstanding  shares  of the  Series  A
                           Convertible   Preferred   Stock  and  the   Series  B
                           Preferred  Stock;  and if at any time the  number  of
                           authorized  but unissued  shares of their  respective
                           common  stock shall not be  sufficient  to effect the
                           conversion  of all  then  outstanding  shares  of the
                           Series A Convertible Preferred Stock and the Series B
                           Preferred  Stock,  the  Corporation  will  take  such
                           corporate action,  and shall cause Pego, to take such
                           corporate  action,  as  may,  in the  opinion  of its
                           counsel,  be necessary to increase  their  respective
                           authorized  but  unissued  shares of common  stock to
                           such number of shares as shall be sufficient for such
                           purpose.

                                    (2) If,  at the time any  holder of Series B
                           Preferred  Stock  requests  conversion  pursuant to a
                           Notice  of  Conversion  under  this  Section  5,  the
                           Corporation   or  Pego   does  not  have   sufficient
                           authorized  but  unissued  shares of Common  Stock or
                           Pego Common Stock,  as the case may be,  available to
                           effect the  conversion  of the  Series B  Convertible
                           Preferred  Stock  which is the subject of such Notice
                           of Conversion (a "Conversion  Default"),  then,  with
                           respect  to the  shares of Series B  Preferred  Stock
                           requested to be converted but not converted beginning
                           on the tenth (10th) day after the applicable  date of
                           conversion   and   ending   on  the  date  of  actual
                           conversion of such  unconverted  Series B Convertible
                           Preferred  Stock and issuance of Common Stock or Pego
                           Common  Stock  therefor,  as the  case  may  be,  the
                           Dividend rate shall be

                                                         8

<PAGE>



                           increased by two percent per 30-day period, (24%
                           annually) compounded and accrued daily.

                  (g) Notices.  Except as otherwise  stated herein,  any notices
         required by the provisions of this Section 5 to be given to the holders
         of  shares  of  Series  B  Preferred  Stock  shall be  deemed  given if
         deposited in the United States mail, postage prepaid,  and addressed to
         each  holder  of record at its  address  appearing  on the books of the
         Corporation.

                  (h) Status of Converted Stock. Upon conversion of the Series B
         Preferred  Stock (in whole or in part) the Series B Preferred  Stock so
         converted  shall no longer be deemed to be  outstanding  and all rights
         with respect  thereto,  except only the right of the holder of Series B
         Preferred Stock to receive shares of Common Stock or Pego Common Stock,
         as the case may be,  upon such  conversion,  shall  terminate,  and the
         shares of Series B Preferred  Stock so converted  or redeemed  shall be
         canceled.  The converted shares of Series B Preferred Stock so canceled
         shall return to the status of authorized but unissued  Preferred  Stock
         of no designated series.

         6.       Voting Provisions.  Except as otherwise expressly
required by the Utah Business Corporations Act or other applicable
law, and except as provided in Section 5(3) hereof, the Series B
Preferred Stock shall have no voting rights.

         7. Rank.  The Series B  Preferred  Stock shall rank (i) prior to all of
the  Corporation's  Common  Stock,  (ii) prior to any class or series of capital
stock of the  Corporation  now  existing or  hereafter  created,  and (iii) on a
parity  with the  Series  A  Convertible  Preferred  Stock,  in each  case as to
dividends  of  assets  upon  liquidation,  dissolution  or  winding  up  of  the
Corporation, whether voluntary or involuntary.

         8. Preference  Rights. The Corporation shall not authorize or issue any
other series of Preferred  Stock with dividend  and/or  liquidation  preferences
senior  to the  dividend,  liquidation  or  other  preferences  of the  Series A
Convertible Preferred Stock or Series B Preferred Stock.

         9.  Unenforceable  Provisions.  If any  provision of these  Articles of
Amendment of the Articles of Incorporation is invalid, illegal or unenforceable,
the balance of these  Articles of  Amendment  of the  Articles of  Incorporation
shall remain in effect,  and if any provision is  inapplicable  to any person or
circumstance,  it shall nevertheless  remain applicable to all other persons and
circumstances.

         IN WITNESS  WHEREOF,  the  Corporation  has caused  these  Articles  of
Amendment to the Articles of  Incorporation to be duly executed by its President
and attested to by its Secretary this ____ day of October, 1997.

                                                  THE HARTCOURT COMPANIES, INC.

                                                         9

<PAGE>






                                                     Alan Phan, President



                                                 __________________, Secretary


                                                        10

<PAGE>