SECURITY AGREEMENT

This Security Agreement is made on 8-1-04, between AmeriChip Tool and Abrasives,
LLC, a wholly owned subsidiary of AmeriChip International, Inc. of Detroit,
Michigan ("Debtor"), and National Abrasive Systems, Co., a Michigan Corporation
of Detroit, Michigan ("Secured Party").

1.    Grant of Security Interest. Debtor grants to Secured Party a continuing
security interest in all items listed in Attachment "A".

2.    Indebtedness Secured. The foregoing security interest is given to
secure payment and performance of all indebtedness and obligations of Debtor to
Secured Party under this Agreement and the indebtedness and obligations owing to
Secured Party by Debtor pursuant to a Promissory Note of even date, including
any and all modifications, extensions, and renewals.
      The indebtedness and obligations that are secured by this security
interest are collectively called the "indebtedness."

3.    Warranties, Representatives, and Agreements. Debtor warrants and
represents to Secured party, and agrees, as follows:
      (a) Debtor is a limited liability company and is organized and is in good
      standing under the laws of the state of Michigan; Debtor has full power
      and authority to enter into and perform its obligations under this
      agreement; the execution, delivery, and performance of this agreement have
      been duly authorized by all necessary action of Debtor's members and
      managers and will not violate Debtor's articles of organization or
      operating agreement; this agreement is the valid and binding obligation of
      Debtor, enforceable in accordance with its terms.
      (b) All information that Debtor has furnished or in the future furnishes
      to Secured Party concerning Debtor or the Collateral, including without
      limitation, all financial statements and all information concerning the
      condition, quality or value of the Collateral, is and will be correct and
      complete.
      (c) Debtor's exact legal name is set forth in the first paragraph of this
      Agreement.
      (d) Debtor is the owner of the collateral, and none of the collateral is
      subject to any lien, security interest, encumbrance, or claim in favor of
      any third party, and no financing statement is on file in any public
      office covering any of the collateral.

4. Agreements of Debtor. Debtor agrees that:
      (a) Debtor will not cause or permit any lien, security interest or
      encumbrance to be placed on any collateral, except in favor of Secured
      Party and Debtor will not sell, assign, or transfer any collateral or
      permit any collateral to be transferred by operation of law.
      (b) Debtor will maintain all records concerning the collateral at Debtor's
      address appearing on the first page of this agreement and will keep all
      collateral at the present location or locations of the collateral.
      (c) Debtor will furnish Secured Party with the information regarding the
      collateral that Secured Party shall from time to time request and will
      allow Secured Party at any reasonable time to inspect the collateral and
      Debtor's records regarding the collateral.
      (d) Debtor will execute, file, record, or procure from third persons the
      financing statements, subordination agreements, and other documents and
      take all other action that Secured party necessary to perfect, to continue
      perfection of, or to maintain first priority of Secured Party's security
      interest in the collateral.

<PAGE>

      (e) Secured Party may file a photography of this agreement as a financing
      statement evidencing Secured Party's security interest in the collateral.
      (f) Debtor will immediately notify Secured Party in writing of any change
      in Debtor's business structure, and of any change in the location of
      Debtor's place of business and of the location of each additional place of
      business established by Debtor.
      (g) Debtor will indemnify Secured Party with respect to all losses,
      damages, liabilities, and expenses (including attorney fees) incurred by
      Secured Party by reason of any failure of Debtor to comply with any of
      Debtor's obligations under this agreement or by reason of any warranty or
      representation made by Debtor to Secured Party in this agreement being
      false in any material respect.
      (h) Debtor will maintain all collateral in good condition and repair and
      maintain fire and extended coverage insurance covering all tangible
      collateral in the amounts and against the risks that are customarily
      maintained by similar businesses, or as Secured Party may reasonably
      request. Each insurance policy will contain a standard lender's loss
      payable endorsement and will provide that its proceeds will be payable to
      Secured Party to the extent of Secured Party's interest in the collateral
      and that the policy will not be canceled, and the coverage will not be
      reduced, without at least 10 days' prior written notice by the insurer to
      Secured Party and will be in the form and substance satisfactory to
      Secured Party. Debtor will provide Secured Party with evidence of the
      insurance coverage. On Secured Party's request, Debtor will deliver to
      Secured Party all policies providing for such insurance.
      (i) Debtor will pay, before they become delinquent, all taxes and
      assessments upon the collateral or for its use or operation.

5. Secured Party's Right to Perform. If Debtor fails to perform any obligation
of Debtor under this agreement, Secured Party may, without giving notice to or
obtaining the consent of Debtor, perform that obligation on behalf of Debtor.
For example, this may include obtaining insurance coverage for collateral or for
paying off liens on collateral. Debtor will reimburse Secured Party on demand
for any expense that Secured Party incurs in performing any such obligation.

      Secured Party is not required to perform an obligation that Debtor has
failed to perform. If Secured Party does so, that will not be a waiver of
Secured Party's right to declare the indebtedness immediately due and payable by
reason of Debtor's failure to perform.

6. Events of Default and Acceleration. Any part or all of the indebtedness
shall, at the option of Secured Party, become immediately due and payable
without notice or demand upon the occurrence of any of the following events of
default:
      (a) If default occurs in the payment or performance of any of the
      indebtedness, when and as it shall be due and payable, and if the default
      continues for 15 days after Secured Party has given written notice of it
      to Debtor.
      (b) If default occurs in the performance of any obligation of Debtor to
      Secured Party under this agreement or under the promissory note evidencing
      the indebtedness or under any other security agreement, loan agreement or
      other agreement that now or later secures or relates to any indebtedness
      or obligation now or later owing by Debtor to Secured Party or that
      secures any such indebtedness or obligation ("security documents") and if,
      in the case of a default that is capable of being cured, the default
      continues for 15 days after Secured Party has given written notice of it
      to Debtor.
      (c) If any attachment, garnishment, levy, execution, or other legal
      process is at any time issued against or placed upon any of the
      collateral.

<PAGE>

      (d) If all or any material part of any tangible collateral is destroyed or
      materially damaged by fire or other casualty, whether or not there is
      insurance coverage for the damage or destruction.

7. Secured Party's Rights and Remedies. Secured Party shall have all rights and
remedies of a secured party under applicable laws. Without limiting these rights
and remedies;

      (a) If all or any part of the indebtedness is not paid at maturity, then
      Debtor, upon demand by Secured party, shall deliver the collateral and
      proceeds of collateral to Secured Party as such place as Secured Party
      shall designate, and Secured Party may dispose of the collateral in any
      commercially reasonable manner. Any notification required to be given by
      Secured Party to Debtor regarding any sale or other disposition of
      collateral shall be considered reasonable if mailed at least ten days
      before the sale or other disposition. In connection with any disposition
      of collateral, Secured Party may comply with the requirements of any
      applicable state or federal law or regulation, and such compliance shall
      not cause the disposition to not be commercially reasonable.
      (b) The proceeds of any collection or disposition of collateral shall be
      applied first to expenses that Secured Party incurs in retaking, holding,
      preparing for disposition, processing and disposing of the Collateral and
      to Secured Party's attorney fees and expenses, as provided in pararaph 8,
      and then to the indebtedness, and Debtor shall be liable for any
      deficiency remaining. Secured Party has no obligatioin to prepare or
      process any Collateral for sale or other disposition. If Secured Party
      sells any of the collateral on credit, then Debtor will be credited only
      with payments that are actually made by the purchase, received by Secured
      Party and applied to the unpaid balance of the purchase price of the
      collateral. If the purchaser fails to pay for the collateral, then Secured
      Party may again dispose of the collateral and apply the proceeds in
      accordance with this paragraph.
            All rights and remedies of Secured Party shall be cumulative and may
      be exercised from time to time.

8.    Expenses. Debtor shall reimburse Secured Party on demand for all
attorney fees, legal expenses, and other expenses that Secured Party incurs in
protecting and enforcing its rights under this agreement. This includes fees and
expenses incurred in trying to take possession of collateral from Debtor, a
trustee or receiver in bankruptcy, or any other person. Secured Party may apply
any proceeds of collection or disposition of collateral to Secured Party's
reasonable attorney fees, legal expenses, and other expenses.

9.    Amendments and Waivers. No provision of this agreement may be modified
or waived except by a written agreement signed by Secured Party. Secured Party
will continue to have all of its rights under this agreement even if it does not
fully and promptly exercise them on all occasions. Debtor waives all defenses
based on suretyship or impairment of Collateral. Without limiting the generality
of the preceding sentence, (i) Secured Party may, at its option, (a) waive any
default, or defer an action on any default; (b) extend or modify the time or
manner of payment of the indebtedness or waive or modify any term or condition
relating to the indebtedness; (c) release collateral or other security for the
indebtedness; (d) make advances or other extensions of credit secured by this
agreement; all without giving Debtor notice or obtaining Debtor's consent; (ii)
any such action by Secured Party will not release or impair its security
interest in the collateral or Debtor's obligations under this agreement; (iii)
Secured Party's security interest in the collateral and Debtor's obligations
under this agreement will not be released or impaired if Secured Party fails to
obtain, perfect, or secure priority of any other security for the indebtedness
that is agreed to be given, or is given, by anyone else; and (iv)

<PAGE>

Secured Party is not required to sue upon or otherwise enforce payment of the
indebtedness or any other security before exercising its rights under this
agreement.

10.    Notices. Any notice to Debtor or to Secured Party shall be deemed to be
given if and when mailed, with postage prepaid, to the respective address of
Debtor or Secured Party appearing on the first page of this agreement, or if and
when delivered personally.

11.    Other. In this agreement, maturity of any of the indebtedness means the
time when that indetedness has become due and payable, for any reason
(including, for example, acceleration due to default or bankruptcy).

12.   Binding Effect. This agreement shall be binding upon and inure to the
benefit of Debtor and Secured Party and their respective successors, and
assigns.

      Debtor and Secured Party have executed this Security Agreement on the date
listed on the first page of this agreement.

                              DEBTOR

                              AmeriChip Tool and Abrasives, LLC, a wholly
                              owned subsidiary of AmeriChip International, Inc.

                              /s/ Edward D. Rutkowski
                              ---------------------------------------
                              by: Edward D. Rutkowski, Vice President
                                  AmeriChip International, Inc.


                              SECURED PARTY

                              National Abrasive Systems, Co.,
                              a Michigan Corporation

                              By: /s/ Marc A. Walther
                              ---------------------------------------
                              Marc A. Walther
                              Its: President