This Pledge Agreement ("Agreement") dated as of January 28, 2002 (the "Effective Date"), is made by Amir Khiabani, Neil P. DeGuire, Clarence Dyksterhuis, Mitchell R. Johnson, Colin D. Burrows, Steve A. Rodrigues, and Brian A. Bevis ("Pledgors"), in favor of SGI International, a Utah corporation ("Secured Party").

Pledgors are purchasing all of the outstanding common stock of Assembly and Manufacturing Systems ("AMS") from SGI International and are entering into this Agreement to secure their obligations under individual notes (the "Notes") being executed by each for that purchase.

        NOW THEREFORE, in consideration of the covenants and conditions of this Agreement the parties do hereby agree as follows:

Section 1.    Definitions. The terms "security," "instrument," "document," and "proceeds" shall have the meanings specified by Article 9 of the UCC. All accounting terms used herein shall be construed in accordance with United States generally accepted accounting principles as in effect on the applicable date of determination. As used herein, the following terms shall have the following meanings:

"Event of Default" means any failure of the Pledgors or any of them to pay when due (taking into account any cure periods) under the Notes any amounts constituting Secured Obligations or any breach of this Agreement (taking into account any cure periods) or the failure of AMS to make payment of its obligations to California Bank & Trust when due and the consequent requirement or payment by the Kerr Foundation to pay under its guarantee to California Bank & Trust.

"Pledged Securities" means all of the shares of stock of AMS, together with all dividends, instruments, and other proceeds from time to time received or otherwise distributed in respect of the foregoing, including stock rights, options, rights to subscribe, dividends, liquidating dividends, stock dividends, new securities, or other properties or benefits to which the Pledgors may become entitled to receive on account of such property.

"Proceeds" means all present and future proceeds of the Pledged Securities, whether arising from the collection, sale, exchange, assignment, or other disposition of any Pledged Securities, the realization upon any Pledged Securities, or any other transaction or occurrence, including all claims of Pledgors against third parties for impairment, loss, or damage to any Pledged Securities, all proceeds payable under any put, call, hedge, or other protection for the value of any Pledged Securities, and all rights under any indemnity, warranty, or guaranty of or for any of the foregoing, whether such proceeds are represented as money, accounts, securities, instruments, documents, or chattel paper.

"Secured Obligations" means all amounts owed to SGI under the Notes or any of them now or hereafter owed by the Pledgors to the Secured Party, and any increases, extensions, renewals, replacements, and rearrangements of the foregoing obligations under any amendments, supplements, and other modifications of this Agreement or the Notes, including any increases, extensions, renewals, replacements, and rearrangements of the foregoing obligations.

Section 2.    Security Interest.

Grant of Security Interest. The Pledgors hereby grant to the Secured Party a security interest in all of the Pledgor's right, title, and interest in and to the Pledged Securities to secure Pledgors payment of the Notes.

Pledgors Remain Liable. Anything herein to the contrary notwithstanding: (a) the Pledgors shall remain liable under the Notes as if this Agreement had not been executed; (b) the exercise by Secured Party of any rights hereunder shall not release any of the Pledgors from any obligations under any of the Notes; and (c) Secured Party shall not have any obligation under the Notes other than as described in the Notes.
 

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