Document:

Exhibit 10.1

                          NINTH MODIFICATION AGREEMENT

     This NINTH  MODIFICATION  AGREEMENT (this  "AGREEMENT") is made and entered
into as of August 22,  2002,  by and  between  LEGACY/MONTEREY  HOMES  L.P.,  an
Arizona  limited  partnership,   HANCOCK-MTH   COMMUNITIES,   INC.,  an  Arizona
corporation,   HANCOCK-MTH   BUILDERS,   INC.,  an  Arizona   corporation,   MTH
HOMES-TEXAS,   L.P.,  a  Texas  limited   partnership,   jointly  and  severally
(collectively,   "BORROWER"),   and  GUARANTY  BANK,  a  federal   savings  bank
("Lender").

                                   WITNESSETH:

     WHEREAS, pursuant to a certain Master Loan Agreement (the "LOAN AGREEMENT")
dated as of January 31, 1993,  between  Lender and Borrower,  Lender made a loan
(the "LOAN") to Borrower,  evidenced by a certain Revolving Promissory Note (the
"NOTE") dated as of January 31, 1993,  payable to Lender in the stated principal
amount  of  SEVENTY-FIVE  MILLION  AND  NO/100  DOLLARS  ($75,000,000.00),  with
interest and principal payable as set forth therein; and

     WHEREAS,  to secure the Note and Loan,  Master Form  Deed(s) of Trust (With
Security Agreement and Assignment of Rents and Leases) (hereinafter collectively
referred to as the "MASTER DEEDS OF TRUST,"  whether one or more),  which Master
Deeds of Trust have been  recorded in certain  counties in the State of Texas as
more particularly described on EXHIBIT A attached hereto; and which Master Deeds
of Trust are  incorporated by reference  pursuant to the terms and provisions of
certain  Deeds of Trust  Incorporating  by Reference a Master Form Deed of Trust
(With  Security  Agreement  and  Assignment  of  Rents  and  Leases)  (hereafter
collectively  referred to as the  "SUPPLEMENTAL  DEEDS OF TRUST," whether one or
more) recorded in such counties and encumbering  certain real and other property
(the  "PROPERTY")  described  in such  Supplemental  Deeds of Trust (such Master
Deeds of Trust and Supplemental Deeds of Trust hereafter  collectively  referred
to as the "DEEDS OF TRUST," whether one or more); and

     WHEREAS,  the  Deeds of Trust  were  modified  pursuant  to a  Modification
Agreement (the "FIRST Modification"), and recorded in various counties in Texas,
which First  Modification  modified  certain terms and provisions of the Loan as
set forth therein; and

     WHEREAS,  the Deeds of Trust were further pursuant to a Second Modification
Agreement (the "SECOND  MODIFICATION") dated as of May 19, 1998, and recorded in
various counties in Texas, which Second Modification  modified certain terms and
provisions of the Loan as set forth therein; and

     WHEREAS,  the Deeds of Trust were further pursuant to a Third  Modification
Agreement (the "THIRD MODIFICATION") dated as of March 30, 1999, and recorded in
various counties in Texas, which Third  Modification  modified certain terms and
provisions of the Loan as set forth therein; and

     WHEREAS,  the Deeds of Trust were further pursuant to a Fourth Modification
Agreement (the "FOURTH MODIFICATION") dated as of July 31, 1999, and recorded in

NINTH MODIFICATION AGREEMENT - Page 1
<PAGE>
various counties in Texas, which Fourth Modification  modified certain terms and
provisions of the Loan as set forth therein; and

     WHEREAS,  the Deeds of Trust were further pursuant to a Fifth  Modification
Agreement  (the "FIFTH  MODIFICATION")  dated March 24,  2000,  and  recorded in
various counties in Texas, which Fifth  Modification  modified certain terms and
provisions of the Loan as set forth therein; and

     WHEREAS,  the Deeds of Trust were further pursuant to a Sixth  Modification
Agreement (the "SIXTH  MODIFICATION") dated as of July 31, 2000, and recorded in
various counties in Texas, which Sixth  Modification  modified certain terms and
provisions of the Loan as set forth therein; and

     WHEREAS, the Deeds of Trust were further pursuant to a Seventh Modification
Agreement (the "SEVENTH MODIFICATION") dated as of _________________,  2001, and
recorded  in various  counties in Texas,  which  Seventh  Modification  modified
certain terms and provisions of the Loan as set forth therein; and

     WHEREAS,  the Deeds of Trust were further  pursuant to a  Ratification  and
Assumption Agreement (the "RATIFICATION  AGREEMENT") dated as of December _____,
2001, and recorded in various counties in Texas,  which  Ratification  Agreement
modified certain terms and provisions of the Loan as set forth therein; and

     WHEREAS,  the Deeds of Trust were further pursuant to a Eighth Modification
Agreement (the "EIGHTH  MODIFICATION") dated as of May 31, 2002, and recorded in
various counties in Texas, which Eighth Modification  modified certain terms and
provisions of the Loan as set forth therein; and

     WHEREAS,  the Deeds of Trust were further  pursuant to a  Ratification  and
Assumption  Agreement  (the "SECOND  RATIFICATION  AGREEMENT")  dated as of July
_____,   2002,  and  recorded  in  various  counties  in  Texas,   which  Second
Ratification  Agreement modified certain terms and provisions of the Loan as set
forth therein; and

     WHEREAS,  the Note and the Loan are  guaranteed  pursuant  to that  certain
Guaranty  Agreement  dated as of July ____, 2002 (the  "GUARANTY"),  executed by
MTH-Texas GP, Inc., an Arizona corporation, MTH-Texas LP, Inc., MTH-Texas GP II,
Inc., an Arizona corporation, MTH-Texas LP II, Inc., an Arizona corporation, and
Meritage Corporation, a Maryland corporation ("GUARANTOR," whether one or more);
and

     WHEREAS, the Loan Agreement,  the Note, the First Modification,  the Second
Modification,  the  Third  Modification,  the  Fourth  Modification,  the  Fifth
Modification, the Sixth Modification, the Seventh Modification, the Ratification
Agreement, the Eighth Modification, the Second Ratification Agreement, the Deeds
of  Trust  and all  other  documents  evidencing  and/or  securing  the Loan are
hereinafter collectively called the "LOAN Instruments"; and

     WHEREAS,  Lender,  the owner and  holder of the Note and the Deeds of Trust
and all rights and titles evidenced thereby,  and Borrower,  the record owner of

NINTH MODIFICATION AGREEMENT - Page 2
<PAGE>
the Property  and being  liable for the payment of the Note and Loan,  desire to
modify the Loan Instruments as herein provided.

     NOW,  THEREFORE,  in  consideration  of Ten and No/100 Dollars ($10.00) and
other good and valuable consideration,  the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

     1. The Loan is hereby increased from $75,000,000.00 to $90,000,000.00.  All
references in the Loan  Instruments to the amount of  $75,000,000.00  are hereby
increased to $90,000,000.00.

     2. Borrower shall execute and deliver to Lender a letter agreement (in form
and  substance  satisfactory  to Lender  in its sole  discretion)  (the  "LETTER
AGREEMENT")  dated  as of the date  hereof  amending  certain  other  terms  and
provisions of the Loan  Instruments.  (Hereafter,  this Agreement and the Letter
Agreement shall be included in the defined term "LOAN INSTRUMENTS.")

     3. Borrower  acknowledges and agrees, that as an accommodation to Borrower,
EXHIBIT A hereto  (which  exhibit  describes the  recording  information  of the
Master Deeds of Trust) shall be attached to this  Agreement  (and to any and all
other  documents  which may  require  the  attachment  of a  description  of the
recording  information of the Master Deeds of Trust) after Borrower's  execution
of same.  Accordingly,  Borrower hereby  authorizes and directs Lender to attach
such EXHIBIT A to this Agreement.

     4. Notwithstanding anything to the contrary in any of the Loan Instruments,
Borrower  acknowledges and agrees,  that to the extent that Lender is relying on
Chapter 303 of the Texas  Finance  Code to  determine  the  Maximum  Lawful Rate
(hereafter  defined)  payable  on  the  Note  and/or  the  Related  Indebtedness
(hereafter  defined) Lender will utilize the weekly ceiling from time to time in
effect as provided in such Chapter 303, as amended.  To the extent United States
federal law permits Lender to contract for, charge,  take,  receive or reserve a
greater  amount of  interest  than under  Texas law,  Lender will rely on United
States  federal law instead of such  Chapter 303 for the purpose of  determining
the Maximum Lawful Rate.  Additionally to the extent permitted by applicable law
now or  hereafter  in effect,  Lender  may, at its option and from time to time,
utilize any other  method of  establishing  the  Maximum  Lawful Rate under such
Chapter 303 or under other  applicable  law by giving  notice,  if required,  to
Borrower as provided  by  applicable  law now or  hereafter  in effect.  As used
herein,  the term  "MAXIMUM  LAWFUL RATE" shall mean the maximum  lawful rate of
interest which may be contracted for,  charged,  taken,  received or reserved by
Lender  in  accordance  with the  applicable  laws of the  State  of  Texas  (or
applicable  United  States  federal law to the extent that it permits  Lender to
contract for, charge, take, receive or reserve a greater amount of interest than
under Texas law), taking into account all Charges (as hereafter defined) made in
connection  with  the  transaction  evidenced  by the Note  and the  other  Loan
Instruments.  As used herein,  the term "CHARGES"  shall mean all fees,  charges
and/or any other things of value,  if any,  contracted for,  charged,  received,
taken or reserved by Lender in connection with the transactions  relating to the
Note and the  other  Loan  Instruments,  which are  treated  as  interest  under
applicable law. As used herein, the term "RELATED  INDEBTEDNESS"  shall mean any
and all  debt  paid or  payable  by  Borrower  to  Lender  pursuant  to the Loan
Instruments  or any other  communication  or writing by or between  Borrower and

NINTH MODIFICATION AGREEMENT - Page 3
<PAGE>
Lender related to the transaction or transactions  that are the subject mater of
the Loan  Instruments,  except  such debt  which has been paid or is  payable by
Borrower to Lender.

     5. Notwithstanding anything to the contrary contained in the Deeds of Trust
or other Loan Instruments,  with respect to any amendment to the Master Deeds of
Trust, the following terms and provisions shall apply:

     With respect to any amendment or  modification of the Master Deeds of Trust
     now or hereafter  executed by Borrower (or any future owner of the Property
     if different from Borrower) and duly recorded in the  appropriate  official
     public  records,  Borrower  acknowledges  and agrees that such amendment or
     modification of the Master Deeds of Trust shall  constitute an amendment or
     modification to the terms and provisions of any such Supplemental  Deeds of
     Trust (and shall be incorporated into any such Supplemental  Deeds of Trust
     and made a part  thereof  for all  purposes,  as though such  amendment  or
     modification  of the Master  Deeds of Trust  specifically  referred to such
     Supplemental  Deeds  of  Trust)  without  the  necessity  of  any  specific
     reference in such amendment or modification to any such Supplemental  Deeds
     of Trust;  and no such  amendment  or  modification  of the Master Deeds of
     Trust shall impair the obligations of Borrower under any such  Supplemental
     Deeds of Trust or any other of the Loan Instruments.

     6. Borrower hereby  expressly  promises to pay to the order of Lender,  the
principal  amount of the Note (as  modified  and  extended)  and all accrued and
unpaid  interest now or hereafter to become due and payable under the Note,  and
Borrower hereby expressly promises to perform all of the obligations of Borrower
under the Loan Instruments (as modified and extended).

     7. The liens of the Deeds of Trust are hereby  acknowledged  by Borrower to
be good,  valid and  subsisting  liens,  and such liens are hereby  renewed  and
extended  so as to secure  the  payment  of the Note and Loan (as  modified  and
extended).

     8. Borrower  hereby  represents and warrants to Lender that (a) Borrower is
the sole legal and beneficial  owner of the Property;  (b) Borrower has the full
power and authority to make the agreements  contained in this Agreement  without
joinder  or  consent  of any  other  party;  (c)  the  execution,  delivery  and
performance  of this  Agreement will not contravene or constitute an event which
itself or which  with the  passing  of time or  giving  of notice or both  would
constitute a default under any deed of trust, loan agreement, indenture or other
agreement to which  Borrower or Guarantor is a party or by which Borrower or any
of its  property  is bound;  and (d)  there  exists  no  default  under the Loan
Instruments  (as modified).  BORROWER HEREBY AGREES TO INDEMNIFY AND HOLD LENDER
HARMLESS  AGAINST  ANY LOSS,  CLAIM,  DAMAGE,  LIABILITY  OR EXPENSE  (INCLUDING
WITHOUT LIMITATION,  ATTORNEYS' FEES) INCURRED AS A RESULT OF ANY REPRESENTATION
OR  WARRANTY  MADE BY  BORROWER  HEREIN  PROVING  TO BE UNTRUE  IN ANY  MATERIAL
RESPECT.

     9. The terms and conditions hereof may not be modified, amended, altered or
otherwise  affected  except by  instrument  in  writing  executed  by Lender and
Borrower.

NINTH MODIFICATION AGREEMENT - Page 4
<PAGE>
     10.  All Loan  Instruments  are hereby  amended  and  modified  in a manner
consistent with the  modifications,  terms and/or  provisions  contained herein.
Except as  expressly  modified  hereby,  the terms  and  conditions  of the Loan
Instruments are and shall remain in full force and effect.

     11. Borrower agrees to pay to Lender,  contemporaneously with the execution
and delivery  hereof,  all costs and expenses  incurred in connection  with this
transaction,  title insurance endorsement premiums,  reasonable fees of Lender's
counsel and recording fees.

     12.  Borrower  hereby  agrees to execute and deliver to Lender such further
documents and instruments  evidencing or pertaining to the Loan, as modified and
increased hereby, as may be reasonably  requested by Lender from time to time so
as to evidence the terms and conditions hereof.

            [The balance of this page is intentionally left blank.]

NINTH MODIFICATION AGREEMENT - Page 5
<PAGE>
     EXECUTED  on the  date(s)  set forth in the  acknowledgment(s)  below to be
EFFECTIVE as of the date first above written.

                                        BORROWER:

                                        LEGACY/MONTEREY HOMES L.P.,
                                        an Arizona limited partnership

                                        BY: MTH-TEXAS GP, INC.,
                                            an Arizona corporation,
                                            General Partner

                                            By: /s/ Rick Morgan
                                                --------------------------------
                                               Name: Rick Morgan
                                                     ---------------------------
                                               Title: V.P.
                                                      --------------------------

                                        HANCOCK-MTH COMMUNITIES, INC.,
                                        an Arizona corporation

                                        By: /s/ Rick Morgan
                                            ------------------------------------
                                           Name: Rick Morgan
                                                 -------------------------------
                                           Title: V.P.
                                                  ------------------------------

                                        HANCOCK-MTH BUILDERS, INC.,
                                        an Arizona corporation

                                        By: /s/ Rick Morgan
                                            ------------------------------------
                                           Name: Rick Morgan
                                                 -------------------------------
                                           Title: V.P.
                                                  ------------------------------

                                        MTH HOMES-TEXAS, L.P.,
                                        an Texas limited partnership

                                        BY: MTH-TEXAS GP II, INC.,
                                            an Arizona corporation,
                                            General Partner

                                        By: /s/ Rick Morgan
                                            ------------------------------------
                                           Name: Rick Morgan
                                                 -------------------------------
                                           Title: V.P.
                                                  ------------------------------

NINTH MODIFICATION AGREEMENT - Page 6
<PAGE>
                                        LENDER:

                                        GUARANTY BANK
                                        a federal savings bank

                                        By: /s/ Sam A. Meade
                                            ------------------------------------
                                           Name: Sam A. Meade
                                                 -------------------------------
                                           Title: Senior Vice President
                                                  ------------------------------

NINTH MODIFICATION AGREEMENT - Page 7
<PAGE>
STATE OF TEXAS      )
                    )
COUNTY OF COLLIN    )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T.  Morgan,  V.P. of  MTH-TEXAS  GP, INC.,  an Arizona  corporation,  as General
Partner of LEGACY/MONTEREY HOMES L.P., an Arizona limited partnership, on behalf
of said limited partnership.

                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------

STATE OF TEXAS      )
                    )
COUNTY OF COLLIN    )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T. Morgan, V.P. of HANCOCK-MTH  COMMUNITIES,  INC., an Arizona  corporation,  on
behalf of said corporation.

                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------

STATE OF TEXAS      )
                    )
COUNTY OF COLLIN    )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T. Morgan, V.P. of HANCOCK-MTH BUILDERS, INC., an Arizona corporation, on behalf
of said corporation.

                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------

NINTH MODIFICATION AGREEMENT - Page 8
<PAGE>
STATE OF TEXAS      )
                    )
COUNTY OF COLLIN    )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T. Morgan,  V.P. of MTH-TEXAS GP II, INC.,  an Arizona  corporation,  as General
Partner of MTH HOMES-TEXAS, L.P., a Texas limited partnership, on behalf of said
limited partnership.

                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------

STATE OF TEXAS           )
                         )
COUNTY OF DALLAS         )

     This instrument was acknowledged before me on the 22nd day of August, 2002,
by Sam A. Meade, Senior Vice President of GUARANTY BANK, a federal savings bank,
on behalf of said federal savings bank.

                                        /s/ Leslie Ruth Reynolds
                                        ----------------------------------------
                                        Notary Public in and for the
                                        above county and state

My Commission Expires:                  Leslie Ruth Reynolds
                                        ----------------------------------------
     02-04-2005                         Printed Name of Notary Public
----------------------

NINTH MODIFICATION AGREEMENT - Page 9
<PAGE>
                              CONSENT OF GUARANTOR

     Each of the undersigned,  as a guarantor ("GUARANTOR," whether one or more)
of the loan (the  "LOAN"),  evidenced  by the Note and  secured  by the Deeds of
Trust described in the foregoing Ninth Modification  Agreement (the "AGREEMENT")
to which this Consent is attached,  hereby  acknowledge and consent (jointly and
severally) to the terms of the Agreement and agree (jointly and severally)  that
the  execution  and  delivery of the  Agreement  will in no way change or modify
Guarantor's  respective  obligations under their respective Guaranty (as defined
in the  Agreement);  and each  Guarantor  acknowledges  and agrees  (jointly and
severally)  that the  Indebtedness  (as  defined in the  respective  instruments
comprising  the  Guaranty)  includes the Loan (as increased and set forth in the
Agreement),  together  with any and all  other  Indebtedness  now or at any time
hereafter  owing by  Guarantor  to  Lender;  and  each  Guarantor  (jointly  and
severally)  hereby  unconditionally  and  absolutely  guarantees  to Lender  the
payment when due of such  Indebtedness,  and hereby  acknowledge  and agree that
their  respective  Guaranty is in full force and  effect,  and that there are no
claims,  counterclaims,  offsets or defenses to their respective  Guaranty;  and
each Guarantor acknowledges and consents (jointly and severally) to the terms of
any and all prior  modifications  to the terms of the Loan  (including,  without
limitation,  any and all  extensions  of the term  thereof and  increases in the
principal thereof prior to the date hereof, if any).

     EXECUTED  on the  date(s)  set forth in the  acknowledgment(s)  below to be
EFFECTIVE as of the 22 day of August, 2002.

                                        GUARANTOR:

                                        MERITAGE CORPORATION,
                                        a Maryland corporation

                                        By: /s/ John Landon
                                            ------------------------------------
                                           Name: John Landon
                                                 -------------------------------
                                           Title: Co-CEO
                                                  ------------------------------

                                        MTH-TEXAS GP, INC.,
                                        an Arizona corporation

                                        By: /s/ Rick Morgan
                                            ------------------------------------
                                           Name: Rick Morgan
                                                 -------------------------------
                                           Title: V.P.
                                                  ------------------------------

NINTH MODIFICATION AGREEMENT - Page 10
<PAGE>
                                        MTH-TEXAS LP, INC.,
                                        an Arizona corporation

                                        By: /s/ Rick Morgan
                                            ------------------------------------
                                           Name: Rick Morgan
                                                 -------------------------------
                                           Title: V.P.
                                                  ------------------------------

                                        MTH-TEXAS GP II, INC.,
                                        an Arizona corporation

                                        By: /s/ Rick Morgan
                                            ------------------------------------
                                           Name: Rick Morgan
                                                 -------------------------------
                                           Title: V.P.
                                                  ------------------------------

                                        MTH-TEXAS LP II, INC.,
                                        an Arizona corporation

                                        By: /s/ Rick Morgan
                                            ------------------------------------
                                           Name: Rick Morgan
                                                 -------------------------------
                                           Title: V.P.
                                                  ------------------------------

NINTH MODIFICATION AGREEMENT - Page 11
<PAGE>
STATE OF TEXAS     )
                   )
COUNTY OF COLLIN   )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T. Morgan, V.P. of MERITAGE CORPORATION,  a Maryland  corporation,  on behalf of
said corporation.

                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------

STATE OF TEXAS     )
                   )
COUNTY OF COLLIN   )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T. Morgan, V.P. of MTH-TEXAS GP, INC., an Arizona corporation, on behalf of said
corporation.

                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------

STATE OF TEXAS     )
                   )
COUNTY OF COLLIN   )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T. Morgan, V.P. of MTH-TEXAS LP, INC., an Arizona corporation, on behalf of said
corporation.

                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------

NINTH MODIFICATION AGREEMENT - Page 12
<PAGE>
STATE OF TEXAS     )
                   )
COUNTY OF COLLIN   )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T. Morgan, V.P. of MTH-TEXAS GP II, INC., an Arizona  corporation,  on behalf of
said corporation.

                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------

STATE OF TEXAS     )
                   )
COUNTY OF COLLIN   )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T. Morgan, V.P. of MTH-TEXAS LP II, INC., an Arizona  corporation,  on behalf of
said corporation.

                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------

NINTH MODIFICATION AGREEMENT - Page 13
<PAGE>
                                    EXHIBIT A

                       Description of the Deed(s) of Trust

EXHIBIT A - Page 1Exhibit 10.6

                             AMENDMENT NUMBER THREE
                                       TO
              ACCOUNTS RECEIVABLE AND INVENTORY FINANCING AGREEMENT

     This  AMENDMENT  NUMBER THREE is to that certain  Accounts  Receivable  and
Inventory  Financing  Agreement dated July 13, 2001, entered into by and between
Transamerica  Commercial Finance Corporation ("TCFC") and Pacific Magtron,  Inc.
("Dealer 1") and Pacific Magtron (GA), Inc.  ("Dealer 2") (Dealer 1 and Dealer 2
shall  hereinafter be individually  referred to as "Dealer" and  collectively as
the "Dealer"), and any and all amendments and riders thereto (the "Agreement").

     WHEREAS,  Dealer  wishes  to add  Frontline  Network  Consulting,  Inc.,  a
California  corporation (referred to individually as a "Dealer" and collectively
together  with Pacific  Magtron,  Inc.  and Pacific  Magtron  (GA),  Inc, as the
"Dealers") as an additional Dealer under the Agreement,

     WHEREAS,  TCFC and Dealer have agreed to further amend the Agreement on the
terms and conditions hereinafter set forth.

     NOW THEREFORE,  in consideration of the premises set forth above. the terms
and conditions contained herein and other good and valuable  consideration,  the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereto
agree as follows:

     1. DEFINITIONS.  Terms defined is the Agreement which are used herein shall
have the same meanings as set forth in the Agreement  unless  otherwise  defined
herein.

     2. AMENDMENTS.

          2.1 Section  1.3(a) of the Agreement is hereby amended by deleting the
     definition of "Credit Limit" and replacing it with the following;

          "CREDIT LIMIT" -  $3,000,000.00  in the aggregate for Inventory  Loans
     and the  Letter of Credit  Facility.  The  Letter  of Credit  Facility  (as
     defined in Section  2.2) shall not exceed  $1,000,000.00.  The Credit Limit
     for Pacific Magtron,  Inc. shall not exceed  $1,750,000.00 in the aggregate
     for Inventory  Loans.  The Credit Limit for Frontline  Network  Consulting,
     Inc. shall not exceed $250,000.00 in tire aggregate for Inventory Loans."

          2.2 Section 1.3(a) of the Agreement is hereby amended by deleting the
     definition of "Loans" and replacing it with the following:

          "'Loans'  - Any  amounts  outstanding  under  the  Letter  of  Credit
     Facility,  Inventory  Loans and other  loans made by TCFC  pursuant to this
     Agreement."

          2.3 The  fist  paragraph  of  Section  2.2 of the  Agreement  entitled
     "Loans" is hereby deleted in its entirety and replaced with the following:

     "2.2 Loans.  Subject to the terms and  conditions of this Agreement and the
     Other  Agreements and such other terms and conditions as TCFC may from time
     to time, in its sole  discretion  determine,  TCFC may from time to time in
     its  sole  discretion,  make  Loans  to  Dealers  in  connection  with  the
     acquisition of Inventory ("Inventory Loans") and other Loans to Dealers for
     working capital purposes ("Working Capital Loans"); provided, however, that
     the only Working Capital Loans TCFC may extend to Dealers shall be pursuant
     to the Letter of Credit Facility."
<PAGE>

          2.4 Section 12.19 of the Agreement entitled "List of Dealers is hereby
     deleted in its entirety and replaced with the following;

     "12.19 List of Dealers. The following persons are parties to this Agreement
     as Dealers:

     Pacific Magtron, Inc.
     Pacific Magtron (GA), Inc.
     Frontline Network Consulting Inc."

          2.5 Schedule 2.9, Schedule 2.10, Schedule 2.12, Schedule 3.9, Schedule
     5.3 and Schedule 6.6 of the Agreement  are hereby  deleted and are replaced
     with the attached Schedules of the same numbers dated October 23, 2002.

     3. Frontline Network Consulting, Inc. is hereby considered a Dealer for all
purposes and Frontline Network Consulting,  Inc. hereby assumes and agrees to be
bound by all  obligations  hereunder as a Dealer,  including but not limited to,
the provisions of Sections 2.2 and 3.1.

     4. Representations and Warranties of Dealer. Dealer represents and warrants
that this Amendment and the Agreement, as amended hereby.  constitute the legal,
valid and binding obligation of Dealer, enforceable against Dealer in accordance
with its respective terms.

     5. Governing  Law. THIS  AMENDMENT HAS BEEN  DELIVERED TO,  ACCEPTED AT AND
SHALL BE DEEMED TO HAVE BEEN MADE IN ILLINOIS.  THIS AMENDMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

     6. Except as specifically  modified hereby,  all other terms and conditions
of the Agreement remain in full force and effect.

     7. The Agreement and this  Amendment  represent the final  agreement of the
parties,  and all  prior and  contemporaneous  discussions,  understandings  and
agreements  are merged  herein.  The  Agreement  and this  Amendment  may not be
modified except in writing by both parties.

                                       2
<PAGE>
     IN WITNESS  WHEREOF,  this  AMENDMENT NO. THREE has been duly executed this
24th day of October, 2002.

                                        TRANSAMERICA FINANCE CORPORATION

                                        By:    /s/ Christopher C. Meals
                                               ---------------------------------
                                               Christopher C. Meals

                                        Title: Vice President - Credit

                                        PACIFIC MAGTRON, INC.

                                        By:    /s/ Theodore S. Li
                                               ---------------------------------
                                               Theodore S. Li

                                        Title: President

                                        PACIFIC MAGTRON (GA), INC.

                                        By:    /s/ Hui "Cynthia" Lee
                                               ---------------------------------
                                               Hui "Cynthia" Lee

                                        Title: President

                                        FRONTLINE NETWORK CONSULTING, INC.

                                        By:    /s/ Theodore S. Li
                                               ---------------------------------
                                               Theodore S. Li

                                        Title: President

                                       3
<PAGE>
                                  SCHEDULE 2.9
                                October 23, 2002

                               INTEREST PROVISIONS

Interest will accrue an Inventory Loans at the rate of the Prime Rate, in effect
from time to time (such  applicable rate defined as the  "PRE-DEFAULT  INVENTORY
LOAN RATE").  Interest will be calculated  for the actual number of days elapsed
on the basis of a year consisting of 360 days. Upon a Default and for so long as
such Default continues, such interest shall accrue at a rate equal to the lesser
of four percent (4.0 %) above the Pre-Default Inventory Loan Rate or the highest
rate allowed by applicable law (the  "Inventory Loan Default Rate") and shall be
payable  upon demand. TCFC may  provide  for the  payment of any unpaid  accrued
interest by charging the Loan Accounts.

In the case of any  inventory  Loan with  respect to which a Free  Floor  period
applies,  interest at the Pre-Default inventory Loan Rate on each such Inventory
Loan will commence on the day following the last day of the Free Floor Period or
after the Start Date. Dealer acknowledges that the Free Floor Period, if any, is
determined by the Participating  Seller in its sole discretion and can change at
any time.

                                       4
<PAGE>
                                  SCHEDULE 2.10
                                October 27, 2002

                              FEES AND CHARGES MENU

AUDIT FEE:

Dealer  shall pay to TCFC upon  being  billed  therefore  the  following  fee in
connection  with each audit of Collateral or Records  performed by TCFC pursuant
to Section 6.5 of this agreement: $1,000 00 semi-annually provided that no event
of Default  has  occurred.  If an event of default  shall have  occurred  and be
continuing, then no limit on the amount of such cost and expense shall apply

EARLY TERMINATION FEE:

In the event  this  Agreement  is  terminated  by TCFC by reason of a Default by
Dealer or if this Agreement is terminated by Dealer, and either such termination
occurs prior to the end of the initial two year term of this Agreement,  then in
addition to the aggregate outstanding balance of all Liabilities (existing as of
the effective date of termination),  including,  without limitation, all accrued
interest,  fees and other charges due and payable under this  Agreement,  Dealer
shall pay to TCFC,  as  liquidated  damages  and not as a penalty in the case of
such  termination  by  TCFC  and as a  prepayment  premium  in the  case of such
termination  by Dealer,  an early  termination  fee as of the effective  date of
termination equal to:

An amount equal to: (1) 1.0% of the then established Credit Limit.

NSF FEE:

TCFC  shall  charge  Dealer a fee of $25.00  for each  check of  Dealer  that is
returned unpaid for non-sufficient funds.

FLAT CHARGE:

Dealer shall pay to TCFC a fee equal to 0.50% of the original  principal  amount
of each Inventory Loan with respect to which no Free Floor Period applies.  Such
fees shall be due and  payable by Dealer  monthly  immediately  upon  receipt of
billing  statement  from TCFC for such month but in no event later than the 15th
day of the following month.

                                       5
<PAGE>
                                  SCHEDULE 2.12
                                October 23, 2002

                            PAYMENTS AND COLLECTIONS

A)   INVENTORY  LOANS:  All  Inventory  Loans with respect to which a Free Floor
     period applies, shall be paid at the end of the Free Floor period end date.
     Inventory  Loans without a Free Floor  period,  shall be paid 30 days after
     its Start Date.

B)   Notwithstanding the above, principal payments otherwise due between the 1st
     and 15th day of a month  shall be due and payable on the 10th of such month
     and principal  payments  otherwise due between the 16th and the last day of
     the month shall be due on the 20th of such month.

EARLY PAYMENT REBATE

Dealers shall be eligible for an Early Payment  rebate with respect to Inventory
Loans which have a 60 day Free Floor  Period  applicable  to them.  In the event
that Dealer repays any  Inventory  Loan in full before the end of such sixty day
Free Floor Period of such  Inventory  Loan,  then Dealer shall be entitled to an
Early Payment  Rebate equal to 1.0% of the face amount of such  Inventory  Loan.
Any such Early Payment Rebates earned by Dealer during a calendar month shall be
paid by TCFC to Dealer by the 15th day of the following month.

                                       6
<PAGE>
                                  SCHEDULE 3.9
                                October 23, 2002

                                  REPORTS MENU

Dealer shall  provide TCFC with the  following  reports,  in form and  substance
satisfactory  to TCFC,  and such other  reports as TCFC may request from time to
time:

     Monthly  Inventory  reports for both Pacific  Magtron  Inc.  and  Frontline
     Network  Consulting,  Inc. as of the prior month end due by the 10th day of
     each month.  Such reports  shall  contain a schedule of Inventory by value,
     cost, type, availability, brand, model and location.

     Monthly accounts  receivable and accounts  payable reports  (including aged
     trial balance of accounts and concentration  report describing sales volume
     and account  balances by  customer)  for both  Pacific  Magtron,  Inc.  and
     Frontline  Network  Consulting,  Inc.  as of the prior month end due by the
     10th day of each month.

     Annual  internal  financial  statements far both Pacific  Magtron,  Inc and
     Frontline  Network  Consulting,  Inc due within 60 days of the fiscal  year
     end.

     Monthly financial  statements for both Pacific Magtron,  Inc. and Frontline
     Network Consulting, Inc, due within 20 days of each month end.

     Annual Financial Projection for Pacific Magtron, Inc, for each fiscal year,
     submitted  no later tan 45 days  before the end of the prior  fiscal  year.
     Annual  Financial  Projection  shall mean the  projected  balance sheet and
     profit and loss  statement  of Dealer,  prepared in  accordance  with GAAP.
     Dealer  warrants each Annual  Financial  Projection is and will be the best
     available good faith estimate of Dealer's  management  regarding the course
     of Dealer's  business for the period covered thereby.  Dealer also warrants
     each Annual Financial  Projection,  and the assumption on which such Annual
     Financial  Projection is based,  shall be reasonable and realistic based on
     the current economic conditions.

                                       7
<PAGE>
                                  SCHEDULE 5.3
                                October 23, 2002

                                 DEALER'S NAMES

1.   Legal names used in the past 5 years:

     Pacific Magtron, Inc.
     Pacific Magtron (GA), Inc.
     Frontline Network Consulting, Inc.

2.   Trade names and trade styles used in the past 5 years:

     Pacific Magtron, Inc.
     Pacific Magtron (GA.), Inc.
     Frontline Network Consulting, Inc.

3.   Current legal name:

     Pacific Magtron, Inc.
     Pacific Magtron (GA.), Inc,
     Frontline Network Consulting, Inc,

4.   Current trade names and trade styles:

     Pacifc Magtron, Inc
     Pacific Macron (GA.), Inc.
     Frontline Network Consulting, Inc

                                       8
<PAGE>
                                  SCHEDULE 6.6
                                 October 23, 2002

                            FINANCIAL COVENANTS MENU

Dealer  covenants  and  agrees  that so long as any of the  Liabilities  to TCFC
remain  outstanding or this Agreement remains in effect,  even if no Liabilities
to TCFC are outstanding:

     INDEBTEDNESS  TO  TANGIBLE  NET  WORTH:  Dealer  shall  maintain a ratio of
     indebtedness  to  Tangible  Net Worth  not to  exceed:  3.25 to 1.00.  Such
     covenant will be measured monthly.

     TANGIBLE NET WORTH:  Dealer shall maintain a Tangible Net Worth of not less
     than $4,250,000.00. Such covenant will be measured monthly.

     MINIMUM EDIT- Dealer shall maintain a minimum EBIT of;

     $0 as of the quarter ending on September 30, 2002 and

     $275,000.00 as of the quarter ending on December 31, 2002.

     Such covenant will be measured quarterly.

"EBIT" as used herein shall mean earnings before  deducting for interest expense
and income taxes in accordance with "GAAP."

                                       9
<PAGE>
                                    GUARANTEE

     For value  received  and in  consideration  of any loan or other  financial
accommodation  of any  kind  heretofore,  now or  hereafter  made  or  given  by
Transamerica  Commercial  Finance  Corporation  ("TCFC")  to  Frontline  Network
Consulting,  Inc (the "Debtor") or to a customer of the Debtor,  the undersigned
(the "Guarantor")  unconditionally  guarantees the full and punctual payment and
performance when due,  whether upon demand,  at maturity or earlier by reason of
acceleration  or  otherwise,  and  at  all  times  thereafter,  of  all  of  the
indebtedness  and  obligations  of every  kind and  nature of the Debtor to TCFC
howsoever  created,  arising or  evidenced,  whether  arising  before or after a
bankruptcy of the Debtor,  whether  direct or indirect,  absolute or contingent,
joint or several,  now or hereafter existing,  or due or to become due (all such
indebtedness   and   obligations   being   hereinafter   referred   to  as   the
"Liabilities").  The  Guarantor  further  agrees to pay on demand  all costs and
expenses  incurred  by TCFC in  endeavoring  to collect  the  Liabilities  or in
enforcing this Guarantee.

     This is a guarantee of payment and not of collection.  The Guarantor agrees
that  the   obligations  of  the  Guarantor   under  this  Guarantee   shall  be
unconditional,  irrespective  of (i) the invalidity or  unenforceability  of the
Liabilities  or  any  agreement  or  instrument   relating  to  the  Liabilities
(sometimes hereinafter referred to, collectively, as the "Documents") or any law
affecting the  Liabilities  or any Document;  (ii) the absence of any attempt to
collect the  Liabilities  from the Debtor or from any other person  primarily or
secondarily  liable with respect to the Liabilities or of any attempt to realize
upon any collateral for the  Liabilities,  for the obligations of any such other
person, or for this Guarantee;  (iii) any failure by TCFC to acquire, perfect or
maintain a security interest in or to protect any collateral for the Liabilities
or for  any  such  obligations;  (iv)  any  defense  arising  by  reason  of any
disability  or other  defense  of the Debtor or any other  person  liable on the
Liabilities  (v) the acceptance of additional  parties  primarily or secondarily
liable on the  Liabilities;  (vi) the  disallowance  or  avoidance of all or any
portion of TCFC's Claim(s) for repayment of the Liabilities or of any collateral
for the  Liabilities,  or (vii) any other  circumstance  which  might  otherwise
constitute a discharge or defense of a guarantor.

     Upon a default  under any Document,  TCFC may proceed  directly and at once
against  the  Guarantor  to collect the full amount of all or any portion of the
liability  of  the  Guarantor  hereunder,   without  notice  and  without  first
proceeding  against  the Debtor or any other  person  primarily  or  secondarily
liable on the Liabilities.  TCFC shall have the exclusive right to determine the
application of payments and credits, if any, from the Guarantor,  the Debtor, or
any other person primarily or secondarily liable on the Liabilities.

     TCFC Is hereby  authorized  without  notice  (which is hereby waived by the
Guarantor) and without affecting the liability of the Guarantor hereunder,  from
time to time to (i) renew,  extend,  accelerate  or  otherwise  change the time,
place or manner for payment of, or other terms relating to, the Liabilities,  or
otherwise  modify,  amend,  change  or waive  compliance  with the  terms of the
Liabilities  or  any of the  Documents;  (ii)  accept  partial  payments  on the
Liabilities;  (iii) take  collateral for the  Liabilities and the obligations of
any  other  person  primarily  or  secondarily  liable on the  Liabilities,  and
exchange,  release, realize upon or institute any proceeding to realize upon, or
liquidate any such  collateral;  (iv) apply such collateral and direct the order
or manner of sale thereof as TCFC may determine in its  discretion;  (v) release
or compromise,  in any manner,  or collect or initiate any proceeding to collect
the Liabilities or any portion thereof; (vi) extend additional loans, credit and
financial  accommodations  and otherwise create  additional  Liabilities,  (vii)
enforce or  institute  any  proceeding  to enforce  any other  guarantee  of the
Liabilities  or release,  or  compromise in any manner the  obligations  of, any
other person primarily or secondarily liable on the Liabilities.

     Until the  Liabilities  and other  obligations  of the Debtor to TCFC shall
have  been  paid  and  discharged  in full  and  all  Documents  (including  any
commitments with respect to any Liabilities) have been terminated, the Guarantor
shall have no right,  and agrees it will not make any claim,  against the Debtor
or any other person  primarily or  secondarily  liable on the  Liabilities  with
respect to or on account of any payment  which the Guarantor may make on account
of its obligations under this Guarantee, including without limitation, any right
of subrogation, exoneration, reimbursement, contribution or indemnification.

     In order to secure all of Guarantor's  obligations to TCFC pursuant to this
Guarantee, the undersigned Guarantor hereby grants to TCFC a continuing security
interest in all personal  property of  Guarantor,  including but not limited to,
all  inventory,   accounts   receivable,   equipment,   chattel  paper,   notes,
instruments,  contract  rights,  general  intangibles  and all  proceeds  of the
foregoing.

     If the Debtor or the Guarantor  shall die or if the Debtor or the Guarantor
should at any time dissolve or terminate its existence,  or become  insolvent or
make a general  assignment  for the benefit of  creditors,  or if a  bankruptcy,
insolvency  or  reorganization  proceeding  shall  be  filed  by or  against  or
commenced in respect of the Debtor or the Guarantor, the Guarantor shall, at the
option  of TCFC,  forthwith  pay TCFC the full  amount  which  would be  payable
hereunder by the Guarantor if all Liabilities were then due and payable.

     The  Guarantor  Waives all  set-Offs  and  counterclaims  and all  notices,
presentments,  protests and demands of any kind with respect to the  Liabilities
and this  Guarantee  (including  without  limitation  demands  for  performance,
notices  of  non-payment  or  non-performance,  notices of  protest,  notices of
dishonor  and  notices of  acceptance  of this  Guarantee)  and  promptness  and
diligence with respect to the Liabilities.

     The  Guarantor  hereby  agrees  that TCFC  shall have no duty to advise !he
Guarantor of information  now or hereafter known to TCFC regarding the financial
or other  condition of the Debtor or any other person  primarily or  secondarily
liable on the Liabilities or regarding any  circumstance  bearing on the risk of
non-payment of the Liabilities.

     The  Guarantor  agrees to provide to TCFC,  promptly  after TCFC's  request
therefor,  such financial statements and other financial records and information
respecting  the  Guarantor as may be from time to time  requested  by TCFC.  The
Guarantor  authorizes TCFC to investigate or make inquiries of former or current
creditors or other persons and provide to any creditors or other persons any and
all  financial,  credit  of  other  information  regarding  or  relating  to the
Guarantor,  whether  supplied by the Guarantor to TCFC or otherwise  obtained by
TCFC, with such authority to continue throughout the term of this Guarantee.

     The Guarantor  agrees that the sale of inventory by TCFC to a person who is
liable to TCFC under a guarantee, endorsement,  repurchase agreement or the like
shall not be deemed to be a transfer  subject to Section 9-504(5) of the Uniform
Commercial  Code as in effect in Illinois or any similar  provision of any other
applicable  law, and the Guarantor  waives any provision to the contrary of such
laws.  The  Guarantor  agrees that  repurchase of inventory by a seller of goods
pursuant to a  repurchase  agreement  between  TCFC and such  seller  shall be a
commercially reasonable method of disposition.  The Guarantor shall be liable to
TCFC for any deficiency  resulting from TCFC's  disposition,  including  without
limitation  a  repurchase  by  such  a  seller,  regardless  of  the  subsequent
disposition  of  the  inventory  by  the  purchaser.  The  Guarantor  is  not  a
beneficiary  of, and has no right to require  TCFC to  enforce,  any  repurchase
agreement. Any notice of a

                                       10
<PAGE>
disposition  shall  be  demmed  reasonable  and  properly  given if given to the
Guarantor at least 10 days before such disposition in accordance with the notice
provision below.

     This  Guarantee  shall be binding  upon the  Guarantor  and upon the heirs,
personal representatives, trustees, successors and assigns of the Guarantor, and
shall inure to the benefit of TCFC's  successors and assigns.  References herein
to TCFC shall be deemed to refer to TCFC and it successors and assigns.

     Wherever  possible each provision of this Guarantee shall be interpreted in
such  manner as to be  effective  and valid  under  applicable  law,  but if any
provision of this  Guarantee  shall be  prohibited by or invalid under such law,
such  provision  shall be  ineffective  to !he  extent  of such  prohibition  or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Guarantee.

     This Guarantee may be terminated only upon written notice to TCFC effective
no earlier than 30 days after the date such written notice is actually  received
by TCFC.  Any such  termination  shall not affect the liability of the Guarantor
under this Guarantee  with respect to  Liabilities  created or incurred prior to
the effective date of such termination. Without limiting the foregoing, any such
termination shall not relate to any approval given by TCFC to or for the benefit
of the Debtor prior to the effective date of such  termination and upon any such
termination,  the Guarantor shall nevertheless remain liable with respect to all
Liabilities, and the performance of all duties, created or arising in heretofore
or based on a commitment  theretofore  entered into or any approval  theretofore
given to or for the benefit of the Debtor to the full extent of the  Guarantor's
liability therefor as provided herein.

     All notices and other  communications  hereunder to or upon the  respective
parties  shall be in  writing  (and,  in the case of a notice by the  Guarantor,
identify the name of the Debtor) and shall be delivered by hand to, or mailed by
first class United  States mail,  postage  prepaid,  certified,  return  receipt
requested, addressed to, or by personal delivery to, or by a reputable overnight
courier service addressed to, the addresses specified below.

     No delay on the part of TCFC in the  exercise of any right or remedy  shall
operate as a waiver  thereof,  and no single or partial  exercise by TCFC of any
right or remedy shall preclude any further  exercise  thereof.  No modification,
waiver or amendment of any of the previsions of this Guarantee  shall be binding
upon TCFC  except as  expressly  set  forth in a writing  duly  signed on TCFC's
behalf by any  authorized  officer or agent of TCFC and delivered by TCFC to the
Guarantor.  TCFC's  failure at any time to  require  strict  performance  by the
Guarantor of any of the provisions  contained in this Guarantee shall not waive,
affect or diminish  any right of TCFC at any time to demand  strict  performance
therewith.

     This   Guarantee   contains  all  of  the   understandings,   promises  and
undertakings  of the parties  hereto  concerning the subject  matter.  All prior
undertakings and agreements,  oral or written, concerning the subject matter are
merged herein.

     To the extent that the  Guarantor or the Debtor makes a payment or payments
to TCFC or TCFC  enforces  its security  interests  or  exercises  its rights of
setoff,  and such  payment or payments or the  proceeds of such  enforcement  or
setoff  or  any  part  thereof  are  subsequently  invalidated,  declared  to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other  party under any  bankruptcy  law,  state or federal  law,
common  law or  equitable  cause,  then  to the  extent  of such  recovery,  the
obligation or part thereof originally  intended to be satisfied shall be revived
and  continued  in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.

     The Guarantor  hereby consents to the  jurisdiction of any local,  state or
federal  court  located  within the State of Illinois  and waives any  objection
which the Guarantor may have based on improper  venue or forum non conveniens to
the  conduct  of  any  proceeding  in  any  such  court.  The  Guarantor  hereby
irrevocably  appoints CT  Corporation  System as the  Guarantor's  agent for the
purpose of  accepting  the service of any process  within be State of  Illinois.
Nothing  contained in this section shall affect the right of TCFC to serve legal
process  in any other  manner  permitted  by law or affect  the right of TCFC to
bring any action or  proceeding  against the  Guarantor  or its  property in the
courts of any other jurisdiction.

     TO THE EXTENT  PERMITTED BY APPLICABLE  LAW, THE PARTIES  HERETO EACH WAIVE
ANY RIGHT TO A TRIAL BV JURY ON ANY CLAIM,  DEMAND,  ACTION,  CAUSE OF ACTION OR
COUNTERCLAIM  ARISING UNDER OR IN ANY WAY RELATED TO THIS  GUARANTEE,  AND UNDER
ANY THEORY OF LAW OR EQUITY, WHETHER NOW EXISTING OR HEREAFTER ARISING.

THIS GUARANTEE  SHALL BE EFFECTIVE WHEN ACCEPTED BY TCFC, HAS BEEN DELIVERED AND
ACCEPTED  AND SHALL BE DEEMED TO BE MADE IN ILLINOIS,  AND SHALL BE  INTERPRETED
AND THE  RIGHTS  AND  OBLIGATIONS  OF THE  PARTIES  HERETO,  WHETHER  ARISING IN
CONTRACT  OR TORT OR  OTHERWISE,  SHALL BE  DETERMINED  IN  ACCORDANCE  WITH THE
INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS  PROVISIONS)  OF THE STATE OF
ILLINOIS. ACCEPTANCE MAY BE BY FACSIMILE SIGNATURE.

                                       11
<PAGE>
         If more than one person or entity has signed this  Guarantee,  then the
term "Guarantor" herein shall refer to each of the undersigned (other than TCFC)
and obligations of each of the undersigned  shall be joint and several.  The use
of any gender shall include all other genders.

     IN WITNESS WHEREOF, this Gurantee is dated October 23, 2002.

<TABLE>
<S>                                                                    <C>

                                                        INDIVIDUAL GUARANTOR

WITNESS:
-------------------------------------------------------------          -------------------------------------------------------------
[Signature should be witnessed by a non-related third party.]          [Print Name of Guarantor]

Print Name:
           --------------------------------------------------          -------------------------------------------------------------
                                                                       [Signature of Individual]

Witness' Home Address                                                  Home Address for Notices to Guarantor:

-------------------------------------------------------------          -------------------------------------------------------------

-------------------------------------------------------------          -------------------------------------------------------------

                                                                       S.S. No.
                                                                                ----------------------------------------------------

                                                        INDIVIDUAL GUARANTOR
WITNESS:
-------------------------------------------------------------          -------------------------------------------------------------
[Signature should be witnessed by a non-related third party.]          [Print Name of Guarantor]

Print Name:
           --------------------------------------------------          -------------------------------------------------------------
                                                                       [Signature of Individual]

Witness' Home Address                                                  Home Address for Notices to Guarantor:

-------------------------------------------------------------          -------------------------------------------------------------

-------------------------------------------------------------          -------------------------------------------------------------

                                                                       S.S. No.
                                                                                ----------------------------------------------------

                                 CORPORATION, PARTNERSHIP OR LIMITED LIABILITY COMPANY - GUARANTOR

ATTEST:

/s/ HUI LEE                                                            PACIFIC MAGTRON INTERNATIONAL CORP.
-------------------------------------------------------------          -------------------------------------------------------------
Title: Secretary/Assistant Secretary                                   [Print Name of Guarantor]

Print Name: HUI LEE                                                    By: /s/ Theodore S. Li
            -------------------------------------------------              ---------------------------------------------------------
WITNESS:                                                               Title: President
                                                                              ------------------------------------------------------
-------------------------------------------------------------
[Signature should be witnessed by a non-related third party]           Address for Notices to Guarantor:

                                                                       1600 CALIFORNIA CIR
                                                                       -------------------------------------------------------------

Print Name:                                                            MILPITAS, CA  95035
            -------------------------------------------------          -------------------------------------------------------------

Adress:                                                                TAX ID No.
            -------------------------------------------------          -------------------------------------------------------------

            -------------------------------------------------                   ----------------------------------------------------

Accepted In Illinois:                                                  Address for Notices to TCFC:

TRANSAMERICA COMMERICAL FINANCE CORPORATION                            Transamerica Commerical Finance Corporation
                                                                       5595 Trillium Boulevard
                                                                       Hoffman Estates, Illinois 60192
By: /s/ Christopher C. Meals                                           Attention: Credit Department
    ----------------------------------------------------------
    Christopher C. Meals
    Vice President - Credit
</TABLE>

                                                                 12

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