Document:

10.3 Distribution  Agreement  between The  Hartcourt  Companies,  Inc. and Enova
     Holdings, Inc.

                             DISTRIBUTION AGREEMENT

         THIS  DISTRIBUTION  AGREEMENT,  dated March 24, 1999, is by and between
The  Hartcourt  Companies  Inc.,  a Utah  corporation  ("Hartcourt")  and  Enova
Holdings Inc., a Nevada corporation ("Enova"). Capitalized terms used herein and
not otherwise  defined shall have the  respective  meanings  assigned to them in
paragraph 1 hereof.

         WHEREAS,  the Board of Directors of Hartcourt has determined that it is
in the best interests of Hartcourt and its shareholders to separate  Hartcourt's
existing subsidiaries into an independent business;

         WHEREAS,  the Board of  Directors  of  Hartcourt  has  determined  that
Hartcourt will distribute to its  shareholders all of the capital stock of Enova
held directly or indirectly  by Hartcourt,  subject to the terms and  conditions
set forth herein;

         WHEREAS,  the Enova  Distribution  is intended to qualify as a tax-free
spin-off under Section 355 of the Code;

         WHEREAS,   it  is  appropriate  and  desirable  to  set  forth  certain
agreements that will govern certain matters  relating to the Enova  Distribution
and the relationship of Hartcourt and Enova following the Enova Distribution;

         NOW,  THEREFORE,  the parties,  intending to be legally bound, agree as
follows:

1.   Definitions

     For the  purpose  of this  Agreement  the  following  terms  shall have the
     following meanings:

     1.1  "Agent" means the  distribution  agent to be appointed by Hartcourt to
          distribute the shares of Enova stock held by Hartcourt pursuant to the
          Enova Distribution.

     1.2  "Agreement"  means this Distribution  Agreement,  including all of the
          Schedules hereto.

     1.3  "Code" means the Internal Revenue Code of 1986, as amended.

     1.4  "Commission" means the Securities and Exchange Commission.

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     1.5  "Consents"   means  any  consents,   waivers  or  approvals  from,  or
          notification requirements to, any third parties.

     1.6  "Exchange Act" means the Securities  Exchange Act of 1934, as amended,
          together with the rules and regulations promulgated thereunder.

     1.7  "Enova" means Enova Holdings Inc., a Nevada corporation.

     1.8  "Enova  Common  Stock"  means the Common  Stock,  par value  $.001 per
          share, of Enova.

     1.9  "Enova  Class A  Warrant"  means the Class A Warrant  that  grants the
          holder  the  right to  acquire  one share of Enova  Common  Stock at a
          purchase price of $4.00 per share.

     1.10 "Enova Preferred Stock" means the Preferred Stock, Series D, par value
          $.001 per share, of Enova.

     1.11 "Enova Stock" means  collectively the Enova Common Stock and the Enova
          Preferred Stock.

     1.12 "Enova Distribution" means the distribution by Hartcourt on a pro rata
          basis to holders of Hartcourt Stock of all of the  outstanding  shares
          of Enova Stock owned by  Hartcourt on the Enova  Distribution  Date as
          set forth in paragraph 2 of this Agreement.

     1.13 "Enova  Distribution  Date"  means  the date  determined  pursuant  to
          paragraph  2.3 of this  Agreement  on  which  the  Enova  Distribution
          occurs.

     1.14 "Enova Form 10-SB" means the  Registration  Statement on Form 10-SB to
          be filed by Enova with the  Commission  in  connection  with the Enova
          Distribution.

     1.15 "Enova   Information   Statement"  means  the  Information   Statement
          constituting  a part of the  Enova  Form 10,  which  will be mailed to
          Hartcourt shareholders in connection with the Enova Distribution.

     1.16 "Enova  Record Date" means the time at which the  transfer  agents for
          the Hartcourt Stock close the transfer  records for Hartcourt Stock on
          the date to be determined  by the Hartcourt  Board of Directors as the
          record date for  determining  shareholders  of  Hartcourt  entitled to
          receive  the  special  dividend  of shares of Enova Stock in the Enova
          Distribution.

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     1.17 "Enova  Ancillary  Agreement"  means  any  written  agreement  between
          Hartcourt  and  Enova  executed  in  furtherance  of the  transactions
          contemplated herein.

     1.18 "Hartcourt" means The Hartcourt Companies Inc., a Utah corporation.

     1.19 "Hartcourt  Common Stock" means the Common  Stock,  $.01 par value per
          share, of Hartcourt.

     1.20 "Securities  Act"  means  the  Securities  Act of  1933,  as  amended,
          together with the rules and regulations promulgated thereunder.

2.0  The Distribution

     2.1  The Distribution.  Subject to paragraph 2.3 hereof, on or prior to the
          Enova Distribution  Date,  Hartcourt will deliver to the Agent for the
          benefit of holders of record of  Hartcourt  Stock on the Enova  Record
          Date, stock certificates representing all of the outstanding shares of
          Enova Stock then beneficially owned by Hartcourt,  and shall cause the
          transfer agent for the shares of Hartcourt Stock to instruct the Agent
          on the Enova Distribution Date to distribute the appropriate number of
          such shares of Enova Stock to each such holder of  Hartcourt  Stock or
          designated transferee or transferees of such holder

          Subject to paragraph 2.4, each holder of Hartcourt  Stock on the Enova
          Record Date (or such holder's  designated  transferee or  transferees)
          will be  entitled  to  receive in the Enova  Distribution  a number of
          shares of Enova Stock equal to the number of shares of Hartcourt Stock
          held by such holder on the Enova Record date divided by four (4).

          Each of Enova and  Hartcourt,  as the case may be, will provide to the
          Agent all share certificates and any information  required in order to
          complete the Enova Distribution on the terms contemplated hereby.

     2.2. Actions  Prior to The Enova  Distribution.  Hartcourt  and Enova shall
          prepare and mail, prior to the Enova Distribution Date, to the holders
          of Hartcourt  Common Stock,  the Enova  Information  Statement,  which
          shall set forth  appropriate  disclosure  concerning  Enova, the Enova
          Distribution  and such  other  matters  as  Hartcourt  and  Enova  may
          determine.  Within a  reasonable  period of time  following  the Enova
          Distribution  Date Hartcourt and Enova shall prepare,  and Enova shall
          file with the Commission, the Enova Form 10-SB, which shall include or
          incorporate by reference the Enova Information Statement.  Enova shall
          use its  reasonable  best  efforts to cause the Enova Form 10-SB to be
          declared  effective  under  the  Exchange  Act as soon as  practicable
          following the filing thereof. In this regard:

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          (a)  Hartcourt  and  Enova  shall  take  all  such  action  as  may be
               necessary or appropriate under the securities or blue sky laws of
               the United  States  (and any  comparable  laws under any  foreign
               jurisdiction) in connection with the Enova Distribution.

          (b)  Enova shall prepare and file, and shall use its  reasonable  best
               efforts to have approved,  an application  for the listing of the
               Enova Common stock to be distributed in the Enova Distribution on
               a mutually  agreeable stock exchange or on the Nasdaq  Electronic
               Bulletin Board system.

     2.3. Conditions to The Enova  Distribution.  The Hartcourt Board shall have
          the sole  discretion  to determine the Enova Record Date and the Enova
          Distribution  Date, and all appropriate  procedures in connection with
          the Enova Distribution, provided that the Enova Distribution shall not
          occur  prior to such time as each of the  following  conditions  shall
          have been  satisfied or shall have been waived by the Hartcourt  Board
          in its sole discretion:

          (a)  A private  letter  ruling from the  Internal  Revenue  Service or
               written  opinion  from  qualified  tax  counsel  shall  have been
               obtained, and shall continue in effect, to the effect that, among
               other things,  the Enova  Distribution will qualify as a tax-free
               distribution for federal income tax purposes under Section 355 of
               the  Code,  and  such  ruling  or  opinion  shall  be in form and
               substance satisfactory to Hartcourt in its sole discretion;

          (b)  Any material  Governmental  approvals  and consents  necessary to
               consummate the Enova Distribution shall have been obtained and he
               in full force and effect;

          (c)  No order,  injunction  or decree issued by any court or agency of
               competent  jurisdiction  or other legal  restraint or prohibition
               preventing the consummation of the Enova Distribution shall be in
               effect and no other event shall have  occurred or failed to occur
               that prevents the consummation of the Enova Distribution;

          (d)  The   Hartcourt   Board   shall  have   formally   approved   the
               Distribution;  provided that the  satisfaction of such conditions
               shall not create any  obligation on the part of Hartcourt,  Enova
               or any other  person  to  effect  or to seek to effect  the Enova
               Distribution or in any way limit  Hartcourt's  right to terminate
               this  Agreement  as set  forth  in  paragraph  7.1 or  alter  the
               consequences  of any such  termination  from those  specified  in
               paragraph 7.2.

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     2.4. Fractional Shares. No certificates  representing  fractional shares of
          Enova Common Stock will be distributed to holders of Hartcourt  Common
          Stock in the Enova Distribution.  Holders that receive certificates in
          the Enova  Distribution and holders that would otherwise  receive less
          than one whole share of Enova Common  Stock in the Enova  Distribution
          will  receive  one whole  share in lieu of such  fractional  shares as
          contemplated hereby.

3.   Certain Agreements Relating to The Enova Distribution

     3.1. Enova Ancillary  Agreements.  Effective as of the date hereof, each of
          Hartcourt  and Enova are executing  and  delivering  each of the Enova
          Ancillary Agreements.

     3.2. The Enova Board.  Enova and Hartcourt shall take all actions which may
          be required to elect or otherwise appoint as directors of Enova, on or
          prior to the Enova  Distribution Date, the persons so named shall also
          be directors in the Enova Form 10-SB and shall constitute the Board of
          Directors of Enova on the Enova Distribution Date.

     3.3. Enova Charter,  Bylaws And Warrants.  Prior to the Enova  Distribution
          Date, (a) Hartcourt  shall cause Articles of Amendment and Restatement
          of Enova,  substantially  in the form filed with the Enova Form 10-SB,
          to be filed for record with the Nevada Secretary of State and to be in
          effect on the Enova  Distribution Date, and (b) the Board of Directors
          of Enova shall amend the Bylaws of Enova so that the Enova  Bylaws are
          substantially  in the form filed with the Enova Form  10-SB.  Prior to
          the Enova Record Date, the Board of Directors of Enova shall declare a
          dividend  of the Class A Warrants  so that each share of Enova  Common
          Stock  issued and  outstanding  on the Enova  Distribution  Date shall
          initially have one Class A Warrant attached thereto.

4.   Mutual Releases; Indemnification

     4.1. Release of Pre-Closing Claims.

     (a)  Release by Enova.  It is the intent of each of Hartcourt  and Enova by
          virtue of the  provisions of this  paragraph 4.1 to provide for a full
          and  complete  release and  discharge of all  Liabilities  existing or
          arising  from all acts and  events  occurring  or  failing to occur or
          alleged to have occurred or to have failed to occur and all conditions
          existing   or  alleged  to  have   existed  on  or  before  the  Enova
          Distribution  Date,  between  or among  Enova,  on the one  hand,  and
          Hartcourt,  on the other hand (including any contractual agreements or

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          arrangements  existing  or alleged to exist  between or among any such
          members on or before the Enova  Distribution  Date as  follows:  Enova
          does hereby,  for itself and successors  and assigns,  and all Persons
          who at any  time  prior  to the  Enova  Distribution  Date  have  been
          shareholders,  directors,  officers,  agents or employees of Enova (in
          each case, in their respective  capacities as such),  remise,  release
          and forever discharge Hartcourt, its respective Affiliates, successors
          and  assigns,  and all  Persons  who at any time  prior  to the  Enova
          Distribution Date have been shareholders,  directors, officers, agents
          or  employees  of  Hartcourt  (in  each  case,  in  their   respective
          capacities  as  such),   and  their   respective   heirs,   executors,
          administrators,  successors and assigns,  from any and all Liabilities
          whatsoever,  whether  at law or in  equity  (including  any  right  of
          contribution),  whether  arising under any contract or  agreement,  by
          operation  of law or  otherwise,  existing or arising from any acts or
          events occurring or failing to occur or alleged to have occurred or to
          have  failed to occur or any  conditions  existing  or alleged to have
          existed  on or  before  the  Enova  Distribution  Date,  including  in
          connection  with the actions or decisions taken or omitted to be taken
          in connection with the Enova Distribution

     (b)  Release by  Hartcourt.  Effective as of the Enova  Distribution  Date,
          Hartcourt does hereby, for itself and its successors and assigns,  and
          all Persons who at any time prior to the Enova  Distribution Date have
          been  shareholders,   directors,  officers,  agents  or  employees  of
          Hartcourt  (in each case,  in their  respective  capacities  as such),
          remiss,  release and  forever  discharge  Enova,  its  successors  and
          assigns,  and  all  Persons  who  at  any  time  prior  to  the  Enova
          Distribution Date have been shareholders,  directors, officers, agents
          or employees of Enova (in each case, in their respective capacities as
          such~,  and  their  respective   heirs,   executors,   administrators,
          successors  and  assigns,  from  any and all  Liabilities  whatsoever,
          whether  at law or in equity  (including  any right of  contribution),
          whether  arising under any contract or agreement,  by operation of law
          or otherwise, existing or arising from any acts or events occurring or
          failing  to occur or  alleged to have  occurred  or to have  failed to
          occur or any  conditions  existing  or alleged  to have  existed on or
          before the Enova Distribution Date.

     4.2. Indemnification  by Enova.  Enova  shall  indemnify,  defend  and hold
          harmless Hartcourt, and each of its directors, officers and employees,
          and each of the heirs, executors, successors and assigns of any of the
          foregoing collectively, the "Hartcourt Indemnities"), from and against
          any and all  Liabilities  of the  Hartcourt  Indemnities  relating to,

<PAGE>

          arising out of or resulting  from any of the following  items (without
          duplication),  in each case whether  arising  before,  on or after the
          Enova Distribution Date:

          (a)  The  failure  of Enova or any  other  Person to pay,  perform  or
               otherwise  promptly  discharge any  Liabilities  of any member of
               Enova in accordance with their respective terms, whether prior to
               or  after  the  Enova   Distribution  Date  or  the  date  hereof
               (including any Liabilities assumed or retained by Enova);

     4.3. Indemnification  by Hartcourt.  Hartcourt shall indemnify,  defend and
          hold harmless  Enova,  each of its directors,  officers and employees,
          and each of the heirs, executors, successors and assigns of any of the
          foregoing  (collectively,  the "Enova Indemnities"),  from and against
          any and all Liabilities of the Enova Indemnities  relating to, arising
          out  of  or  resulting  from  any  of  the  following  items  (without
          duplication),  in each case whether  arising  before,  on or after the
          Enova Distribution Date:

          (a)  The failure of Hartcourt  or any other Person to pay,  perform or
               otherwise promptly discharge any Liabilities of Hartcourt whether
               prior to or after the Enova  Distribution Date or the date hereof
               (including any Liabilities assumed or retained by Hartcourt);

     4.4. Survival  of  Indemnities.  The  rights  and  obligations  of  each of
          Hartcourt  and Enova  and  their  respective  Indemnities  under  this
          paragraph 4 shall  survive the sale or other  transfer by any party of
          any Assets or businesses or the assignment by it of any Liabilities.

5.   Interim Operations And Certain Other Matters

     5.1. Certain  Tax  Matters.  Unless  otherwise  agreed to in writing in any
          Ancillary Agreement, Hartcourt and Enova shall each be responsible for
          any taxes  incurred,  accrued or owed  through the Enova  Distribution
          Date.  Following the Enova Distribution Date,  Hartcourt and Enova, as
          separate  entities,  shall be  responsible  for their  respective  tax
          obligations.

     5.2. Agreement For Exchange of Information;  Archives.  Hartcourt and Enova
          each agrees  that (a) Enova  shall  maintain in effect at its own cost
          and expense  adequate  systems and controls to the extent necessary to
          enable  Hartcourt  to satisfy its  respective  reporting,  accounting,
          audit and other obligations,  and (b) Enova shall provide, or cause to
          be provided,  to Hartcourt in such form as Hartcourt shall request, at
          no charge to Hartcourt,  all financial and other data and  information
          as  Hartcourt  determines  necessary  or advisable in order to prepare
          Hartcourt  financial  statements  and  reports  or  filings  with  any
          Governmental Authority.

<PAGE>

     5.3. Insurance Matters.  All rights of Enova under Enova Policies as of the
          Enova  Distribution Date shall survive the Enova  Distribution Date in
          accordance with their respective terms as of such date.

     Enova  does  hereby  agree  that  Hartcourt  shall  not have any  Liability
     whatsoever as a result of the insurance policies and practices of Hartcourt
     and its Affiliates as in effect at any time prior to the Enova Distribution
     Date,  including  as a result of the level or scope of any such  insurance,
     the  creditworthiness of any insurance carrier, the terms and conditions of
     any policy,  the  adequacy  or  timeliness  of any notice to any  insurance
     carrier with respect to any claim or potential  claim or  otherwise.  In no
     event shall  Hartcourt have liability or obligation  whatsoever to Enova in
     the event that any Enova  Insurance  Policy or other  contract or policy of
     insurance  shall be terminated  or otherwise  cease to be in effect for any
     reason,  shall be unavailable or inadequate to cover any Liability of Enova
     for any reason  whatsoever  or shall not be renewed or extended  beyond the
     current expiration date.

6.   Further Assurances And Additional Covenants

     6.1. Further Assurances.  In addition to the actions specifically  provided
          for elsewhere in this Agreement,  each of the parties hereto shall use
          its  reasonable  best  efforts,  prior  to,  on and  after  the  Enova
          Distribution Date, to take, or cause to be taken, all actions,  and to
          do, or cause to be done, all things,  reasonably necessary,  proper or
          advisable  under  applicable  laws,   regulations  and  agreements  to
          consummate and make effective the  transactions  contemplated  by this
          Agreement and the Enova Ancillary Agreements.

          Without  limiting  the  foregoing,  prior  to,  on and after the Enova
          Distribution  Date,  each party hereto shall  cooperate with the other
          parties, and without any further consideration,  but at the expense of
          the requesting  party,  to execute and deliver,  or use its reasonable
          best efforts to cause to be executed and delivered,  all  instruments,
          including instruments of conveyance,  assignment and transfer,  and to
          make all  filings  with,  and to obtain  all  consents,  approvals  or
          authorizations  of, any  Governmental  Authority  or any other  Person
          under any permit,  license,  agreement,  indenture or other instrument
          (including any Consents or  Governmental  Approvals),  and to take all
          such other  actions as such party may  reasonably be requested to take
          by any other party hereto from time to time, consistent with the terms
          of this  Agreement  and the Enova  Ancillary  Agreements,  in order to
          effectuate the provisions and purposes of this Agreement and the Enova
          Ancillary  Agreements and the other transactions  contemplated  hereby
          and thereby.  Without limiting the foregoing,  each party will, at the

<PAGE>

          reasonable  request,  cost and expense of any other  party,  take such
          other  actions as may be  reasonably  necessary  to vest in such other
          party  good  and  marketable  title,  free and  clear of any  Security
          Interest, if and to the extent it is practicable to do so.

          Hartcourt  and  Enova,  at the  request  of the  other,  shall use its
          reasonable  best efforts to obtain,  or to cause to be  obtained,  any
          consent,  substitution,  approval  or  amendment  required  to  novate
          (including with respect to any federal government  contract) or assign
          all  obligations   under  agreements,   leases,   licenses  and  other
          obligations or Liabilities of any nature  whatsoever  that  constitute
          Liabilities of Enova or Liabilities that relate to Enova, or to obtain
          in  writing  the   unconditional   release  of  all  parties  to  such
          arrangements,  so  that,  in any  such  case,  Enova  will  be  solely
          responsible  for such  Liabilities;  provided,  however,  that neither
          Hartcourt  nor  Enova  shall  be  obligated  to pay any  consideration
          therefor  to any  third  party  from whom  such  consents,  approvals,
          substitutions, amendments and releases are requested.

          If Hartcourt or Enova is unable to obtain, or to cause to be obtained,
          any  such  required  consent,  approval,   release,   substitution  or
          amendment,  Hartcourt  shall continue to be bound by such  agreements,
          leases,  licenses and other  obligations  and, unless not permitted by
          law or the terms thereof,  Enova shall, as agent or subcontractor  for
          Hartcourt,  pay,  perform and discharge  fully all the  obligations or
          other  Liabilities  of  Hartcourt  thereunder  from and after the date
          hereof.  Enova shall  indemnify each Hartcourt  Indemnities,  and hold
          each of them harmless  against any  Liabilities  arising in connection
          therewith.

          The parties hereto agree to take any reasonable  actions  necessary in
          order for the Enova Distribution to qualify as a tax-free distribution
          pursuant to Section 355 of the code.

     6.2. Qualification as Tax-free  Distribution.  After the Enova Distribution
          date,  Hartcourt  or  Enova  shall  not take any  action  which  could
          reasonably  be  expected  to  prevent  the  Enova   Distribution  from
          qualifying  as a tax-free  distribution  within the meaning of Section
          355  of the  Code  or  any  other  transaction  contemplated  by  this
          Agreement or any Ancillary  Agreement which is intended by the parties
          to be tax-free from failing so to qualify.

          After the Enova  Distribution Date, Enova shall not take any action or
          enter into any  transaction  which  could  reasonably  be  expected to
          materially  adversely impact the reasonably  expected tax consequences
          to Hartcourt which are known to Enova of any transaction  contemplated
          by this Agreement.

<PAGE>

7.   Termination

     7.1. Termination. This Agreement may be terminated at any time prior to the
          Enova Distribution Date by Hartcourt.

     7.2. Effect  of  Termination.  In the  event  of any  termination  of  this
          Agreement,  no party to this  Agreement  (or any of its  directors  or
          officers) shall have any Liability or further  obligation to any other
          party.

8.   Miscellaneous

     8.1. Counterparts;  Entire  Agreement;  Corporate Power. This Agreement and
          each  Enova  Ancillary  Agreement  may be  executed  in  one  or  more
          counterparts,  all of  which  shall  be  considered  one and the  same
          agreement,  and shall become  effective when one or more  counterparts
          have been  signed by each of the parties  and  delivered  to the other
          party.

          This Agreement  contains the entire agreement between the parties with
          respect  to  the  subject  matter   hereof,   supersede  all  previous
          agreements,   negotiations,   discussions,  writings,  understandings,
          commitments and conversations  with respect to such subject matter and
          there are no  agreements or  understandings  between the parties other
          than those set forth or referred to herein or therein.

          Hartcourt  represents  on  behalf of itself  and Enova  represents  on
          behalf of itself as follows:

          (a)  each has the requisite corporate or other power and authority and
               has taken all  corporate  or other  action  necessary in order to
               execute,  deliver and  perform  each of this  Agreement  and each
               other Enova  Ancillary  Agreements  to which it is a party and to
               consummate the transactions contemplated hereby and thereby; and

          (b)  this Agreement and each Enova Ancillary  Agreement to which it is
               a  party  has  been  duly   executed  and  delivered  by  it  and
               constitutes a valid and binding  agreement of it  enforceable  in
               accordance with the terms thereof.

          Notwithstanding any provision of this Agreement or any Enova Ancillary
          Agreement, Hartcourt shall not be required to take or omit to take any
          act  that  would  violate  its   fiduciary   duties  to  any  minority
          stockholders, if any.

     8.2. Governing Law. This Agreement and, unless expressly  provided therein,
          each Enova Ancillary Agreement, shall be governed by and construed and
          interpreted in accordance with the laws of the State of California.

<PAGE>

     8.3. Assign Ability.  Except as set forth in any Enova Ancillary Agreement,
          this  Agreement and each Enova  Ancillary  Agreement  5hail be binding
          upon and inure to the  benefit  of the  parties  hereto  and  thereto,
          respectively,  and their respective successors and assigns;  provided,
          however,  that no party  hereto or thereto  may assign its  respective
          rights or delegate its respective  obligations under this Agreement or
          any Enova  Ancillary  Agreement  without  the  express  prior  written
          consent of the other parties hereto or thereto.

     8.4. Third Party Beneficiaries. Except for the indemnification rights under
          this Agreement of any Hartcourt  Indemnities  or Enova  Indemnities in
          their  respective  capacities  as  such,  (a) the  provisions  of this
          Agreement  and each  Enova  Ancillary  Agreement  are  solely  for the
          benefit of the parties and are not  intended to confer upon any Person
          except the parties any rights at remedies hereunder, and (b) there are
          no third party  beneficiaries of this Agreement or any Enova Ancillary
          Agreement and neither this Agreement nor any Enova Ancillary Agreement
          shall  provide any third  person with any  remedy,  claim,  liability,
          reimbursement,  claim of  action  or other  right in  excess  of those
          existing  without  reference to this Agreement or any Enova  Ancillary
          Agreement.

     8.5. Notices.  All notices or other  communications under this Agreement or
          any Enova Ancillary  Agreement shall be in writing and shall be deemed
          to be duly given when (a)  delivered in person or (b) deposited in the
          United States mail or private express mail, postage prepaid, addressed
          as follows:

                  If to Hartcourt, to:      The Hartcourt Companies Inc.
                                            c/o Dr. Alan Phan
                                            2049 Century Park East
                                            Los Angeles, California 90067
                                            Telephone:        (310) 788-2634
                                            Facsimile:        (310) 553-1338

                  If to Enova, to:          Enova Holdings Inc.
                                            4695 MacArthur Court, Suite 530
                                            Newport Beach, CA 92660
                                            Telephone:        (949) 833-2094
                                            Facsimile:        (949) 833-7854

     8.6. Severability.  If  any  provision  of  this  Agreement  or  any  Enova
          Ancillary  Agreement  or the  application  thereof  to any  Person  or
          circumstance is determined by a court of competent  jurisdiction to be
          invalid,  void or  unenforceable,  the remaining  provisions hereof or

<PAGE>

          thereof,   or  the   application  of  such  provision  to  Persons  or
          circumstances or in jurisdictions  other than those as to which it has
          been held  invalid or  unenforceable,  shall  remain in full force and
          effect  and  shall  in no way be  affected,  impaired  or  invalidated
          thereby,   so  long  as  the  economic  or  legal   substance  of  the
          transactions  contemplated  hereby or thereby,  as the case may be, is
          not  affected  in  any  manner   adverse  to  any  party.   Upon  such
          determination,  the parties shall negotiate in good faith in an effort
          to agree upon such a suitable  and  equitable  provision to effect the
          original intent of the parties.

     8.7. Force  Majeure.  No party shall be deemed in default of this Agreement
          or any  Enova  Ancillary  Agreement  to the  extent  that any delay or
          failure in the performance of its obligations  under this Agreement or
          any  Enova  Ancillary  Agreement  results  from any cause  beyond  its
          reasonable  control and without its fault or negligence,  such as acts
          of God,  acts of civil or military  authority,  embargoes,  epidemics,
          war, riots,  insurrections,  fires, explosions,  earthquakes,  floods,
          unusually severe weather conditions,  labor problems or unavailability
          of  parts,  or,  in the  case of  computer  systems,  any  failure  in
          electrical  or air  conditioning  equipment.  In the event of any such
          excused delay, the time for performance shall be extended for a period
          equal to the time lost by reason of the delay.

     8.8. Publicity.  Prior to the Enova  Distribution  Date,  each of Enova and
          Hartcourt  shall  consult  with each other  prior to issuing any press
          releases or otherwise  making  public  statements  with respect to the
          Enova  Distribution  or  any of the  other  transactions  contemplated
          hereby and prior to making any filings with any Governmental Authority
          with respect thereto.

     8.9. Expenses.  Except as expressly  set forth in this  Agreement or in any
          Enova Ancillary  Agreement,  whether or not the Enova  Distribution is
          consummated, all third party fees, costs and expenses paid or incurred
          prior to the  Enova  Distribution  Date in  connection  with the Enova
          Distribution  will be paid by Hartcourt;  provided  however that Enova
          shall consult with  Hartcourt  prior to incurring any such third party
          obligations.

     8.10.Headings.  The  paragraph  and  paragraph  headings  contained in this
          Agreement  and in the Enova  Ancillary  Agreements  are for  reference
          purposes  only  and  shall  not  affect  in any  way  the  meaning  or
          interpretation of this Agreement or any Enova Ancillary Agreement.

     8.11.Survival  of  Covenants.  Except as  expressly  set forth in any Enova
          Ancillary  Agreement,  the covenants,  representations  and warranties
          contained in this Agreement and each Enova  Ancillary  Agreement,  and
          liability for the breach of any obligations  contained  herein,  shall
          survive  the Enova  Distribution  and shall  remain in full  force and
          effect following the consummation of the Enova Distribution.

<PAGE>

     8.12.Waivers of  Default.  Waiver by any party of any  default by the other
          party  of any  provision  of this  Agreement  or any  Enova  Ancillary
          Agreement  shall not be deemed a waiver  by the  waiving  party of any
          subsequent or other default,  nor shall it prejudice the rights of the
          other party.

     8.13.Amendments.  No  provisions of this  Agreement or any Enova  Ancillary
          Agreement shall be deemed waived, amended, supplemented or modified by
          any party, unless such waiver,  amendment,  supplement or modification
          is in writing and signed by the authorized representative of the party
          against  whom  it  is  sought  to  enforce  such  waiver,   amendment,
          supplement or modification.

<PAGE>

         IN WITNESS WHEREOF, the parties have caused this Distribution Agreement
to be executed by their duly authorized representatives.

                                        "Hartcourt"
                                        The Hartcourt Companies Inc.

                                        By:  /s/       Alan Phan
                                             ----------------------------------
                                             Name:     Dr. Alan Phan
                                             Title:    President

                                        "Enova"
                                        Enova Holdings Inc.

                                        By:  /s/       JL Lawver
                                             ----------------------------------
                                             Name:     JL Lawver
                                             Title:    President10.4 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.

<PAGE>

     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:

<PAGE>

          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

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