Document:

EXHIBIT 10.19

                               OPERATING AGREEMENT

                                       OF

                          SCOTTSDALE THOMPSON PEAK, LLC
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                                TABLE OF CONTENTS

                                                                            PAGE

ARTICLE I      DEFINITIONS.....................................................1

     1.1       Definitions.....................................................1

ARTICLE II     FORMATION OF THE LIMITED LIABILITY COMPANY......................5

     2.1       General.........................................................5

     2.2       Name............................................................5

     2.3       Purposes and Powers.............................................5

     2.4       Registered Office...............................................5

     2.5       Statutory Agent.................................................5

     2.6       Term............................................................5

ARTICLE III    CAPITAL CONTRIBUTIONS...........................................6

     3.1       Capital Contributions...........................................6

     3.2       Units...........................................................7

     3.3       Use of Capital Contributions....................................7

     3.4       No Unauthorized Withdrawals of Capital Contributions............7

     3.5       Return of Capital...............................................7

ARTICLE IV     MANAGEMENT......................................................7

     4.1       Management by the Manager - General.............................7

     4.2       Prohibited Acts.................................................9

     4.3       Reliance Upon Actions by the Manager............................9

     4.4       Manager, Tenure, Qualifications and Manner of Acting...........10

     4.5       Resignation....................................................10

     4.6       Removal........................................................10

     4.7       Vacancies......................................................10

     4.8       Independent Activities.........................................10

     4.9       Salary and Expenses............................................10

ARTICLE V      PAYMENTS and DISTRIBUTIONS.....................................10

     5.1       Payment of the Non-Member Loans................................10

     5.2       Distributions of Net Available Cash Flow.......................10

     5.3       Distributions in Liquidation...................................11

     5.4       Amounts Withheld...............................................11

     5.5       State Law Limitation on Distributions..........................11

     5.6       Inclusion of Unit Holder.......................................11

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ARTICLE VI     ALLOCATION OF PROFITS AND LOSSES...............................11

     6.1       Profit and Loss Allocations....................................11

     6.2       Tax Allocations................................................11

ARTICLE VII    LIABILITIES, RIGHTS AND OBLIGATIONS OF MEMBERS.................12

     7.1       Limitation of Liability........................................12

     7.2       Access to Company Records......................................12

     7.3       Authority to Bind the Company, Management Authority............12

     7.4       Waiver of Action for Partition.................................13

     7.5       Cooperation With Tax Matters Partner...........................13

     7.6       Acknowledgment of Liability for State and Local Taxes..........13

     7.7       Limitation On Bankruptcy Proceedings...........................13

     7.8       Voting Rights..................................................13

     7.9       Voting Procedure...............................................13

     7.10      Meetings of Members............................................13

ARTICLE VIII   LIABILITY, EXCULPATION AND INDEMNIFICATION.....................14

     8.1       Liability......................................................14

     8.2       Exculpation....................................................14

     8.3       Indemnification................................................14

ARTICLE IX     BOOKS AND RECORDS, REPORTS, TAX ACCOUNTING, BANKING............15

     9.1       Books and Records..............................................15

     9.2       Reports to Members.............................................16

     9.3       Tax Matters....................................................16

     9.4       Bank Accounts..................................................17

ARTICLE X      ADMISSIONS AND WITHDRAWALS.....................................17

     10.1      Admission of Member............................................17

     10.2      Right to Withdraw..............................................18

     10.3      Rights of Withdrawn Member.....................................18

ARTICLE XI     TRANSFERABILITY................................................18

     11.1      General........................................................18

     11.2      Permitted Transfers............................................18

     11.3      Conditions To Permitted Transfer...............................18

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     11.4      Right of First Refusal.........................................19

     11.5      Admission As Substitute Member.................................20

     11.6      Rights As Assignee.............................................21

     11.7      Prohibited Transfers...........................................21

     11.8      Marital Dissolution or Legal Separation........................21

     11.9      Legends........................................................22

     11.10     Distributions in Respect of Transferred Units..................22

     11.11     Inclusion of Unit Holders......................................22

ARTICLE XII    DISSOLUTION AND TERMINATION....................................23

     12.1      Dissolution....................................................23

     12.2      Notice of Winding Up...........................................23

     12.3      Liquidation, Winding Up and Distribution of Assets.............23

     12.4      Deficit Capital Accounts.......................................24

     12.5      Articles of Termination........................................24

     12.6      Return of Contribution Non-Recourse to Other Members...........24

     12.7      In Kind Distributions..........................................24

     12.8      Inclusion of Unit Holder.......................................24

ARTICLE XIII   FUNDING AND LOANS..............................................24

     13.1      Funding for Acquisition of Company Property....................24

     13.2      Bank Loan Guaranty.............................................25

     13.3      Allianz Loan Non-Recourse Carve Outs...........................25

     13.4      Substitute Guarantor...........................................25

ARTICLE XIV    MISCELLANEOUS PROVISIONS.......................................25

     14.1      Notices........................................................25

     14.2      Governing Law..................................................25

     14.3      Entire Agreement; Amendments...................................25

     14.4      Additional Documents and Acts..................................26

     14.5      Headings.......................................................26

     14.6      Severability...................................................26

     14.7      Heirs, Successors, and Assigns.................................26

     14.8      Creditors and Other Third Parties..............................26

     14.9      Section, Other References......................................26

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     14.10     Authority to Adopt Agreement...................................26

     14.11     Counterparts...................................................27

APPENDIX A     SPECIAL TAX AND ACCOUNTING PROVISIONS.........................A-1

     A.1       Accounting Definitions........................................A-1

     A.2       Special Allocations...........................................A-4

     A.3       Curative Allocations..........................................A-6

     A.4       General Allocation Rules......................................A-6

     A.5       Recharacterization of Fees or Distributions...................A-7

     A.6       Recapture of Deductions and Credits...........................A-7

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                               OPERATING AGREEMENT
                                       OF
                          SCOTTSDALE THOMPSON PEAK, LLC

     THIS OPERATING AGREEMENT (this "AGREEMENT"), is entered into on __________,
2002,  by and among  STRATFORD  AMERICAN  CORPORATION,  an  Arizona  Corporation
("STRATFORD"),   GOLDEN  GATE  APARTMENTS,  LTD.,  L.P.,  a  California  Limited
Partnership  ("GOLDEN GATE"),  AURIGA PROPERTIES,  INC., an Arizona  Corporation
("AURIGA"),  and DONALD R. DIAMOND,  as Family Trustee of The DRD-97 Trust under
Agreement dated August 8, 1997 ("DRD"), as members of the Company  (collectively
the "MEMBERS") and Stratford as manager of the Company (the "MANAGER").

     For the consideration of their mutual covenants  hereinafter set forth, the
Members and Manager hereby agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

     1.1  DEFINITIONS.  Appendix A hereof sets forth the  definitions of certain
terms relating to the maintenance of capital  accounts and accounting  rules. In
addition,  the following  terms used in this Agreement  shall have the following
meanings:

          "ACT" means the Arizona Limited  Liability  Company Act,  Chapter 4 of
Title 29, Arizona Revised Statutes.

          "AFFILIATE"  means any  Person  directly  or  indirectly  controlling,
controlled  by,  or  under  common  control  with  another  Person.   "Control,"
"controlled"  and  "controlling"  shall  mean the  power to  direct or cause the
direction  of the  management  and  policies  of a Person and shall be deemed to
exist if any Person directly or indirectly owns, controls, or holds the power to
vote fifty percent (50%) or more of the voting securities of such other Person.

          "ALLIANZ" means Allianz Life Insurance Company of North America.

          "ALLIANZ GUARANTY" means as set forth in Section 13.3.

          "ALLIANZ LOAN" means the Twenty Million Dollar  ($20,000,000.00)  loan
to the Company from Allianz, secured by a first lien on the Company Property.

          "BANK LOAN" means as set forth in the  definition  of Mezzanine  Loans
below.

          "CAPITAL ACCOUNT" means as defined in Section A.1 of Appendix A.

          "CAPITAL  CONTRIBUTION"  means any  contribution to the capital of the
Company whenever made.

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          "CODE" means the Internal  Revenue Code of 1986,  as amended from time
to time.  All  references  herein to  sections  of the Code  shall  include  any
corresponding provision or provisions of succeeding law.

          "COMPANY"  means  Scottsdale  Thompson Peak,  LLC, an Arizona  limited
liability company.

          "COMPANY PROPERTY" means that certain land,  building and improvements
located at 20225 N. Scottsdale Road, Scottsdale,  Arizona, the legal description
of which is set forth on Exhibit A attached hereto and made a part hereof.

          "COVERED  PERSON"  means a Member,  the  Manager,  an  Affiliate  and,
directly  or  indirectly,  the  respective  officers,  directors,  shareholders,
partners, members, trustees, beneficiaries, employees, representatives or agents
of a Member, the Manager, or an Affiliate.

          "DEFAULT  INTEREST  RATE"  means the rate per annum  equal to The WALL
STREET  JOURNAL  prime rate of interest as quoted in the Money Rates  section of
The WALL STREET JOURNAL.

          "DELINQUENT MEMBER" means as set forth in Section 3.1.

          "DEPRECIATION" means as set forth in Section A.1 of Appendix A.

          "DIAMOND LOAN" means as set forth in the definition of Mezzanine Loans
below.

          "DISABLING CONDUCT" means fraud, a willful violation of this Agreement
after notice and an opportunity to cure, or gross  negligence in the performance
of duties.

          "DISPOSING MEMBER" means as set forth in Section 11.4(b).

          "DISPOSITION NOTICE" shall mean as set forth in Section 11.4(b).

          "DISSOLUTION NOTICE" shall mean as set forth in Section 11.8(b).

          "DVI" means Diamond Ventures, Inc, an Arizona corporation.

          "FINANCIAL COVENANTS" means as set forth in Section 13.3.

          "FISCAL  YEAR"  means the  Company's  taxable  year,  which shall be a
calendar year except as otherwise required by law.

          "GROSS  AVAILABLE  CASH FLOW" means,  with respect to any period,  the
Company's  gross cash receipts  derived from any source  whatsoever  that may be
used to pay or  establish  reserves  for Company  expenses,  debt  payments  and
accrued interest,  including principal and interest payments on Non-Member Loans
and  loans  made  to  the  Company  by  the  Members,  contingencies,   proposed
acquisitions and other transactions, as determined by the Manager.

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          "GUARANTEED  REPAYMENTS" means any repayments by JDMD and DVI of up to
$1,250,000  each of their equally  shared  guaranteed  portions of not more than
$2,500,000 of the Bank Loan.

          "INITIAL MEMBERS" means the undersigned Members.

          "JDMD" means JDMD  Investments,  L.L.C.,  an Arizona limited liability
company.

          "LENDING MEMBER" means as set forth in Section 3.1.

          "LIQUIDATING  TRANSACTION" means a sale or other disposition of all or
substantially all of the assets of the Company that the Manager  designates as a
Liquidating Transaction.

          "LOSSES" means as set forth in Section A.1 of Appendix A.

          "MANAGEMENT  AGREEMENT"  means the written  agreement now or hereafter
entered into between the Manager and the Company to manage the Company Property.

          "MANAGER"   means   Stratford   American   Corporation,   an   Arizona
Corporation.

          "MEMBER"  means (a) the Initial  Members until such time, if any, that
any such  Person  becomes a Withdrawn  Member,  (b) any Person  acquiring  Units
directly from the Company in accordance  with this Agreement until such time, if
any,  that any such Person  becomes a Withdrawn  Member,  and (c) any Person who
acquires Units in the Company in a Permitted  Transfer and who is deemed,  or is
admitted  as, a  Substitute  Member  until such time,  if any,  that such Person
becomes a Withdrawn Member.

          "MEZZANINE LOANS" means loans not secured by the Company Property (but
which may be secured by the Members'  Percentage  Interest),  and any  renewals,
modifications or replacements thereof,  totaling not more than the principal sum
of  $5,000,000,  at an  interest  rate not to exceed 12% per  annum,  such loans
initially  to be  obtained  either  from  Diamond  Ventures,  Inc.,  an  Arizona
corporation,  or an Affiliate thereof  ("DIAMOND  LOAN"),  and/or from a bank or
other lending  institution ("BANK LOAN");  provided,  that in no event shall the
Diamond Loan exceed the principal sum of  $1,800,000.  The repayment of not more
than $2,500,000 of the Bank Loan may be equally guaranteed by JDMD and DVI up to
$1,250,000 each.

          "NET  AVAILABLE  CASH FLOW"  means,  with  respect to any period,  the
Company's gross cash receipts derived from any source whatsoever, reduced by the
portion thereof used to pay or establish reserves for all Company expenses, debt
payments and accrued  interest  (including  principal  and interest  payments on
Non-Member  Loans and loans made to the Company by the Members),  contingencies,
and proposed  acquisitions,  as determined by the Manager.  "Net  Available Cash
Flow"  shall  not  be  reduced  by  depreciation,  amortization,  cost  recovery
deductions, or similar allowances.

          "NON-DISPOSING MEMBERS" shall mean as set forth in Section 11.4(b).

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          "NON-MEMBER  LOANS" means the Allianz Loan, the Mezzanine  Loans,  and
any other  loan  obtained  on behalf of the  Company  from a Person who is not a
Member.

          "PERCENTAGE  INTEREST"  means at any  particular  time the  percentage
interest  of each  Member or Unit  Holder of the  Company  and  determined  with
respect to a particular Member or Unit Holder at any particular time by dividing
the number of Units owned by such Member or Unit Holder by the aggregate  number
of outstanding Units.

          "PURCHASE NOTICE" shall mean as set forth in Section 11.8(c).

          "PERMITTED TRANSFER" means a transfer as defined in Section 11.2.

          "PERSON" means any individual, firm, corporation, partnership, limited
liability company, trust, association or other legal entity.

          "PROFITS"  means as the  profits of the  Company as defined in Section
A.1 of Appendix A.

          "SPECIAL PURCHASE RIGHT" shall mean as set forth in Section 11.8(a).

          "RETAINED LIABILITIES" means as set forth in Section 13.3.

          "SUBSTITUTE  MEMBER"  means a Person who acquires  Units from a Member
and who satisfies all of the conditions of Section 11.5.

          "TAXING  JURISDICTION"  means any state,  local, or foreign government
that collects tax, interest, and penalties,  however designated, on any Member's
share of income or gain attributable to the Company.

          "TAX  MATTERS  PARTNER"  means the  Person so  designated  in  Section
9.3(d).

          "TRANSFER"  means when used as a noun,  any  voluntary or  involuntary
sale, assignment,  gift, transfer, or other disposition and when used as a verb,
voluntarily  or  involuntarily  to sell,  assign,  gift,  dispose,  or otherwise
transfer.

          "TREASURY  REGULATIONS"  means the Regulations  issued by the Treasury
Department under the Code.

          "UNANIMOUS CONSENT" means the written consent of all of the Members.

          "UNIT" means the economic interest in the Company acquired by a Member
or Unit Holder  representing  the economic rights of a Member or Unit Holder and
the Member's or Unit Holder's  permitted  assignees  and  successors to share in
distributions  of cash and other  property from the Company  pursuant to the Act
and this  Agreement,  together with the Member's or Unit  Holder's  distributive
share of the Company's Profits and Losses.

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          "UNIT  HOLDER" means a Person who owns Units of the Company but who is
not a Member  including,  except as  otherwise  provided  herein,  a Member  who
becomes a Withdrawn Member.

          "WITHDRAWAL  EVENT"  means those  events and  circumstances  listed in
Section 29-733 of the Act.

          "WITHDRAWN  MEMBER"  means a  Member  following  the  occurrence  of a
Withdrawal Event with respect to such Member.

                                   ARTICLE II

                   FORMATION OF THE LIMITED LIABILITY COMPANY

     2.1  GENERAL. The Company has been formed pursuant to the Act and the terms
of this Agreement, effective upon the filing of the Articles of Organization for
the Company with the Arizona Corporation  Commission.  The Members shall execute
and  acknowledge  any and all  certificates  and  instruments and do all filing,
recording,  and other acts as may be necessary or appropriate to comply with the
requirements of the Act relating to the formation, operation, and maintenance of
the Company in accordance with the terms of this Agreement.

     2.2  NAME. The name of the Company shall be "Scottsdale Thompson Peak, LLC"
and the  business  of the  Company  shall be  carried  on in this name with such
variations and changes as the Manager in its sole discretion  deems necessary or
appropriate  to  comply  with  requirements  of the  jurisdictions  in which the
Company's operations shall be conducted.

     2.3  PURPOSES AND POWERS.  The business  purpose of the Company shall be to
transact  any lawful  business  as may be  authorized  under the Act;  provided,
however,  that the Company  shall be a "single asset entity" with respect to the
Company Property and the funds for or generated by the Company Property. Without
limiting the foregoing,  the Company shall be engaged in the business of owning,
leasing, operating, maintaining and otherwise dealing with the Company Property.

     2.4  REGISTERED  OFFICE.  The registered office shall be located at 2400 E.
Arizona  Biltmore  Circle,  Bldg. 2, Suite 1270,  Phoenix,  Arizona  85016.  The
Manager shall be authorized to change the location of the  registered  office of
the Company; provided, however, that such change is authorized under the Act and
the Manager provide written notice of such change to all of the Members.

     2.5  STATUTORY  AGENT.  The  statutory  agent for service of process on the
Company in the State of  Arizona  is Mel L.  Shultz,  2400 E.  Arizona  Biltmore
Circle, Bldg. 2, Suite 1270, Phoenix, Arizona 85016.

     2.6  TERM. The term of the Company  commenced on the filing of the Articles
of  Organization  for the Company and shall not expire except in accordance with
the provisions of Article XII hereof or in accordance with the Act.

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                                   ARTICLE III

                              CAPITAL CONTRIBUTIONS

     3.1  CAPITAL CONTRIBUTIONS.  The Initial Members of the Company contributed
or caused to be  contributed  to the  capital of the  Company  their  respective
undivided  interests  in the Company  Property  identified  in Exhibit B. If the
Manager  determines (i) that the Company requires cash  contributions to capital
in  order to pay  when  due the  obligations  and  expenses  of the  Company  or
otherwise to accomplish the Company's purposes, and (ii) that the Company cannot
otherwise  satisfy such capital  needs  through  Non-Member  Loans or loans from
Members,  then each Member shall contribute such Member's share in proportion to
the number of Units held by such Member of such additional cash contributions in
the amount(s) and date(s) on which such additional contributions are needed.

     If a Member fails to make any required  Capital  Contribution,  the Company
may exercise, on notice to that Member (the "DELINQUENT MEMBER"), one or more of
the following remedies:

          (a)  taking such  action,  at the cost and  expense of the  Delinquent
Member,  to  obtain  payment  by the  Delinquent  Member of the  portion  of the
Delinquent  Member's  Capital  Contribution  that is in default,  together  with
interest  on that  amount at the  Default  Interest  Rate from the date that the
Capital Contribution was due until the date that it is made;

          (b)  permitting  the  Members,   in  proportion  to  their  Percentage
Interests or in such other  percentages as they may agree (the "LENDING MEMBER",
whether one or more), to advance the portion of the Delinquent  Member's Capital
Contribution that is in default, with the following results:

               (i)  the sum advanced  constitutes a loan from the Lending Member
to the Delinquent  Member and a Capital  Contribution of that sum to the Company
by the Delinquent Member;

               (ii) the unpaid  principal  balance  of the loan and all  accrued
unpaid  interest is due and payable on the tenth day after written demand by the
Lending Member to the Delinquent Member;

               (iii) the unpaid balance of the loan bears simple interest at the
Default  Interest  Rate from the day that the  advance is deemed  made until the
date that the loan, together with all accrued interest, is repaid to the Lending
Member;

               (iv) all amounts  distributable  by the Company to the Delinquent
Member  shall be paid to the  Lending  Member  until  the  loan and all  accrued
interest have been paid in full;

               (v)  the payment of the loan and accrued interest is secured by a
security interest in the Delinquent Member's Units; and

               (vi) in addition to the other rights and  remedies  granted to it
under  this  Agreement,  the  Lending  Member  has the right to take any  action
available at law or in equity, at the cost and expense of the Delinquent Member,

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to obtain payment from the  Delinquent  Member of the unpaid balance of the loan
and all accrued and unpaid interest.

          (c)  The Delinquent  Member grants to the Company,  and to the Lending
Member with respect to any loans made to that  Delinquent  Member,  as security,
equally  and  ratably  for the  payment of all  Capital  Contributions  that the
Delinquent  Member has agreed to make and the payment of all loans and  interest
accrued made by Lending Members to that Delinquent  Member, a security  interest
in its  Company  Interest  under  the  Uniform  Commercial  Code of the State of
Arizona. On any default in the payment of a required Capital  Contribution or in
the payment of a loan or interest accrued, the Company or the Lending Member, as
applicable,  is entitled to all the rights and remedies of a secured party under
the Uniform Commercial Code of the State of Arizona with respect to the security
interest  granted.  Each  Delinquent  Member  shall  execute  and deliver to the
Company and the other Members all  financing  statements  and other  instruments
that the Manager or the Lending Member, as applicable, may request to effectuate
and carry out the preceding  provisions of this Section 3.1(a). At the option of
the Manager or the Lending  Member,  this  Agreement or a copy of this Agreement
may serve as a financing statement.

     3.2  UNITS. The total number of outstanding  Units of the Company initially
shall be 10,000.  The name and  address of each  Initial  Member and the initial
number of Units held by each is set forth on  Exhibit B hereto.  Such list shall
reflect any  additional  Units issued by the Company,  any Units  transferred in
accordance with this Agreement,  and any Person admitted as a Member. Members or
Unit Holders who change their  addresses  following  the issuance of Units shall
advise the Company of any such change of address.  Any reference to Exhibit B in
this  Agreement  shall mean  Exhibit B as amended to reflect  any changes in the
information   specified  herein.  The  Manager  shall  be  authorized  to  issue
certificates reflecting the number of Units held by each Member of the Company.

     3.3  USE OF  CAPITAL  CONTRIBUTIONS.  All  Capital  Contributions  shall be
expended only in furtherance of the business purpose of the Company as set forth
in Section 2.3 hereof.

     3.4  NO UNAUTHORIZED WITHDRAWALS OF CAPITAL CONTRIBUTIONS.  No Member shall
have  the  right  to  withdraw  or to be  repaid  any of such  Member's  Capital
Contributions, except as specifically provided in this Agreement.

     3.5  RETURN OF CAPITAL.  Except as otherwise provided in this Agreement, no
Member shall be entitled to the return of the Member's Capital  Contributions to
the Company.  The Manager shall have no personal  liability for the repayment of
the Capital Contributions made by any Member, it being agreed that any return of
Capital  Contributions  or Profits  shall be made  solely from the assets of the
Company.

                                   ARTICLE IV

                                   MANAGEMENT

     4.1  MANAGEMENT  BY THE MANAGER - GENERAL.  The business and affairs of the
Company  shall be managed  exclusively  by the  Manager.  Subject to Section 4.2
below, the Manager shall have sole and unfettered discretion with respect to all

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determinations,  decisions,  consents,  approvals,  actions  and the like by the
Manager  pursuant  to this  Agreement  or under the Act.  Without  limiting  the
generality of the  foregoing,  in addition to the rights and  obligations of the
Manager  provided  for  elsewhere  in  this  Agreement  and  in  the  Management
Agreement, the Members hereby authorize the Manager:

          (a)  To open  accounts in the name of the Company with banks and other
financial  institutions and designate,  replace and remove from time to time all
signatories on such bank accounts;

          (b)  To invest Company funds temporarily in time deposits,  short-term
governmental obligations, commercial paper or other investments;

          (c)  To pay all bills,  invoices and expenses properly incurred by and
on behalf of the Company;

          (d)  To purchase policies of comprehensive general liability insurance
and to purchase such other insurance  coverage as the Manager shall determine to
be  necessary  or  desirable  to insure the Members or to protect the  Company's
assets;

          (e)  Subject to Section 4.2 below, to execute on behalf of the Company
all  agreements,   contracts,   instruments  and  documents  including,  without
limitation, checks, drafts, notes and other negotiable instruments, mortgages or
deeds of trust, security agreements,  financing statements,  documents providing
for the  acquisition,  lease,  mortgage or disposition of the Company's  assets,
assignments,  bills of sale,  leases,  and any other instruments or documents in
connection with the business of the Company;

          (f)  To employ accountants,  legal counsel,  consultants,  independent
contractors  and other  Persons  to  perform  services  for the  Company  and to
compensate them from Company funds;

          (g)  To obtain  the  Allianz  Loan and,  subject  to the  restrictions
imposed by the Allianz Loan, to obtain  Mezzanine Loans,  Non-Member  Loans, and
loans from Members,  or Affiliates of the Members,  on such terms as the Manager
deems appropriate;

          (h)  To comply with, or cause to be complied  with,  all provisions of
the Act governing the administration of a limited liability  company,  including
but not limited to, filing with the Arizona Corporation  Commission any required
and necessary amended Articles of Organization;

          (i)  To act as "Tax Matters  Partner"  pursuant to Section 6231 of the
Code, as provided in Section 9.3(d);

          (j)  To keep all books of account  and other  records  required by the
Company, keep vouchers,  statements,  receipted bills and invoices and all other
records,  covering all collections,  disbursements  and other data in connection
with the Company;

          (k)  To defend, compromise and settle claims against the Company;

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          (l)  Subject to any other requirements in this Agreement, to determine
if and when the distributions shall occur to the Members;

          (m)  To prepay in whole or in part,  refinance,  increase,  modify, or
extend any loans liabilities of the Company and in connection  therewith execute
any  extensions or renewals of  encumbrances  on any or all of the assets of the
Company; and

          (n)  To  perform  such  other  acts as are set forth  herein or as the
Manager  determines  necessary or appropriate  in connection  with the Company's
business.

     4.2  PROHIBITED ACTS. The Manager shall not have authority to do any of the
following acts on behalf of the Company:

          (a)  Until the Diamond  Loan is fully  repaid and the  obligations  of
JDMD  and  DVI  for  any  Guaranteed  Repayments  of the  Bank  Loan  are  fully
extinguished, or if any indebtedness owing to JDMD and DVI is converted to Units
pursuant to Section  10.1(b)  hereof,  the Manager shall not sell,  refinance or
otherwise  dispose of or encumber  the Company  Property  without the  Unanimous
Consent of all the Members;

          (b)  The Manager  shall not file a petition in  bankruptcy or seek the
reorganization or the appointment of a receiver on behalf of the Company; and

          (c)  The Manager shall not knowingly  perform any act that contravenes
the provisions of this Agreement.

     4.3  RELIANCE  UPON  ACTIONS BY THE  MANAGER.  Any Person  dealing with the
Company  may rely  without  any duty of  inquiry  upon any  action  taken by the
Manager on behalf of the Company. Any and all deeds, bills of sale, assignments,
mortgages,  deeds of trust,  security agreements,  promissory notes, leases, and
other contracts,  agreements or instruments executed by the Manager on behalf of
the Company shall be binding upon the Company, and all Members agree that a copy
of this  provision may be shown to the  appropriate  parties in order to confirm
the same.  Without limiting the generality of the foregoing,  any Person dealing
with the Company may rely upon a certificate or written  statement signed by the
Manager as to:

          (a)  The identity of the Manager or any Member;

          (b)  The  existence  or   nonexistence  of  any  fact  or  facts  that
constitute a condition precedent to acts by the Manager or that are in any other
manner germane to the affairs of the Company;

          (c)  The  Persons  who are  authorized  to  execute  and  deliver  any
instrument or documents on behalf of the Company; or

          (d)  Any act or  failure  to act by the  Company  on any other  matter
whatsoever involving the Company or any Member.

                                       9
<PAGE>
     4.4  MANAGER, TENURE, QUALIFICATIONS AND MANNER OF ACTING.

          (a)  The  Manager   shall  hold  office   until  the  earlier  of  its
resignation or removal.

          (b)  The  Manager  shall not be required to be a resident of the State
of Arizona.

     4.5  RESIGNATION.  The Manager may resign at any time by delivering written
notice to all  Members.  The  resignation  of a Manager  shall take  effect upon
receipt of notice  thereof or at such later time as shall be  specified  in such
notice;  and,  unless  otherwise  specified  therein,  the  acceptance  of  such
resignation shall not be necessary to make it effective.  Such resignation shall
not affect the Manager's rights and liabilities as a Member, if applicable.

     4.6  REMOVAL.  The Manager may be removed only by the Unanimous  Consent of
the Members.

     4.7  VACANCIES.  Any  vacancy  occurring  for any  reason in the  office of
Manager may be filled by the Unanimous Consent of the Members.

     4.8  INDEPENDENT  ACTIVITIES.  The Manager and any  Affiliate  of a Manager
may,  notwithstanding this Agreement,  engage in whatever activities such Person
chooses without having or incurring any obligation to offer any interest in such
activities  to the  Company or to any Member.  Neither  this  Agreement  nor any
obligation undertaken pursuant hereto shall prevent the Manager or any Affiliate
of a Manager  from  engaging  in such  activities,  or  require a Manager or any
Affiliate of a Manager to permit the Company or any Member to participate in any
such activities,  and as a material part of the  consideration for the execution
of this  Agreement by a Manager and the  admission  of each Member,  each Member
hereby  waives,  relinquishes,   and  renounces  any  such  right  or  claim  of
participation.

     4.9  SALARY AND EXPENSES.  The Manager shall be reimbursed for its expenses
and receive reasonable compensation for services rendered in its capacity as the
manager of the Company Property pursuant to the Management Agreement.

                                    ARTICLE V

                           PAYMENTS AND DISTRIBUTIONS

     5.1  PAYMENT  OF THE  NON-MEMBER  LOANS.  The  Manager  shall use the Gross
Available  Cash Flow of the Company and any other Company funds that the Manager
determines  appropriate  to  repay  Non-Member  Loans  in  accordance  with  the
following priorities:

          (a)  First,  to the  repayment  of the  accrued  interest,  and unpaid
principal due on the Allianz loan; and

          (b)  Second, to the repayment of the accrued interest and principal on
the Mezzanine Loans in proportion to the amount due and owing to each lender.

     5.2  DISTRIBUTIONS  OF NET  AVAILABLE  CASH  FLOW.  Except as  provided  in
Article XII in connection with the  dissolution of the Company,  distribution of
Net Available Cash Flow shall be made  periodically  as determined by Manager to
the Members in proportion to the then outstanding Units held by such Member.

                                       10
<PAGE>
     5.3  DISTRIBUTIONS IN LIQUIDATION. Following the dissolution of the Company
and  the  commencement  of  winding  up  and  the  liquidation  of  its  assets,
distributions to the Members shall be governed by Section 12.3.

     5.4  AMOUNTS  WITHHELD.  All amounts  withheld  pursuant to the Code or any
provisions of state or local tax law with respect to any payment or distribution
to the Members from the Company shall be treated as amounts  distributed  to the
relevant Members for all purposes of this Agreement.

     5.5  STATE LAW LIMITATION ON DISTRIBUTIONS.  Notwithstanding  any provision
to the  contrary  contained  in this  Agreement,  the  Manager  shall not make a
distribution  to any Member on account of its  interest  in the  Company if such
distribution would violate the Act or other applicable law.

     5.6  INCLUSION OF UNIT HOLDER.  Except as otherwise  provided  herein,  the
term "Member" for purposes of this Article V shall include a Unit Holder.

                                   ARTICLE VI

                        ALLOCATION OF PROFITS AND LOSSES

     6.1  PROFIT AND LOSS  ALLOCATIONS.  After  making any  special  allocations
required  under  Appendix  A,  Profits and Losses for each fiscal year (and each
item of income,  gain, loss and deduction entering into the computation thereof)
shall be allocated among the Members (and credited to their  respective  Capital
Accounts) in proportion to the  outstanding  Units held by such Member as of the
first day of the fiscal  year;  provided,  however,  that if the number of Units
held by any Member changes  during any fiscal year,  Profits and Losses for each
month shall be allocated among Members in proportion to the number of Units each
Member  holds as of the  first day of such  month,  and each  Member's  share of
Profits  and Losses for such  Fiscal Year shall be equal to the sum of his share
of the Profits and Losses for each month during the fiscal year.

     6.2  TAX ALLOCATIONS.

          (a)  Except as otherwise provided in Section 6.2(b) hereof, for income
tax  purposes,  all items of income,  gain,  loss,  deduction  and credit of the
Company for any tax period  shall be allocated  among the Members in  accordance
with the  allocation  of  Profits  and Losses  prescribed  in this  Article  and
Appendix A hereto.

          (b)  In  accordance   with  Code  Section   704(c)  and  the  Treasury
Regulations  thereunder,  income,  gain,  loss and deduction with respect to any
property  contributed  to the  capital  of the  Company  shall,  solely  for tax
purposes,  be allocated  among  Members so as to take  account of any  variation
between the adjusted  basis of such  property to the Company for federal  income
tax  purposes and its initial  Gross Asset  Value.  In the event the Gross Asset
Value of any  Company  asset is  adjusted  pursuant to Section A.1 of Appendix A
hereto,  subsequent allocations of income, gain, loss and deduction with respect

                                       11
<PAGE>
to such asset shall take account of any variation  between the adjusted basis of
such asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Treasury the Regulations thereunder;
provided,  however, that unless otherwise determined by the Manager, the Company
shall not adopt the Tradition Method with Curative  Allocations as defined under
Treas.  Regs.  Section  1.704-3(c) or the Remedial  Allocation Method as defined
under Treas. Reg. Section 1.704-3(d) that would require any Member to report any
item of income or gain for Section  704(c)  purposes  that  differs in amount or
timing from the taxable  income that the Company  allocates to such Member under
Section 704(b). Allocations pursuant to this Section 6.2 are solely for purposes
of federal,  state and local taxes and shall not affect,  or in any way be taken
into account in  computing,  any Member's  Capital  Account or share of Profits,
Losses  or other  items  or  distributions  pursuant  to any  provision  of this
Agreement.

          (c)  The  Members  are aware of the  income  tax  consequences  of the
allocations  made by this  Article and  Appendix A hereto and hereby agree to be
bound by the provisions of this Article and Appendix A hereto in reporting their
distributive  shares of the  Company's  taxable  income  and loss for income tax
purposes.

          (d)  TRANSFEROR  -  TRANSFEREE   ALLOCATIONS.   Income,   gain,  loss,
deduction or credit  attributable  to any interest in the Company which has been
transferred  shall be allocated  between the transferor and the transferee under
any method  allowed under  Section 706 of the Code and the Treasury  Regulations
thereunder as agreed by the transferor and the transferee.

          (e)  RIGHTS  OF  UNIT  HOLDERS.  If any  Person  who  is not a  Member
acquires ownership of one or more Units, the term "Member" shall be construed to
include such Unit Holder for purposes of this Article VI.

                                   ARTICLE VII

                 LIABILITIES, RIGHTS AND OBLIGATIONS OF MEMBERS

     7.1  LIMITATION  OF LIABILITY.  Each  Member's  liability for the debts and
obligations  of the  Company  shall be limited as set forth in the Act and other
applicable  law. The provisions of this Section 7.1 shall not be deemed to limit
in any way the liabilities of any Member to the Company and to the other Members
arising from a breach of this Agreement.

     7.2  ACCESS TO COMPANY RECORDS. Upon the written request of any Member, the
Manager shall permit such Member,  at a reasonable  time to both the Manager and
the Member,  to inspect and copy, at the Member's  expense,  the Company records
required to be maintained pursuant to Section 9.1.

     7.3  AUTHORITY TO BIND THE COMPANY, MANAGEMENT AUTHORITY. Unless authorized
in writing to do so by this  Agreement or by the Manager,  no Member or group of
Members  shall have any power or  authority  to bind the  Company in any way, to
pledge the Company's credit, to render the Company liable for any purpose, or to
otherwise engage in the management of the Company.

                                       12
<PAGE>
     7.4  WAIVER OF ACTION FOR PARTITION.  Each Member irrevocably waives during
the term of the  Company  any right that such  Member may have to  maintain  any
action for  partition  with  respect to Company  Property or other assets of the
Company.

     7.5  COOPERATION WITH TAX MATTERS PARTNER.  Each Member agrees to cooperate
with the Tax Matters  Partner and to do or refrain  from doing any or all things
reasonably required by the Tax Matters Partner in connection with the conduct of
any proceedings involving the Tax Matters Partner.

     7.6  ACKNOWLEDGMENT  OF LIABILITY FOR STATE AND LOCAL TAXES.  To the extent
that the laws of any Taxing Jurisdiction require, each Member requested to do so
by the Manager shall submit an agreement  indicating  that the Member shall make
timely  income  tax  payments  to the  Taxing  Jurisdiction  and that the Member
accepts  personal  jurisdiction  of the Taxing  Jurisdiction  with regard to the
collection of income taxes, interest, and penalties attributable to the Member's
income. If a Member fails to provide such agreement, the Company may withhold or
pay over to such Taxing  Jurisdiction the amount of tax,  penalty,  and interest
determined  under  the laws of the  Taxing  Jurisdiction  with  respect  to such
income.  Any such  payments  shall be treated as  distributions  for purposes of
Article V.

     7.7  LIMITATION ON BANKRUPTCY  PROCEEDINGS.  No Member, without the consent
of the  Manager,  shall  file or cause  to be filed  any  action  in  bankruptcy
involving the Company.

     7.8  VOTING RIGHTS. The Members shall have the right to vote on the matters
specifically reserved for their approval or consent set forth in this Agreement.

     7.9  VOTING PROCEDURE.  In any circumstances  requiring approval or consent
by the Members,  such approval or consent shall, except as otherwise provided to
the  contrary in this  Agreement,  be given or withheld in the sole and absolute
discretion of the Members, and conveyed in writing to the Manager not later than
thirty (30) days after such  approval or consent was requested by the Manager in
a written notice directed to the Members;  provided,  however,  that the Manager
may require a response within a shorter  period,  but not less than fifteen (15)
days after request by the Manager.  Failure to respond within the requisite time
period shall constitute a vote consistent with the Manager's recommendation with
respect to the proposal if any. If the Manager  receives the necessary  approval
or consent of the Members to such action,  the Manager  shall be  authorized  to
implement such action without further  authorization  by the Members.  Except as
otherwise provided,  each Member entitled to vote shall have a vote equal to the
number of Units that the Member holds in the Company.

     7.10 MEETINGS  OF  MEMBERS.  The  Manager  shall  convene a meeting  of the
Members upon the request of any Member or Manager.  Such  meeting  shall be held
not later than ten (10) days following request therefor.  Any meeting of Members
shall be held at the registered  office of the Company or at such other place as
all of the Members shall  unanimously  agree.  Any Member may participate in any
meeting of Members by means of a conference  telephone or similar  communication
equipment.

                                       13
<PAGE>
                                  ARTICLE VIII

                   LIABILITY, EXCULPATION AND INDEMNIFICATION

     8.1  LIABILITY.  Except as otherwise provided by the Act or pursuant to any
agreement,  the debts,  obligations  and  liabilities  of the  Company,  whether
arising in contract, tort or otherwise,  shall be solely the debts,  obligations
and  liabilities  of the  Company,  and no  Covered  Person  shall be  obligated
personally  for any such debt,  obligation or liability of the Company solely by
reason of being a Covered Person.

     8.2  EXCULPATION.  No Covered  Person shall be liable to the Company or any
Member for any act or omission  taken or suffered by such Covered Person in good
faith and in the  reasonable  belief  that such act or  omission is in or is not
contrary  to the  best  interest  of the  Company  and is  within  the  scope of
authority granted to such Covered Person by this Agreement;  provided,  however,
that such act or omission is not in  violation  of this  Agreement  and does not
constitute Disabling Conduct by the Covered Person.

     8.3  INDEMNIFICATION.

          (a)  The Company shall, to the fullest extent  permitted by applicable
law,  indemnify,  hold harmless and release each Covered Person from and against
all claims,  demands,  liabilities,  costs,  expenses,  damages,  losses, suits,
proceedings and actions,  whether  judicial,  administrative,  investigative  or
otherwise,  of whatever  nature,  known or unknown,  liquidated or  unliquidated
("Claims"), that may accrue to or be incurred by any Covered Person, or in which
any Covered Person may become involved,  as a party or otherwise,  or with which
any Covered Person may be threatened, relating to or arising out of the business
and affairs of, or  activities  undertaken  in  connection  with,  the  Company,
including,  but not limited to, amounts paid in  satisfaction  of judgments,  in
compromise,  or as fines or penalties and counsel fees and expenses  incurred in
connection   with  the   preparation  for  or  defense  or  disposition  of  any
investigation,  action, suit,  arbitration or other proceeding (a "Proceeding"),
whether  civil or  criminal  (all of such  Claims  and  amounts  covered by this
Section 8.3. and all expenses referred to in Section 8.3(c),  are referred to as
"Damages"),  except to the extent that it shall have been determined  ultimately
that such  Damages  arose from  Disabling  Conduct of such Covered  Person.  The
termination  of any  Proceeding  by  settlement  shall not, of itself,  create a
presumption  that any Damages  relating to such settlement arose from a material
violation of this  Agreement  by, or Disabling  Conduct of, any Covered  Person.
Members shall not indemnify any Covered Person.

          (b)  Expenses incurred by a Covered Person in defense or settlement of
any Claim  that may be subject to a right of  indemnification  hereunder  may be
advanced by the Company prior to the final  disposition  thereof upon receipt of
an  undertaking by or on behalf of the Covered Person to repay such amount if it
shall be  determined  ultimately  that the Covered  Person is not entitled to be
indemnified  hereunder.  The right of any Covered Person to the  indemnification
provided herein shall be cumulative with, and in addition to, any and all rights
to which such  Covered  Person may  otherwise  be  entitled  by contract or as a
matter  of law or equity  and  shall  extend  to such  Covered  Person's  heirs,
personal representatives, successors and assigns.

                                       14
<PAGE>
          (c)  Promptly  after  receipt  by a  Covered  Person  of notice of the
commencement  of any  Proceeding,  such  Covered  Person  shall,  if a claim for
indemnification  in respect  thereof is to be made  against  the  Company,  give
written notice to the Company of the commencement of such  Proceeding,  provided
that the failure of any Covered  Person to give notice as provided  herein shall
not relieve the Company of its obligations  under this Section 8.3 except to the
extent that the Company is actually  prejudiced  by such failure to give notice.
In case any such  Proceeding is brought  against a Covered  Person (other than a
derivative  suit in right of the  Company),  the  Company  will be  entitled  to
participate in and to assume the defense  thereof to the extent that the Company
may wish, with counsel  reasonably  satisfactory  to such Covered Person.  After
notice  from the Company to such  Covered  Person of the  Company's  election to
assume  the  defense  thereof,  the  Company  will not be  liable  for  expenses
subsequently  incurred by such  Covered  Person in  connection  with the defense
thereof. The Company will not consent to entry of any judgment or enter into any
settlement that does not include as an unconditional  term thereof the giving by
the claimant or plaintiff to such Covered Person of a release from all liability
in respect to such Claim.

                                   ARTICLE IX

               BOOKS AND RECORDS, REPORTS, TAX ACCOUNTING, BANKING

     9.1  BOOKS AND RECORDS.  The Manager, at the expense of the Company,  shall
keep or cause to be kept  adequate  books and  records  for the  Company,  which
contain an accurate account of all business  transactions  arising out of and in
connection with the conduct of the Company,  required by the Act.  Additionally,
at the  expense  of the  Company,  the  Manager  shall  maintain  or cause to be
maintained the following records at the Company's registered office:

          (a)  A list of the full name and last known  business,  residence,  or
mailing address of each Member, both past and present;

          (b)  A copy of the Articles of Organization  for the Company,  and all
amendments thereto;

          (c)  Copies of the  Company's  currently  effective  Agreement and all
amendments  thereto,  copies of any prior  Agreements  no longer in effect,  and
copies  of any  writings  permitted  or  required  with  respect  to a  Member's
obligation to contribute cash, property, or services;

          (d)  Copies of the  Company's  federal,  state,  and local  income tax
returns and reports for the six (6) most recent years;

          (e)  Copies of financial  statements  of the Company,  if any, for the
six (6) most recent years;

          (f)  Minutes of every meeting of the Members;

          (g)  Any  written  consents or  approvals  obtained  from  Members for
actions taken by the Manager; and

                                       15
<PAGE>
          (h)  Any  written  consents or  approvals  obtained  from  Members for
actions taken by Members without a meeting.

     Any Member or its designated  representative  shall have the right,  at any
reasonable time, to have access to and may inspect and copy the contents of such
books or records.

     9.2  REPORTS TO MEMBERS.  Within a reasonable  period after the end of each
Fiscal  Year,  the  Manager,  at the expense of the  Company,  shall cause to be
prepared  and  furnished  to each Member an annual  report  containing a balance
sheet as of the end of such Fiscal Year and statements of income and expense for
the year then ended.

     9.3  TAX MATTERS.

          (a)  The Members intend that the Company shall be operated in a manner
consistent  with its  treatment as a limited  liability  company for federal and
state income tax purposes.  The Members  shall not take any action  inconsistent
with this  expressed  intent.  The Tax Matters  Partner  shall take no action to
cause the Company to elect to be taxed as a corporation  pursuant to Regulations
Section 301.7701-3(a) or any counterpart under state law. Each Member agrees not
to make any election for the Company to be excluded from the  application of the
provisions of Subchapter K of the Code.

          (b)  The  Manager  shall  cause the  accountants  for the  Company  to
prepare  and timely  file all tax  returns  required  to be filed by the Company
pursuant to the Code and all other tax returns deemed  necessary and required in
each jurisdiction in which the Company does business. The Manager shall instruct
the Company's  accountants  to prepare and deliver all necessary tax returns and
information to each Member within a reasonable  period following the end of each
Fiscal Year.

          (c)  The  Manager  may,  where  permitted  by the rules of any  Taxing
Jurisdiction, file a composite, combined, or aggregate tax return reflecting the
income of the Company,  and pay the tax, interest,  and penalties of some or all
of the  Members  on such  income to the Taxing  Jurisdiction,  in which case the
Company  shall  inform  the  Members of the  amount of such tax,  interest,  and
penalties so paid.

          (d)  Stratford  is hereby  designated  as the Tax  Matters  Partner as
defined in Section 6231 of the Code of the Company and shall be  authorized  and
required to represent the Company in  connection  with all  examinations  of the
Company's  affairs by tax  authorities  (Federal,  State and  local),  including
resulting  administrative and judicial proceedings,  and to expend Company funds
for  professional  services and costs  associated  therewith.  Any successor Tax
Matters Partner shall be selected by the Manager.

          (e)  The Manager may make the election  provided  under Section 754 of
the Code and any corresponding provision of applicable state law.

          (f)  If a Member  reports a Company  item on the  Member's  income tax
return in a manner  inconsistent with the tax return of the Company,  the Member
shall notify the Manager of such treatment before filing the Member's income tax
return.  If a Member  fails to report such  inconsistent  reporting,  the Member
shall be liable to the other Members for any expenses,  including professionals'

                                       16
<PAGE>
fees,  tax,  interest,  penalties,  or  litigation  costs,  that may  arise as a
consequence  of such  inconsistent  reporting,  such  as an  audit  by a  Taxing
Jurisdiction.

     9.4  BANK ACCOUNTS. All funds of the Company shall be deposited in the name
of the  Company  in an account or  accounts  maintained  with such bank or banks
selected by the Manager.  The funds of the Company shall not be commingled  with
the funds of any other Person. Checks shall be drawn upon the Company account or
accounts  only for the purposes of the Company and shall be signed by authorized
Persons on behalf of the Company.

                                    ARTICLE X

                           ADMISSIONS AND WITHDRAWALS

     10.1 ADMISSION OF MEMBER.

          (a)  Except as provided in paragraph (b) of this Section,  Persons may
be admitted as Members as a result of the issuance of Units only with  Unanimous
Consent.  Additionally,  no Person  shall be admitted as a Member of the Company
after the date of  formation  of the Company as a result of a Transfer of Units,
except in accordance with Section 11.5.

          (b)  If the Company  defaults on the repayment of the Mezzanine  Loans
(i.e.,  the  Diamond  Loan and the Bank Loan)  resulting  in JDMD and DVI making
their equally  shared  Guaranteed  Payments of the Bank Loan,  the  indebtedness
owing to JDMD and DVI will be converted to Units in the Company as follows:

               (i)  JDMD will be added as a Member  having 2,387 Units (a 23.87%
interest) in the Company;

               (ii) DVI will be added as a Member  having  5,824 Units (a 58.24%
interest) in the Company;

               (iii) Stratford's 8,000  Units  will be  reduced  to 1,431  Units
(reduced to 14.31% interest);

               (iv) Golden  Gate's  1,300  Units  will be  reduced  to 233 Units
(reduced to 2.33% interest) in the Company;

               (v)  Auriga's  300 Units will be reduced to 54 Units  (reduced to
..54% interest) in the Company; and

               (vi) DRD's 400 Units will be reduced to 71 Units (reduced to .71%
interest) in the Company.

If the  Guaranteed  Payments  are not  equally  made by JDMD and DVI,  or if the
respective  number of Units then held by the Initial  Members are different than
the number of Units initially set forth on Exhibit B hereto, then the conversion
of such indebtedness into Units will be adjusted accordingly by the Manager.

                                       17
<PAGE>
     10.2 RIGHT TO WITHDRAW.  A Member may withdraw from the Company at any time
by mailing or delivering a written  notice of withdrawal to the Manager.  If the
withdrawing  Member is a  Manager,  such  Member  may  withdraw  by  mailing  or
delivering  a  written  notice of  withdrawal  to the  Company  and to the other
Members at their last known addresses set forth in Exhibit B.

     10.3 RIGHTS OF WITHDRAWN MEMBER.  Upon the occurrence of a Withdrawal Event
with  respect  to a Member,  the  Withdrawn  Member (or the  Withdrawn  Member's
personal  representative  or other successor if applicable)  shall cease to have
any rights of a Member, except the right to receive  distributions  occurring at
the times and equal in amounts to those distributions the Withdrawn Member would
otherwise have received if a Withdrawal Event had not occurred.  If there are no
remaining  Members,  distributions  to any Withdrawn Member shall be governed by
Section 12.3.

                                   ARTICLE XI

                                 TRANSFERABILITY

     11.1 GENERAL. No Member shall be authorized to Transfer all or a portion of
such Member's Units unless the Transfer constitutes a Permitted Transfer.

     11.2 PERMITTED  TRANSFERS.  Subject to the conditions and  restrictions set
forth in  Section  11.3,  a Transfer  of a Member's  Units  shall  constitute  a
Permitted Transfer provided that:

          (a)  The Transfer is made to another Member; or

          (b)  The Transfer is made to an Affiliate of DVI; or

          (c)  The Transfer is made following  compliance  with the terms of the
right-of-first refusal set forth in Section 11.4.

     11.3 CONDITIONS TO PERMITTED TRANSFER. A Transfer shall not be treated as a
Permitted Transfer unless all of the following conditions are satisfied:

          (a)  The transferor  and the transferee  reimburse the Company for all
costs that the Company incurs in connection with such Transfer;

          (b)  The  Transfer  does not  cause the  Company  to  "terminate"  for
federal  income tax  purposes  unless all of the  Members  consent in writing to
waive this condition;

          (c)  The  Transfer  does not cause the  Company to become a  "publicly
traded partnership" within the meaning of Code Section 7704(b);

          (d)  The Units which are the subject of the  Transfer  are  registered
under  the  Securities  Act of  1933,  as  amended,  and  any  applicable  state
securities laws, or alternatively,  counsel for the Company furnishes an opinion
that such Transfer is exempt from all applicable  registration  requirements  or
that such Transfer will not violate any applicable securities laws; and

                                       18
<PAGE>
          (e)  The transferor and the transferee agree to execute such documents
and  instruments  necessary or  appropriate  in the discretion of the Manager to
confirm such Transfer.

     The transferee of Units in a Permitted Transfer under Section 11.2(a) shall
automatically become a Substitute Member unless the transferor determines to the
contrary.  If the transferee of Units in a Permitted Transfer shall not become a
Substitute  Member,  the  transferee  shall  have only the  rights  set forth in
Section 11.6 hereof.

     11.4 RIGHT OF FIRST REFUSAL.

          (a)  GENERAL.  If any Member  desires to Transfer  all or a portion of
the  Member's  Units to any Person who is not a Member or an  Affiliate  of DVI,
such Transfer shall not constitute a Permitted Transfer unless such Member shall
afford the Company and the other  Members a  right-of-first-refusal  pursuant to
this Section 11.4.

          (b)  NOTICE.  A Member  desiring to Transfer Units shall first provide
to the other  Members and the Company at least one  hundred  twenty  (120) days'
prior written notice of the Member's  intention to make a Transfer of Units (the
"DISPOSITION  NOTICE").  The Member desiring to Transfer Units shall be known as
the   "DISPOSING   MEMBER"  and  the  other   Members  shall  be  known  as  the
"NON-DISPOSING  MEMBERS"  for  purposes of this  Agreement.  In the  Disposition
Notice,  the  Disposing  Member  shall  specify the price at which the Units are
proposed to be sold or transferred,  the portion of the Disposing Member's Units
to be sold or transferred, the identity of the proposed purchaser or transferee,
and the terms and conditions of the proposed Transfer.

          (c)  OPTION TO COMPANY.  The Company may elect  within sixty (60) days
after  receiving the  Disposition  Notice,  to purchase some or all of the Units
proposed to be  transferred  by the  Disposing  Member at the proposed  price as
contained in the Disposition Notice. The terms and conditions of the purchase by
the Company shall be the terms and  conditions  of the proposed  Transfer as set
forth  in the  Disposition  Notice.  Any  purchase  pursuant  to  the  foregoing
alternative method shall be made in cash within ninety (90) days after receiving
the Disposition Notice.

          (d)  OPTIONS TO MEMBERS.  If the Company  does not purchase all of the
Disposing Member's Units covered by the Disposition  Notice, the remaining Units
may be purchased by the Non-Disposing  Members on the same terms and at the same
price available to the Company.  Each Non-Disposing Member shall have the option
to purchase  that portion of the Disposing  Member's  Units that is necessary to
maintain the Member's  Percentage  Interest  vis-a-vis  the other  Non-Disposing
Members. If any Non-Disposing  Member does not purchase the portion of the Units
available  to such  Member,  the  remaining  Units  will then be  available  for
purchase by the other  Non-Disposing  Members in proportion to their  respective
Percentage Interests.

          (e)  TIMING.  If the Company  decides to purchase less than all of the
Units offered by the Disposing Member, within thirty (30) days after the Company
reaches such decision,  and, in any event,  at the expiration of the first sixty
(60) days of the notice period specified in Section  11.4(b),  the Company shall
so notify each Non-Disposing Member. The notice shall state that the Company did

                                       19
<PAGE>
not exercise its option to purchase all of the Disposing  Member's Units offered
pursuant to the  Disposition  Notice and shall contain  appropriate  information
concerning the Non-Disposing Members' options to purchase all or any part of the
remaining Units offered by the Disposing Member. Each Non-Disposing  Member must
give written notice to the Disposing Member and the other Non-Disposing  Members
of the exercise of such Member's option to acquire the Member's  portion of such
Units  within  the  first  eighty  (80)  days  of  the  notice  period.  If  any
Non-Disposing  Member does not elect to purchase all of the portion of the Units
available to such Member, the remaining  Non-Disposing Members shall be entitled
to purchase  such Units in  accordance  with Section  11.4(d) by giving  written
notice to the Disposing  Member and the other  Non-Disposing  Members within the
first ninety (90) days of the notice period.

          (f)  CONDITION TO ELECTING  OPTION.  The options set forth in Sections
11.4(c) and  11.4(d)  shall be subject to the  condition  that in no event shall
less than one hundred  percent (100%) of the Units proposed to be disposed of by
the  Disposing  Member be  purchased  in the  aggregate  by the  Company and the
Non-Disposing Members.

          (g)  TRANSFER  TO  THIRD  PARTY.   If  neither  the  Company  nor  the
Non-Disposing  Members shall have purchased all of the Disposing  Members' Units
covered by the  Disposition  Notice as provided in the foregoing  subsections of
this Section 11.4 within the first  ninety (90) days of the notice  period,  the
Disposing  Member may,  provided the  conditions of Section 11.3 are  satisfied,
sell its remaining Units to Persons other than the Company and the Non-Disposing
Members,  provided that any disposition must be made on the terms and conditions
and to the party  specified in the  Disposition  Notice and must be  consummated
within the one hundred twenty (120) day notice period.

          (h)  TRANSFER  OF RIGHTS TO  ASSIGNEE.  If the  Transfer  entails  the
Transfer  of all of  Disposing  Member's  Units  and  there  shall  be only  one
Non-Disposing  Member,  such Member shall have the right to assign to any Person
the rights  otherwise  available to the  Non-Disposing  Member  pursuant to this
Section 11.4.

     11.5 ADMISSION AS SUBSTITUTE MEMBER.

          (a)  Except as  otherwise  provided in  paragraph  (b) of this Section
11.5, a transferee of Units who is not a Member shall be admitted to the Company
as a Substitute Member only upon satisfaction of the following conditions:

               (i)  The Units  with  respect  to which the  transferee  is being
admitted was acquired by means of a Permitted Transfer;

               (ii) The  transferee  becomes  a  party  to  this  Agreement  and
executes such documents and  instruments as the Members  determine are necessary
or  appropriate  to confirm such  transferee  as a Member and such  transferee's
agreement to be bound by the terms of this Agreement; and

               (iii) The Members  (defined  for this  purpose by  excluding  the
Disposing  Member)  give  their  Unanimous  Consent  to  the  admission  of  the
transferee as a Substitute Member, which may be given or withheld for any reason
or for no reason.

                                       20
<PAGE>
          (b)  A  transferee  of Units in a Permitted  Transfer  under  Sections
11.2(a) shall  automatically  become a Substitute  Member unless the  transferor
directs in writing to the contrary.

     11.6 RIGHTS AS ASSIGNEE.  A Person who acquires  Units (other than a Person
who was a Member before such acquisition) but who is not admitted to the Company
as a Substitute  Member  shall have only the right to receive the  distributions
and  allocations  of  Profits  and  Losses to which the  Person  would have been
entitled under this Agreement with respect to the transferred  Units,  but shall
have no right to  participate  in the  management  of the  Company,  no right to
inspect the books and records of the Company,  and no other  rights  accorded to
Members under this Agreement.

     11.7 PROHIBITED  TRANSFERS.  Any purported  Transfer of Units that is not a
Permitted Transfer shall be null and void and of no force and effect whatsoever.
In the case of an  attempted  Transfer  that is not a  Permitted  Transfer,  the
Persons  engaging in or attempting to engage in such Transfer shall be liable to
and shall indemnify and hold harmless the Company from all loss, cost, liability
and  damages  that the  Company  or any Member  shall  incur as a result of such
attempted Transfer.

     11.8 MARITAL DISSOLUTION OR LEGAL SEPARATION.

     If the Company  admits a Member that is an  individual,  then the following
shall apply in  connection  with the  dissolution  of the  marriage or the legal
separation of such Member:

          (a)  GRANT.  The Company shall have the right (the  "SPECIAL  PURCHASE
RIGHT"), exercisable at any time during the thirty (30) day period following the
Company's receipt of the required  Dissolution Notice under Section 11.8(b),  to
purchase from the Member's spouse,  in accordance with the provisions of Section
11.8(c) any or all of the  Member's  Units which would  otherwise  be awarded to
such spouse  incident to the  dissolution  of  marriage or legal  separation  in
settlement  of any  community  property or other  marital  property  rights such
spouse may have or obtain in the Member's  Units.  The Special  Purchase  Rights
shall not apply to any Units retained by the Member.

          (b)  NOTICE OF DECREE OR AGREEMENT. Each Member shall promptly provide
the Company with written notice (the  "DISSOLUTION  NOTICE") of (i) the entry of
any judicial decree or order resolving the property rights of the Member and the
Member's spouse in connection with their marital dissolution or legal separation
or (ii) the execution of any contract or agreement  relating to the distribution
or division of such property rights. The Dissolution Notice shall be accompanied
by a copy of the actual decree of  dissolution or settlement  agreement  between
Member and the Member's  spouse,  which  provides for the award to the spouse of
any Units in  settlement of any  community  property or other  marital  property
rights such spouse may have in such Units.

          (c)  EXERCISE OF SPECIAL  PURCHASE RIGHT.  The Special  Purchase Right
shall be exercisable  by delivery of written  notice (the "PURCHASE  NOTICE") to
the Member and the Member's  spouse  within thirty (30) days after the Company's
receipt of the Dissolution  Notice.  The Purchase Notice shall indicate the date
the purchase is to be effected  (such date to be not less than five (5) business

                                       21
<PAGE>
days,  nor more than ten (10)  business  days,  after  the date of the  Purchase
Notice),  and the amount which the Company proposes to pay for the Units. If the
Member's spouse does not agree to the amount proposed to be paid by the Company,
then  the  price  to be paid  shall be the  fair  market  value of the  Units as
determined by an independent  appraiser mutually selected by the Company and the
Member's  spouse,  and the purchase shall occur ten (10) business days following
the completion of such valuation.

     11.9 LEGENDS.  Each Member agrees that the following legend shall be placed
upon any  counterpart  of this  Agreement  or any other  instrument  or document
evidencing ownership of an:

          The  Units  represented  by  this  document  have  not  been
          registered under any securities laws and the transferability
          of such  Units is  restricted.  Such  Units may not be sold,
          assigned,  gifted,  transferred or otherwise  disposed,  nor
          will the vendee,  assignee,  beneficiary,  or  transferee be
          recognized  as having  acquired such Units for any purposes,
          unless (a) a registration statement under the Securities Act
          of 1933,  as amended,  with respect to such Units shall then
          be  in  effect  and  such  has  been  qualified   under  all
          applicable state securities laws, or (b) the availability of
          an exemption from such registration and qualification  shall
          be  established  to the  satisfaction  of  counsel  for  the
          Company.

          The Units  represented by this document are further  subject
          to  further   restriction   as  to  their  sale,   transfer,
          hypothecation,  or  assignment as set forth in the Operating
          Agreement of the Company and agreed to by each Member of the
          Company. Said restriction provides, among other things, that
          generally no Units may be  transferred  to any Person who is
          not a  Member  without  first  offering  such  Units  to the
          Company  and  the  other  Members,  and  that  generally  no
          beneficiary, transferee, or assignee shall have the right to
          become a  "Substitute  Member"  without  the  consent of all
          other Members which consent may be given or withheld for any
          reason or for no reason.

     11.10  DISTRIBUTIONS  IN RESPECT OF TRANSFERRED  UNITS. If any Units in the
Company are  transferred  during any  accounting  period in compliance  with the
provisions of this Article XI, all  distributions  on or before the date of such
Transfer shall be made to the transferor, and all distributions thereafter shall
be made to the transferee.

     11.11 INCLUSION OF UNIT HOLDERS. For purposes of this Article XI, except in
connection  with the Unanimous  Consent of the Members,  the term "Member" shall
also include a Unit Holder.

                                       22
<PAGE>
                                   ARTICLE XII

                           DISSOLUTION AND TERMINATION

     12.1 DISSOLUTION. The Company shall be dissolved upon the first to occur of
any of the following events:

          (a)  The written agreement of all the Members;

          (b)  The  entry of a  decree  of  judicial  dissolution  under  A.R.S.
Section 29-785; or

          (c)  The sale, exchange,  or other disposition of all or substantially
all the assets of the Company.

     The Company  shall not be  dissolved  upon the  occurrence  of a Withdrawal
Event with respect to any Manager or Member unless there is no remaining Member,
taking into  consideration  for this purpose the  provisions  of A.R.S.  Section
29-731.B.4.

     12.2 NOTICE OF  WINDING  UP.  Promptly  following  the  dissolution  of the
Company,  the Manager (or such other Person  designated  by the  Members)  shall
cause a  "Notice  of  Winding  Up" to be  filed  with  the  Arizona  Corporation
Commission in accordance with the Act.

     12.3 LIQUIDATION, WINDING UP AND DISTRIBUTION OF ASSETS. The Manager shall,
upon  dissolution of the Company,  proceed to liquidate the Company's assets and
properties,  discharge  the  Company's  obligations,  and wind up the  Company's
business and affairs as promptly as is consistent  with obtaining the fair value
thereof.  The proceeds of  liquidation  of the Company's  assets,  to the extent
sufficient therefor, shall be applied and distributed as follows:

          (a)  First, to the payment and discharge of all of the Company's debts
and  liabilities  except  those owing to Members in the order and  priority  set
forth in Section 5.1 or to the  establishment  of any  reasonable  reserves  for
contingent or unliquidated debts and liabilities;

          (b)  Second, to the payment of any accrued interest owing on any debts
and  liabilities  owing to Members in  proportion to the amount due and owing to
each Member;

          (c)  Third, to the payment of outstanding  principal  amounts owing on
any debts and  liabilities  owing to Members in proportion to the amount due and
owing to each Member;

          (d)  Fourth, to the Members in accordance with the positive balance of
each  Member's  Capital  Account as  determined  after  taking into  account all
Capital  Account  adjustments  for the  Company's  taxable year during which the
liquidation occurs,  including any Capital Account  adjustments  associated with
the allocation of Profits and Losses with respect to any sale, transfer or other
taxable  disposition  of any Company  property.  Any such  distributions  to the
Members in  respect  of their  Capital  Accounts  shall be made  within the time
requirements of Section  1.704-1(b)(3)(ii)(b)(2) of the Regulations.  If for any
reason the amount distributable pursuant to this Section 12.3 shall be more than
or less  than  the sum of all the  positive  balances  of the  Members'  Capital

                                       23
<PAGE>
Accounts,  the  proceeds  distributable  pursuant to this  Section 12.3 shall be
distributed among the Members in accordance with the ratio by which the positive
Capital Account balance of each Member bears to the sum of all positive  Capital
Account balances. Distributions required by this Section 12.3 may be distributed
to a trust  established  for the  benefit of the  Members  for the  purposes  of
liquidating Company property, collecting amounts owed to the Company, and paying
any contingent or unforeseen liabilities or obligations of the Company or of the
Manager  arising out of or in  connection  with the Company.  In such case,  the
assets of such trust shall be  distributed  to the Members from time to time, in
the discretion of the Manager, in the same proportions as the amount distributed
to such  trust by the  Company  would  otherwise  have been  distributed  to the
Members pursuant to this Agreement.

     12.4 DEFICIT  CAPITAL  ACCOUNTS.  No Member  shall have any  obligation  to
contribute  or advance  any funds or other  property to the Company by reason of
any negative or deficit balance in such Member's  Capital Account during or upon
completion  of  winding  up or at any other  time  except to the  extent  that a
deficit  balance is directly  attributable  to a  distribution  of cash or other
property in violation of this Agreement.

     12.5 ARTICLES OF  TERMINATION.  When all the remaining  property and assets
have been applied and  distributed in accordance  with Section 12.5 hereof,  the
Manager (or such other Person  designated by the Members) shall cause  "Articles
of Termination" to be executed and filed with the Arizona Corporation Commission
in accordance with the Act.

     12.6 RETURN  OF  CONTRIBUTION  NON-RECOURSE  TO OTHER  MEMBERS.  Except  as
provided by law, upon  dissolution,  each Member shall look solely to the assets
of the  Company for the return of the  Member's  Capital  Contributions.  If the
Company  property  remaining  after the  payment or  discharge  of the debts and
liabilities of the Company is  insufficient to return the cash or other property
contribution  of one or more  Members,  such  Member or  Members  shall  have no
recourse against the Manager or any other Member.

     12.7 IN KIND  DISTRIBUTIONS.  A Member  shall  have no right to demand  and
receive any distribution from the Company in any form other than cash.  However,
a Member may be  compelled to accept a  distribution  of an asset in kind if the
Company is unable to dispose of all of its assets for cash.

     12.8 INCLUSION OF UNIT HOLDER.  Except as otherwise  provided  herein,  the
term "Member" for purposes of this Article XII shall include a Unit Holder.

                                  ARTICLE XIII

                                FUNDING AND LOANS

     13.1 FUNDING FOR ACQUISITION OF COMPANY  PROPERTY.  Contemporaneously  with
the closing on the purchase of the Company  Property,  the funds for the payment
of the  purchase  price,  closing  costs  and  other  expenses  involved  in the
estimated sum of $25,237,500 will be obtained as set forth in Paragraph 2 of the
letter  agreement dated September 27, 2002,  between the Members.  The shortfall
amount of any increase in the estimated sum of $25,237,500,  or any reduction in
the $20 million Allianz Loan, will be obtained either (at Stratford's  election)
by (a) increasing the Bank Loan by such shortfall  amount,  or (b) by a separate

                                       24
<PAGE>
loan of the shortfall  amount to the Company by Stratford,  bearing  interest at
10% per annum,  repayable pari passu with the repayment of the Bank Loan and the
Diamond Loan.

     13.2 BANK LOAN GUARANTY. Notwithstanding anything to the contrary, JDMD and
DVI  will be  obligated  to  guaranty  up to  $1,250,000  each,  or a  total  of
$2,500,000,  of the Bank Loan, and Stratford  shall be obligated to guaranty any
portion of the Bank Loan over $2,500,000.

     13.3 ALLIANZ LOAN  NON-RECOURSE  CARVE OUTS. The Members recognize that, in
order to obtain the Allianz Loan,  JDMD has agreed to be  personally  liable for
certain non-recourse  exceptions regarding the Allianz Loan (collectively called
the "RETAINED  LIABILITIES"),  and further has agreed to meet certain  financial
requirements (the "FINANCIAL COVENANTS"),  all as more particularly set forth in
that certain Guaranty Agreement between JDMD, Stratford and Allianz, dated as of
the closing of the Allianz Loan (the "ALLIANZ GUARANTY"). If JDMD actually makes
any of its guaranteed  payments for the Allianz Loan Retained  Liabilities under
the Allianz  Guaranty,  the then Members of the Company will reimburse JDMD upon
demand for their  respective  pro rata  shares  (equal to their then  respective
Percentage  Interests in the Company) of the  guaranteed  payments made by JDMD,
together with interest  thereon at the Default  Interest Rate from the date JDMD
made such guaranteed payments until the date(s) of such  reimbursement(s) by the
Members.

     13.4 SUBSTITUTE GUARANTOR. Stratford shall use its best efforts to meet the
Financial  Covenants  set forth in the  Allianz  Guaranty as soon as possible in
order  to be  substituted  in  place  of JDMD as  guarantor  under  the  Allianz
Guaranty.

                                   ARTICLE XIV

                            MISCELLANEOUS PROVISIONS

     14.1 NOTICES.  Except as otherwise provided herein, any notice,  demand, or
communication  required or permitted to be given to a Member by any provision of
this Agreement shall be deemed to have been sufficiently given or served for all
purposes if  delivered  personally  to the Member or, if sent by  registered  or
certified mail, postage prepaid,  addressed to the Member's address set forth in
Exhibit A. Except as otherwise  provided herein, any such notice shall be deemed
to be given on the date on which the same was  personally  delivered or, if sent
by  registered  or certified  mail, on the third (3rd) day after such notice was
deposited in the United States mail addressed as aforesaid.

     14.2 GOVERNING LAW. This Agreement and the rights of the parties  hereunder
will be governed by,  interpreted,  and enforced in accordance  with the laws of
the State of Arizona.

     14.3 ENTIRE AGREEMENT;  AMENDMENTS.  This Agreement  constitutes the entire
agreement between the Members  concerning the matters set forth herein,  and may
not be amended except by Unanimous Consent of the Members.  Notwithstanding  the
foregoing,  the  Manager  shall be  authorized  to make any  amendments  to this
Agreement  which,  in the opinion of counsel to the  Company,  are  necessary to
maintain  the status of the Company as a limited  liability  company for federal
and  state  income  tax  purposes.  In the  event of any  conflict  between  the

                                       25
<PAGE>
provisions of this Agreement and the provisions of the letter agreement  between
the Members,  dated  September 27, 2002, the provisions of this Agreement  shall
prevail.

     14.4 ADDITIONAL  DOCUMENTS  AND ACTS.  Each  Member  agrees to execute  and
deliver such additional documents and instruments and to perform such additional
acts as may be necessary or appropriate to effectuate, carry out and perform all
of the terms,  provisions and conditions of this Agreement and the  transactions
contemplated hereby.

     14.5 HEADINGS.  The headings in this Agreement are inserted for convenience
only and are in no way intended to  describe,  interpret,  define,  or limit the
scope, extent, or intent of this Agreement or any provision hereof.

     14.6 SEVERABILITY.  If any  provision  of  this  Agreement  is  held  to be
illegal,  invalid or  unenforceable  under the present or future laws  effective
during the term of this  Agreement,  such provision will be fully  severable and
the remaining provisions of this Agreement will remain in full force and effect.

     14.7 HEIRS, SUCCESSORS, AND ASSIGNS. Each and all of the covenants,  terms,
provisions,  and agreements  herein contained shall be binding upon and inure to
the benefit of the parties hereto and, to the extent permitted by this Agreement
and  by  applicable  law,  their  respective   heirs,   legal   representatives,
successors, and assigns.

     14.8 CREDITORS  AND OTHER THIRD  PARTIES.  None of the  provisions  of this
Agreement shall be for the benefit of, or  enforceable,  by any creditors of the
Company or any other third parties.

     14.9 SECTION, OTHER REFERENCES.  Except to the extent provided,  references
to the  terms  "Section,"  "Schedule,"  "Exhibit,"  or  "Appendix"  means to the
corresponding  Sections,  Schedules,  Exhibits,  or  Appendices  attached  to or
referred in this Agreement.

     14.10  AUTHORITY  TO ADOPT  AGREEMENT.  By  execution  hereof,  each Member
represents and covenants as follows:

          (a)  The Member has full legal right,  power, and authority to deliver
this Agreement and to perform the Member's obligations hereunder;

          (b)  This  Agreement   constitutes  the  legal,   valid,  and  binding
obligation of the Member enforceable in accordance with its terms, except as the
enforcement  thereof  may be  limited  by  bankruptcy  and other laws of general
application relating to creditors' rights or general principles of equity;

          (c)  This  Agreement  does not  violate,  conflict  with,  result in a
breach of the terms,  conditions or provisions of, or constitute a default or an
event of default under any other agreement of which the Member is a party; and

          (d)  The Member's  investment  in Units in the Company is made for the
Member's  own account for  investment  purposes  only and not with a view to the
resale or distribution of such Units.

                                       26
<PAGE>
     14.11  COUNTERPARTS.  This  Agreement  may  be  executed  in  one  or  more
counterparts  each of which shall for all purposes be deemed an original and all
of such  counterparts,  taken  together,  shall  constitute  one  and  the  same
Agreement.

     By  execution  below,  each of the  undersigned  agrees  to the  terms  and
provisions of this Operating Agreement for Scottsdale Thompson Peak, LLC.

                                       27
<PAGE>
                                      Stratford American Corporation, an
                                      Arizona Corporation, as Manager and Member

                                      By:
                                          --------------------------------------
                                          Mel L. Shultz, President

                                      GOLDEN GATE APARTMENTS, LTD., L.P., a
                                      California Limited Partnership

                                      By:
                                          --------------------------------------
                                          General Partner

                                      AURIGA PROPERTIES, INC., an Arizona
                                      corporation

                                      By:
                                          --------------------------------------
                                          Its
                                              ----------------------------------

                                      ------------------------------------------
                                      DONALD R. DIAMOND, as Family Trustee of
                                      the DRD-97 Trust under Agreement dated
                                      August 8, 1997

<PAGE>
                                   APPENDIX A

                      SPECIAL TAX AND ACCOUNTING PROVISIONS

     A.1  ACCOUNTING   DEFINITIONS.   The  following   terms,   which  are  used
predominantly  in this  Appendix A, shall have the  meanings set forth below for
all purposes under this Agreement.

          "ADJUSTED  CAPITAL ACCOUNT BALANCE" means, with respect to any Member,
the  balance of such  Member's  Capital  Account  as of the end of the  relevant
Fiscal Year, after giving effect to the following adjustments:

               (a)  Credit to such Capital Account any amounts which such Member
is obligated to restore pursuant to this Agreement or as determined  pursuant to
Regulations  Section  1.704-1(b)(2)(ii)(C),  or is  deemed  to be  obligated  to
restore   pursuant  to  the  penultimate   sentences  of  Regulations   Sections
1.704-2(g)(1) and 1.704-2(i)(5); and

               (b)  Debit to such Capital Account the items described in clauses
(4), (5) and (6) of Section 1.704-1(b)(2)(ii)(D) of the Regulations.

The foregoing  definition  of Adjusted  Capital  Account  Balance is intended to
comply with the provisions of Section  1.704-1(b)(2)(ii)(D)  of the  Regulations
and shall be interpreted consistently therewith.

          "CAPITAL  ACCOUNT" means, with respect to any Member or other owner of
Units  in the  Company,  the  Capital  Account  maintained  for such  Person  in
accordance with the following provisions:

               (a)  To each  such  Person's  Capital  Account,  there  shall  be
credited the amount of money and the initial  Gross Asset Value of such Person's
Capital  Contributions as determined by the Manager,  such Person's distributive
share of  Profits  and any  items  in the  nature  of  income  or gain  that are
specially  allocated  pursuant to Sections A.2 and A.3 hereof, and the amount of
any Company liabilities assumed by such Person;

               (b)  To each such Person's Capital Account there shall be debited
the amount of cash and the Gross Asset Value of any Company property distributed
to such Person  pursuant to any provision of this Agreement as determined by the
Manager, such Person's distributive share of Losses, and any items in the nature
of expenses or losses that are specially  allocated pursuant to Sections A.2 and
A.3 hereof,  and the amount of any  liabilities  of such  Person  assumed by the
Company;

               (c)  In the event any Units are  transferred  in accordance  with
the terms of this Agreement, the transferee shall succeed to the Capital Account
of the transferor to the extent it relates to the transferred Units;

               (d)  Section  752(c) of the Code shall be applied in  determining
the amount of any liabilities taken into account for purposes of this definition
of "Capital Account"; and

                                       A-1
<PAGE>
               (e)  The foregoing  provisions  and the other  provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Sections 1.704-1(b) and 1.704-2 of the Regulations and shall be interpreted
and applied in a manner consistent with such Regulations. The Manager may modify
the manner of computing  the Capital  Accounts or any debits or credits  thereto
(including  debits or  credits  relating  to  liabilities  that are  secured  by
contributed  or  distributed  property or that are assumed by the Company or any
Member)  in  order to  comply  with  such  Regulations,  provided  that any such
modification   is  not  likely  to  have  a  material   effect  on  the  amounts
distributable to any Member pursuant to Section 12.3 upon the dissolution of the
Company.  Without limiting the generality of the preceding sentence, the Manager
shall  make any  adjustments  that are  necessary  or  appropriate  to  maintain
equality  between the  aggregate  sum of the Capital  Accounts and the amount of
capital  reflected on the balance sheet of the Company,  as determined  for book
purposes in accordance with Section 1.704-1(b)(2)(iv)(G) of the Regulations. The
Manager shall also make any appropriate  modifications if  unanticipated  events
(for example,  the availability of investment tax credits) might otherwise cause
this Agreement not to comply with Regulations Section 1.704-1(b).

          "COMPANY  MINIMUM GAIN" has the same meaning as the term  "partnership
minimum gain" under Regulations Section 1.704-2(d) of the Regulations.

          "DEPRECIATION"  means, for each Fiscal Year or other period, an amount
equal  to the  depreciation,  amortization  or  other  cost  recovery  deduction
allowable with respect to an asset for such year or other period, except that if
the Gross Asset Value of an asset  differs from its  adjusted  basis for federal
income tax purposes at the beginning of such year or other period,  Depreciation
shall be an amount that bears the same ratio to such beginning Gross Asset Value
as the federal  income tax  depreciation,  amortization  or other cost  recovery
deduction  for such year or other  period bears to such  beginning  adjusted tax
basis; provided, however, that if such depreciation,  amortization or other cost
recovery  deductions  with  respect  to any such  asset for  federal  income tax
purposes is zero for any Fiscal  Year,  Depreciation  shall be  determined  with
reference to the asset's  Gross Asset Value at the  beginning of such year using
any reasonable method selected by the Manager.

          "GROSS ASSET  VALUE"  means,  with  respect to any asset,  the asset's
adjusted basis for federal income tax purposes, except as follows:

               (a)  The  initial  Gross  Asset  Value for any asset  (other than
money)  contributed  by a Member to the Company  shall be as  determined  by the
Manager and the contributing Member;

               (b)  The  Gross  Asset  Value  of all  Company  assets  shall  be
adjusted to equal their  respective  gross fair market values,  as determined by
the Manager as of the following  times:  (i) the acquisition of additional Units
in the  Company by any new or  existing  Member in  exchange  for more than a de
minimis Capital  Contribution;  (ii) the distribution by the Company to a Member
of more than a de minimis amount of cash or property as consideration  for Units
in the  Company,  if (in  any  such  event)  such  adjustment  is  necessary  or
appropriate,  in the reasonable judgment of the Manager, to reflect the relative
economic  interests of the Members in the Company;  or (iii) the  liquidation of
the Company for federal  income tax  purposes  pursuant to  Regulations  Section
1.704-1(b)(2)(ii)(G);

                                       A-2
<PAGE>
               (c)  The Gross Asset Value of any Company  asset  distributed  to
any Member shall be adjusted to equal its gross fair market value on the date of
distribution;

               (d)  The  Gross  Asset  Value of the  Company's  assets  shall be
increased (or  decreased) to reflect any  adjustments  to the adjusted  basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b),  but only to
the extent that such  adjustments are taken into account in determining  Capital
Accounts pursuant to Regulation Section  1.704-1(b)(2)(iv)(M) and Section A.2(g)
hereof;  provided,  however,  that  Gross  Asset  Values  shall not be  adjusted
pursuant to this  subsection  (d) to the extent that an  adjustment  pursuant to
subsection (b) of this definition is necessary or appropriate in connection with
a transaction  that would  otherwise  result in an  adjustment  pursuant to this
subsection (d); and

               (e)  If the Gross Asset Value of an asset has been  determined or
adjusted  pursuant to subsection  (a), (b) or (d) above,  such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account from time to
time with respect to such asset for purposes of computing Profits and Losses.

          "MEMBER  NONRECOURSE  DEBT" has the same meaning as the term  "partner
nonrecourse debt" under Section 1.704-2(b)(4) of the Regulations.

          "MEMBER  NONRECOURSE  DEBT  MINIMUM  GAIN" has the same meaning as the
term "partner nonrecourse debt minimum gain" under Section  1.704-2(i)(2) of the
Regulations and shall be determined in accordance with Section  1.704-2(i)(3) of
the Regulations.

          "MEMBER  NONRECOURSE  DEDUCTIONS"  has the  same  meaning  as the term
"partner nonrecourse  deductions" under Regulations Section  1.704-2(i)(1).  The
amount of Member  Nonrecourse  Deductions  with respect to a Member  Nonrecourse
Debt for each Fiscal  Year of the Company  equals the excess (if any) of the net
increase  (if  any) in the  amount  of  Member  Nonrecourse  Debt  Minimum  Gain
attributable  to such Member  Nonrecourse  Debt during such Fiscal Year over the
aggregate amount of any distributions during such Fiscal Year to the Member that
bears the economic risk of loss for such Member  Nonrecourse  Debt to the extent
that such  distributions  are from the proceeds of such Member  Nonrecourse Debt
which are  allocable  to an increase in Member  Nonrecourse  Debt  Minimum  Gain
attributable  to such Member  Nonrecourse  Debt,  determined in accordance  with
Section 1.704-2(i)(2) of the Regulations.

          "NONRECOURSE DEBT" or "NONRECOURSE  LIABILITY" has the same meaning as
the term "nonrecourse liability" under Section 1.704-2(b)(3) of the Regulations.

          "NONRECOURSE   DEDUCTIONS"  has  the  meaning  set  forth  in  Section
1.704-2(b)(1)  of the  Regulations.  The amount of Nonrecourse  Deductions for a
Company  Fiscal Year equals the excess (if any) of the net  increase (if any) in
the amount of Company  Minimum  Gain during that Fiscal Year over the  aggregate
amount of any distributions during that Fiscal Year of proceeds of a Nonrecourse
Debt that are  allocable  to an increase  in Company  Minimum  Gain,  determined
according to the provisions of Section 1.704-2(c) of the Regulations.

                                       A-3
<PAGE>
          "PROFITS" or "LOSSES" means, for each Fiscal Year or other period, the
taxable  income or taxable loss of the Company as determined  under Code Section
703(a)  (including  in such taxable  income or taxable loss all items of income,
gain,  loss or deduction  required to be stated  separately  pursuant to Section
703(a)(1) of the Code) with the following adjustments:

               (a)  All  items  of gain  or  loss  resulting  from  any  Capital
Transaction  shall be determined upon the basis of the Gross Asset Value of such
property rather than the adjusted tax basis thereof;

               (b)  Any income of the Company that is exempt from federal income
tax shall be added to such taxable income or loss;

               (c)  Any  expenditures  of the Company that are described in Code
Section  705(a)(2)(B),  or  treated  as such  pursuant  to  Regulations  Section
1.704-1(b)(2)(iv)(I),  and that are not  otherwise  taken  into  account  in the
computation of taxable  income or loss of the Company,  shall be deducted in the
determination of Profits or Losses;

               (d)  If the Gross Asset  Value of any  Company  asset is adjusted
pursuant to subsection  (b) or (c) of the  definition of "Gross Asset Value" set
forth in this  Appendix  A, the  amount of such  adjustment  shall be taken into
account  as gain or loss from the  disposition  of such  asset for  purposes  of
computing  Profits or Losses  unless  such gain or loss is  specially  allocated
pursuant to Section A.2 hereof;

               (e)  In lieu of the  depreciation,  amortization,  and other cost
recovery  deductions  taken into account in  determining  such taxable income or
loss,  there shall be deducted  Depreciation,  computed in  accordance  with the
definition of such term in this Appendix A; and

               (f)  Notwithstanding any of the foregoing  provisions,  any items
that are specially  allocated pursuant to Section A.2 or A.3 hereof shall not be
taken into account in computing Profits or Losses.

     A.2  SPECIAL  ALLOCATIONS.  The  allocation  of Profits and Losses for each
Fiscal Year shall be subject to the following  special  allocations in the order
set forth below:

               (a)  COMPANY MINIMUM GAIN CHARGEBACK.  If there is a net decrease
in Company  Minimum  Gain for any Fiscal  Year,  each Member  shall be specially
allocated  items of  income  and gain for such  year  (and,  if  necessary,  for
subsequent  years) in an amount equal to such Member's share of the net decrease
in  Company  Minimum  Gain  during  such year,  determined  in  accordance  with
Regulations  Section  1.704-2(g)(2).   Allocations  pursuant  to  the  preceding
sentence shall be made among the Members in proportion to the respective amounts
required to be allocated to each of them pursuant to such Regulation.  The items
to be so allocated  shall be determined in accordance with  Regulations  Section
1.704-2(f)(6).  Any  special  allocation  of items of  Company  income  and gain
pursuant to this  Section  A.2(a) shall be made before any other  allocation  of
items under this Appendix A. This Section  A.2(a) is intended to comply with the
"minimum gain  chargeback"  requirement  in Regulations  Section  1.704-2(f) and
shall be interpreted consistently therewith.

                                       A-4
<PAGE>
               (b)  MEMBER NONRECOURSE DEBT MINIMUM GAIN CHARGEBACK. If there is
a net decrease during a Fiscal Year in the Member  Nonrecourse Debt Minimum Gain
attributable to a Member  Nonrecourse Debt, then each Member with a share of the
Member  Nonrecourse Debt Minimum Gain  attributable to such debt,  determined in
accordance with Regulations Section 1.704-2(i)(5),  shall be specially allocated
items of income and gain for such year (and, if necessary,  subsequent years) an
amount  equal  to  such  Member's  share  of the  net  decrease  in  the  Member
Nonrecourse  Debt Minimum Gain  attributable  to such Member  Nonrecourse  Debt,
determined in accordance with  Regulations  Section  1.704-2(i)(4).  Allocations
pursuant to the preceding sentence shall be made among the Members in proportion
to the  respective  amounts to be  allocated  to each of them  pursuant  to such
Regulation.  Any special allocation of items of income and gain pursuant to this
Section  A.2(b) for a Fiscal Year shall be made before any other  allocation  of
Company  items  under this  Appendix  A,  except  only for  special  allocations
required  under Section  A.2(a)  hereof.  The items to be so allocated  shall be
determined in accordance with Regulations  Section  1.704-2(i)(4).  This Section
A.2(b)  is  intended  to  comply  with the  provisions  of  Regulations  Section
1.704-2(i)(4) and shall be interpreted consistently therewith.

               (c)  QUALIFIED   INCOME  OFFSET.   If  any  Member  receives  any
adjustments,  allocations, or distributions described in clauses (4), (5) or (6)
of Regulations Section  1.704-1(b)(2)(ii)(D),  items of income and gain shall be
specially  allocated to each such Member in an amount and manner  sufficient  to
eliminate as quickly as possible, to the extent required by such Regulation, any
deficit in such Member's  Adjusted Capital Account  Balance,  such balance to be
determined after all other  allocations  provided for under this Appendix A have
been tentatively made as if this Section A.2(c) were not in this Agreement.

               (d)  GROSS  INCOME  ALLOCATION.  In the  event any  Member  has a
deficit  Capital Account at the end of any Fiscal Year which is in excess of the
sum of (i) the amount (if any) such Member is obligated  to restore  pursuant to
any provision of this Agreement, and (ii) the amount such Member is deemed to be
obligated  to  restore  pursuant  to  the  penultimate   sentences  of  Sections
1.704-2(g)(1)  and  1.704-2(i)(5) of the Regulations,  each such Member shall be
specially  allocated  items of income and gain in the  amount of such  excess as
quickly as possible, provided that an allocation pursuant to this Section A.2(d)
shall be made only if and to the extent  that such  Member  would have a deficit
Capital Account in excess of such sum after all other  allocations  provided for
in this  Appendix A have been made as if Section  A.2(c) hereof and this Section
A.2(d) were not in the Agreement.

               (e)  NONRECOURSE  DEDUCTIONS.   Nonrecourse  Deductions  for  any
Fiscal  Year or other  period  shall be  specially  allocated  to the Members in
accordance with their Percentage Interests.

               (f)  MEMBER NONRECOURSE DEDUCTIONS. Member Nonrecourse Deductions
for any Fiscal Year or other period shall be specially allocated,  in accordance
with Regulations  Section  1.704-2(i)(1),  to the Member or Members who bear the
economic risk of loss for the Member  Nonrecourse  Debt to which such deductions
are attributable.

               (g)  CODE SECTION 754 ADJUSTMENTS. To the extent an adjustment to
the adjusted tax basis of any Company asset under Code Section  734(b) or 743(b)
is required to be taken into account in determining Capital Accounts pursuant to
Regulations Section  1.704-1(b)(2)(iv)(M),  the amount of such adjustment to the

                                       A-5
<PAGE>
Capital  Accounts  shall  be  treated  as an  item of  gain  (if the  adjustment
increases  the basis of the  asset) or loss (if the  adjustment  decreases  such
basis),  and such gain or loss shall be specially  allocated to the Members in a
manner  consistent with the manner in which their Capital  Accounts are required
to be adjusted pursuant to such section of the Regulations.

               (h)  SYNDICATION EXPENSES. Any syndication expenses which must be
deducted  from  each  Member's  Capital  Account  in  accordance  with  Treasury
Regulation section  1.704-1(b)(2)(iv)(i)(2)  in the year paid shall be allocated
pro rata to the  Members  based on their  Percentage  Interest.  If Members  are
admitted to the Company on different  dates,  all syndication  expenses shall be
divided among the Members from time to time so that, to the extent possible, the
cumulative  syndication  expenses allocated pursuant to this Section A.3(h) with
respect  to each  Unit is the  same  amount.  In the  event  the  Manager  shall
determine  that  such  result  is  not  likely  to be  achieved  through  future
allocations  of  syndication  expenses,  the Manager  may  allocate a portion of
Profits or Losses so as to achieve the same  effect on the  Capital  Accounts of
the Members, notwithstanding any other provision of this Agreement.

     A.3  CURATIVE  ALLOCATIONS.  The  allocations  set forth in subsections (a)
through (h) of Section A.2 hereof  ("Regulatory  Allocations")  are  intended to
comply with certain requirements of Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding  any  other  provisions  of this  Appendix  A  (other  than  the
Regulatory Allocations and the next two (2) following sentences), the Regulatory
Allocations shall be taken into account in allocating other Profits,  Losses and
items of income,  gain,  loss and  deduction  among the Members so that,  to the
extent possible, the net amount of such allocations of other Profits, Losses and
other items and the Regulatory  Allocations to each Member shall be equal to the
net amount that would have been  allocated to each such Member if the Regulatory
Allocations had not occurred.  For purposes of applying the preceding  sentence,
Regulatory   Allocations  of  Nonrecourse   Deductions  and  Member  Nonrecourse
Deductions shall be offset by subsequent allocations of items of income and gain
pursuant to this Section A.3 only if (and to the extent)  that:  (a) the Manager
reasonably  determines  that such  Regulatory  Allocations  are not likely to be
offset by subsequent  allocations under Section A.2(a) or Section A.2(b) hereof,
and (b) there has been a net  decrease in Company  Minimum  Gain (in the case of
allocations to offset prior Nonrecourse  Deductions) or a net decrease in Member
Nonrecourse Debt Minimum Gain attributable to a Member  Nonrecourse Debt (in the
case of allocations to offset prior Member Nonrecourse Deductions).  The Manager
shall apply the provisions of this Section A.3, and shall divide the allocations
hereunder  among the  Members,  in such  manner as will  minimize  the  economic
distortions  upon the  distributions  to the Members that might otherwise result
from the Regulatory Allocations.

     A.4  GENERAL ALLOCATION RULES.

               (a)  For purposes of determining the Profits, Losses or any other
items allocable to any period, Profits, Losses and any such other items shall be
determined  on a daily,  monthly or other basis,  as  determined  by the Manager
using  any  method  permissible  under  Code  Section  706 and  the  Regulations
thereunder.

               (b)  For  purposes  of  determining  the  Members'  proportionate
shares of the "excess nonrecourse liabilities" of the Company within the meaning
of  Regulations  Section  1.752-3(a)(3),  their  respective  interests in Member
profits shall be in the same proportions as their Percentage Interests.

                                       A-6
<PAGE>
     A.5  RECHARACTERIZATION  OF  FEES OR  DISTRIBUTIONS.  In the  event  that a
guaranteed payment to a Member is ultimately  recharacterized  (as the result of
an audit of the Company's  return or otherwise)  as a  distribution  for federal
income  tax  purposes,  and  if  such   recharacterization  has  the  effect  of
disallowing  a deduction  or  reducing  the  adjusted  basis of any asset of the
Company,  then an amount of Company gross income equal to such  disallowance  or
reduction shall be allocated to the recipient of such payment. In the event that
a distribution  to a Member is ultimately  recharacterized  (as the result of an
audit of the Company's return or otherwise) as a guaranteed  payment for federal
income  tax  purposes,  and if  any  such  recharacterization  gives  rise  to a
deduction,   such  deduction   shall  be  allocated  to  the  recipient  of  the
distribution.

     A.6  RECAPTURE OF DEDUCTIONS AND CREDITS.  If any "recapture" of deductions
or credits previously claimed by the Company is required under the Code upon the
sale or other taxable  disposition  of any Company  Property,  those  recaptured
deductions or credits shall,  to the extent  possible,  be allocated to Members,
pro rata in the same manner that the  deductions  and credits giving rise to the
recapture  items  were  allocated  using  the  "first-in,  first-out"  method of
accounting;  provided,  however,  that this  Section  A.6 shall only  affect the
characterization of income allocated among the Members for tax purposes.

                                       A-7
<PAGE>
                                    EXHIBIT A

                                LEGAL DESCRIPTION
                                       OF
                                COMPANY PROPERTY
<PAGE>
                                    EXHIBIT B

                  SCHEDULE OF MEMBERS AND CAPITAL CONTRIBUTIONS

                                 INITIAL MEMBERS

<TABLE>
<CAPTION>
                                                                                        NET VALUE OF
                                                                                          PROPERTY
      MEMBER NAME & ADDRESS               PROPERTY CONTRIBUTED            CONTRIBUTED      UNITS
      ---------------------               --------------------            -----------      -----
<S>                                 <C>                                   <C>               <C>
Stratford American Corporation      80% undivided tenancy in common       $750,000.00       8,000
2400 E. Arizona Biltmore Circle     interest in the Company Property,
Building 2, Suite 1270              having a gross value of $20,000,000
Phoenix, AZ 85016

Golden Gate Apartments, Ltd, LP     13% undivided tenancy in common       $121,875.00       1,300
2200 E. River Road, #115            interest in the Company Property,
Tucson, AZ 85718                    having a gross value of $3,250,000

Auriga Properties, Inc.             3% undivided tenancy in common        $ 28,125.00         300
2200 E. River Road, #115            interest in the Company Property,
Tucson, AZ 85718                    having a gross value of $750,000

Donald R. Diamond, as Family        4% undivided tenancy in common        $ 37,500.00         400
Trustee of The DRD-97 Trust under   interest in the Company Property,
Agreement dated August 8, 1997      having a gross value of $1,000,000
2200 E. River Road, #115
Tucson, AZ 85718
</TABLE>Exhibit 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:

                                       1
<PAGE>
     "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."

          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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