Document:

<PAGE>
                                                                   EXHIBIT 10.13
Recording Requested by and:
When Recorded Return to:

Thompson & Knight LLP
1700 Pacific, Suite 3300
Dallas, TX 75201
Attention: Craig B. Anderson

                             MODIFICATION AGREEMENT
                           (SECOND AMENDMENT TO LEASE)

        This MODIFICATION AGREEMENT (this "AGREEMENT") is made as of February 8,
2000, by BNP LEASING CORPORATION, a Delaware corporation ("BNP"), and
ELECTROGLAS, INC., a Delaware corporation ("ELECTROGLAS")

                                 R E C I T A L S

        A. BNP and Electroglas executed a Lease Agreement dated as of March 31,
1997 (as subsequently amended, the "LEASE"), which was amended and supplemented
by a Construction Funding Agreement (First Amendment to Lease Agreement) dated
July 1, 1998 (the "FIRST LEASE AMENDMENT"), and which Lease covered, among other
things, the real property described therein. A Short Form of Lease dated March
31, 1997 was recorded as Document No. 13654978 in the Official Records of Santa
Clara County, California (the "MEMORANDUM OF LEASE"). (The real property
described in Exhibit A to the Lease, save and except any portion thereof no
longer covered by the Lease, and any and all other real or personal property
from time to time covered by the Lease and included within the "Property" as
defined therein are hereinafter collectively referred to as the "PROPERTY".)

        B. BNP and Electroglas executed a Purchase Agreement dated as of March
31, 1997 (as subsequently amended, the "PURCHASE AGREEMENT"), which Lease
covered, among other things, the Property. A Memorandum of Purchase Agreement
dated March 31, 1997 was recorded as Document No. 13654979 in the Official
Records of Santa Clara County, California (the "MEMORANDUM OF PURCHASE
AGREEMENT").

        C. In connection with the construction of the Construction Projects,
Electroglas has requested that a portion of the Land, consisting of
approximately 4,766 square feet as described in Exhibit A (the "RELEASED
PARCEL"), be released from the terms and conditions of the Lease and be conveyed
by BNP to the Redevelopment Agency of the City of San Jose ("BUYER"), pursuant
to the terms of the Purchase and Sale Agreement and Escrow Instructions dated
January 10, 2000 between BNP and Buyer (the "PURCHASE AND SALE AGREEMENT").

        D. BNP and Electroglas now desire to modify the Lease, on and subject to
the terms and conditions set forth below.

        NOW, THEREFORE, in consideration of the above recitals and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

1.      Definitions. Capitalized terms used in this Agreement and not otherwise
        defined herein shall have the meanings given to them in the original
        Lease and previous amendments thereto.

<PAGE>

2.      Modifications.

        a.     The definition of "Land" as defined in the Lease, the Memorandum
               of Lease, and Memorandum of Purchase Agreement is amended to
               refer to the Land as described in the original Lease, the
               Memorandum of Lease, and Memorandum of Purchase Agreement save
               and except the Released Parcel.

        b.     The definition of each of "Property" and "Real Property" as
               defined in the Lease, the Memorandum of Lease, and Memorandum of
               Purchase Agreement as it relates to the Land is amended to
               exclude the Released Parcel.

        c.     All references to the Land or the Real Property in the Purchase
               Agreement, the Pledge Agreement, and the Construction Funding
               Agreement and all documents executed in connection therewith
               (including the Memorandum of Lease and Memorandum of Purchase
               Agreement) are modified accordingly to exclude the Released
               Parcel.

3.      Proceeds from the Sale of the Released Parcel. All proceeds received by
        BNP from the sale of the Released Parcel pursuant to the Purchase and
        Sale Agreement shall be treated as Qualified Payments under the Lease.

4.      Execution of Purchase and Sale Agreement. Contemporaneously with the
        execution of this Agreement, BNP is executing the Purchase and Sale
        Agreement at the request of Electroglas, and in connection therewith
        Electroglas represents and warrants that BNP may lawfully convey the
        Released Parcel to the Buyer and may thereafter convey the remainder of
        the Property to another party, all without violating any platting or
        subdivision ordinance, regulation or other law applicable to the
        Property. Without limiting the foregoing, Electroglas confirms its
        indemnification obligations to BNP as provided in Sections 5.(d) and
        7.(a) of the Lease, as they relate to the sale of the Released Parcel
        and the performance of BNP's obligations, representations and warranties
        pursuant to the terms of the Purchase and Sale Agreement.

5.      Ratification. The Lease, as amended by this Agreement, is hereby
        ratified and confirmed in all respects.

6.      Entire Agreement. This Agreement and the documents and agreements
        referred to herein set forth the entire agreement between the parties
        concerning the subject matter hereof and no amendment or modification of
        this Agreement shall be binding or valid unless expressed in a writing
        executed by both parties hereto.

7.      Successors and Assigns. All of the covenants, agreements, terms and
        conditions to be observed and performed by the parties hereto shall be
        applicable to and binding upon their respective heirs, personal
        representatives, successors and, to the extent assignment is permitted
        under the Lease, their respective assigns.

8.      Further Modifications. From and after the date of this Agreement, in all
        documents related to this transaction references to the "Lease",
        "Purchase Agreement", "Pledge Agreement", or the "Construction Funding
        Agreement" are intended to mean the Lease, Purchase Agreement, Pledge
        Agreement, or Construction Funding Agreement, as the case may be, as
        amended hereby. In

                                       2
<PAGE>

        addition, all documents related to this transaction using capitalized
        terms, the definitions of which terms are modified hereby, shall be
        deemed amended hereby to incorporate the same modifications to such
        capitalized terms.

9.      Execution in Counterparts. To facilitate execution, this Agreement may
        be executed in as many identical counterparts as may be required. It
        shall not be necessary that the signature of, or on behalf of, each
        party, or that the signature of all persons required to bind any party,
        appear on each counterpart. All counterparts, taken together, shall
        collectively constitute a single instrument. It shall not be necessary
        in making proof of this Agreement to produce or account for more than a
        single counterpart containing the respective signatures of, or on behalf
        of, each of the parties hereto. Any signature page to any counterpart
        may be detached from such counterpart without impairing the legal effect
        of the signatures thereon and thereafter attached to another counterpart
        identical thereto except having attached to it additional signature
        pages.

10.     Recitals. The recitals contained herein are incorporated by this
        reference.

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

                                     BNP LEASING CORPORATION,
                                     a Delaware corporation

                                     By: /s/ David C. Schad
                                         -------------------------------------
                                           David C. Schad, President

                                     ELECTROGLAS, INC., a Delaware corporation

                                     By: /s/ A Stegall
                                         -------------------------------------
                                           Armand Stegall, Chief Financial
                                           Officer and Vice President of
                                           Finance

                                       3
<PAGE>

                      CONSENT AND AGREEMENT OF PARTICIPANT

          The undersigned Participant hereby consents to the execution and
delivery of this Agreement and the modifications and amendments provided
therein. Participant hereby ratifies and confirms in all respects the
Participation Agreement, and agrees that its obligations and covenants
thereunder shall continue in full force and effect.

                                      BANQUE NATIONALE DE PARIS

                                      By: /s/ Gavin S. Holles
                                         -------------------------------------
                                            Gavin S. Holles, Vice President

                                      By: /s/ Stuart Darby
                                         -------------------------------------
                                            Stuart Darby, Assistant Vice
                                            President

                                       4
<PAGE>

STATE OF TEXAS                  )
                                )
COUNTY OF DALLAS                )

On February 14, 2000, before me, Kathryn Hackett, personally appeared David C.
Schad, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his authorized capacity, and
that by his signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.

WITNESS my hand and official seal.

Signature /s/ Kathryn Hackett

[Notary Seal affixed here]

                                       5
<PAGE>

STATE OF CALIFORNIA                      )
                                         )SS
COUNTY OF Santa Clara                    )

On February 10, 2000, before me, Avaline Dolores Squier, a Notary Public in and
for said state, personally appeared A. Stegall, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

Signature /s/ Avaline Dolores Squier

[Notary Seal affixed here]

                                       6
<PAGE>

STATE OF CALIFORNIA                     )
                                        )
COUNTY OF San Francisco                 )

On February 17th, 2000, before me, Andrew Albright, personally appeared Gavin
S. Holles and Stuart Darby, (or proved to me on the basis of satisfactory
evidence) to be the persons whose names are subscribed to the within instrument
and acknowledged to me that they executed the same in their authorized capacity,
and that by their signature on the instrument the persons, or the entity upon
behalf of which the persons acted, executed the instrument.

WITNESS my hand and official seal.

Signature /s/ Andrew F. Albright

[Notary Seal affixed here]

                                       7
<PAGE>

                                    EXHIBIT A

                              PROPERTY DESCRIPTION

REAL PROPERTY in the City of San Jose, County of Santa Clara, State of
California, described as follows:

Being a portion of the 6.70 acre parcel of land as shown upon that certain
Record of Survey filed for record October 24, 1950 in Book 29 of Maps at page 6,
Santa Clara County Records;

Commencing at an angle in the centerline of Piercy Road as shown upon that
certain Record of Survey filed for record March 14, 1984 in Book 525 of Maps at
pages 52 through 59, Santa Clara County Records, from which point a monument in
said centerline of Piercy Road bears North 44 degrees 33'30" East, 2011.10 feet
(North 44 degrees 33'30" East, 2011.15 feet as shown on said Record of Survey);

Thence North 23 degrees 37'49" West, 21.54 feet to the northerly line of said
Piercy Road;

Thence along said northerly line, South 89 degrees 34'15" West, 1037.38 feet to
the True Point of Beginning;

Thence continuing along said northerly line, South 89 degrees 34'15" West,
152.87 feet;

Thence North 35 degrees 48'27" West, 151.93 feet to a point of cusp;

Thence Southeasterly along a curve to the left, from which the center bears
North 54 degrees 11'33" East, having a radius of 270.00 feet, through a central
angle of 54 degrees 37'19", an arc length of 257.40 feet;

Thence North 84 degrees 34'15" East, 102.10 feet to a point of cusp;

Thence Westerly along a curve to the left, from which the center bears South 00
degrees 25'45" East, having a radius of 330.00 feet, through a central angle of
14 degrees 16'57", an arc length of 82.26 feet to the True Point of Beginning.

Containing 4,766 square feet of land, more or less.

                                                              [Seal containing:
                       Licensed Land Surveyor State of California in first Ring
                          Steve W. Danner No. 5106 Exp. 6-30-03 in center ring]
                                                            /s/ Steve W. Danner

<PAGE>

Diagram of Parcel Map<PAGE>
                                                                   EXHIBIT 10.14

                             MODIFICATION AGREEMENT
            (THIRD AMENDMENT TO LEASE AND OTHER OPERATIVE DOCUMENTS)

        This MODIFICATION AGREEMENT (this "AGREEMENT") is made as of June 30,
2001, by BNP PARIBAS LEASING CORPORATION, a Delaware corporation ("BNPPLC"), and
ELECTROGLAS, INC., a Delaware corporation ("ELECTROGLAS")

                                 R E C I T A L S

        A. BNPPLC and Electroglas executed a Lease Agreement dated as of March
31, 1997 (as subsequently amended, the "LEASE"), which was amended and
supplemented by a Construction Funding Agreement (First Amendment to Lease
Agreement) dated July 1, 1998 (the "FIRST LEASE AMENDMENT"), and Modification
Agreement (Second Amendment to Lease) dated February 8, 2000 (the "SECOND LEASE
AMENDMENT"), and which Lease covered, among other things, the real property
described therein. (The real property described in Exhibit A to the Lease, save
and except any portion thereof no longer covered by the Lease, and any and all
other real or personal property from time to time covered by the Lease and
included within the "Property" as defined therein are hereinafter collectively
referred to as the "PROPERTY".)

        B. BNPPLC and Electroglas executed a Purchase Agreement dated as of
March 31, 1997 (as subsequently amended, the "PURCHASE AGREEMENT"), which Lease
covered, among other things, the Property.

        C. BNPPLC, BNP Paribas (as successor in interest to Banque Nationale de
Paris) ("BNP Paribas"), and Electroglas executed a Pledge Agreement dated as of
March 31, 1997 (as subsequently amended, the "Pledge Agreement"). Pursuant to
the Supplement to Pledge Agreement dated July 28, 2000, The Industrial Bank of
Japan ("IBJ") became a party to the Pledge Agreement, and pursuant to the
Supplement to Pledge Agreement dated December 1, 2000, Wells Fargo Bank, N.A.
("Wells Fargo") became a party to the Pledge Agreement.

        D. BNPPLC, Electroglas, BNP Paribas, IBJ, and Wells Fargo now desire to
modify the Lease, the Pledge Agreement, and the other Operative Documents, on
and subject to the terms and conditions set forth below.

        NOW, THEREFORE, in consideration of the above recitals and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

1.      Definitions. Capitalized terms used in this Agreement and not otherwise
        defined herein shall have the meanings given to them in the original
        Lease and previous amendments thereto.

2.      Cash Collateral. The Collateral Percentage under the Pledge Agreement
        has been established at 100% and will not under any circumstance be
        hereafter reduced, and the

<PAGE>

        remainder of the Term shall be deemed to be a Mandatory Collateral
        Period. Electroglas shall not be entitled to hereafter designate a
        lesser Collateral Percentage.

3.      Amendment and Restatement of Schedule 2. Schedule 2 attached to the
        Lease and the First Lease Amendment is replaced in its entirety by
        Schedule 2 attached to this Amendment. Also, from and after the date of
        this Amendment, all references in the Pledge Agreement to "Schedule 2"
        (regardless of whether such references are followed by "attached to the
        Lease") shall constitute references to Schedule 2 attached to this
        Amendment.

4.      Secured Spread. The definition of "Secured Spread" in the Lease is
        amended and restated as follows, effective as of the date hereof:

        "SECURED SPREAD" shall equal fifty-five basis points (55/100 of 1%).

5.      Fees and Expenses. Electroglas covenants and agrees to pay to or
        reimburse BNPPLC, upon demand, for all reasonable out-of-pocket costs
        and expenses (including the reasonable fees, charges and disbursements
        of counsel) incurred by BNPPLC in connection with the development,
        preparation, negotiation, execution and delivery of this Agreement.
        Electroglas covenants and agrees to pay to BNPPLC, for payment in turn
        by BNPPLC to each Participant (and BNPPLC) which executes and returns
        this Agreement to BNPPLC on or prior to August 7, 2001, an amendment fee
        equal to twenty basis points of all such Participants' Percentages under
        the Participation Agreement multiplied by the Stipulated Loss Value,
        such fee to be payable on the date hereof.

6.      Ratification. The Lease and the Pledge Agreement, as amended by this
        Agreement, are hereby ratified and confirmed in all respects.

7.      Entire Agreement. This Agreement and the documents and agreements
        referred to herein set forth the entire agreement between the parties
        concerning the subject matter hereof and no amendment or modification of
        this Agreement shall be binding or valid unless expressed in a writing
        executed by both parties hereto.

8.      Successors and Assigns. All of the covenants, agreements, terms and
        conditions to be observed and performed by the parties hereto shall be
        applicable to and binding upon their respective heirs, personal
        representatives, successors and, to the extent assignment is permitted
        under the Lease, their respective assigns.

9.      Further Modifications. From and after the date of this Agreement, in all
        documents related to this transaction references to the "Lease",
        "Purchase Agreement", "Pledge Agreement", or the "Construction Funding
        Agreement" are intended to mean the Lease, Purchase Agreement, Pledge
        Agreement, or Construction Funding Agreement, as the case may be, as
        amended hereby. In addition, all documents related to this transaction

<PAGE>

        using capitalized terms, the definitions of which terms are modified
        hereby, shall be deemed amended hereby to incorporate the same
        modifications to such capitalized terms.

1.      Execution in Counterparts. To facilitate execution, this Agreement may
        be executed in as many identical counterparts as may be required. It
        shall not be necessary that the signature of, or on behalf of, each
        party, or that the signature of all persons required to bind any party,
        appear on each counterpart. All counterparts, taken together, shall
        collectively constitute a single instrument. It shall not be necessary
        in making proof of this Agreement to produce or account for more than a
        single counterpart containing the respective signatures of, or on behalf
        of, each of the parties hereto. Any signature page to any counterpart
        may be detached from such counterpart without impairing the legal effect
        of the signatures thereon and thereafter attached to another counterpart
        identical thereto except having attached to it additional signature
        pages.

1.      Recitals. The recitals contained herein are incorporated by this
        reference.

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

                                       BNP PARIBAS LEASING CORPORATION,
                                       a Delaware corporation

                                       By:   /s/ Lloyd G. Cox
                                          ----------------------------------
                                             Lloyd G. Cox, Managing Director

<PAGE>

                                    ELECTROGLAS, INC., a Delaware corporation

                                    By:   /s/ Tom Brunton
                                       ----------------------------------
                                          Tom Brunton, Chief Financial Officer

<PAGE>

CONSENT AND AGREEMENT OF PARTICIPANT

          The undersigned Participant hereby consents to the execution and
delivery of this Agreement and the modifications and amendments provided
therein. Participant hereby ratifies and confirms in all respects the
Participation Agreement, and agrees that its obligations and covenants
thereunder shall continue in full force and effect.

                                BNP PARIBAS

                                By:   /s/ Stuart Darby
                                  ----------------------------------------
                                Name:  Stuart Darby
                                Title: Vice President

                                By:   /s/ Robert Mimaki
                                  ----------------------------------------
                                Name:  Robert Mimaki
                                Title: Vice President

<PAGE>

CONSENT AND AGREEMENT OF PARTICIPANT

          The undersigned Participant hereby consents to the execution and
delivery of this Agreement and the modifications and amendments provided
therein. Participant hereby ratifies and confirms in all respects the
Participation Agreement, and agrees that its obligations and covenants
thereunder shall continue in full force and effect.

                                   WELLS FARGO BANK, N.A.

                                   By:   /s/ Kevin W. Herr
                                     ----------------------------------------
                                         Kevin W. Herr, Vice President

<PAGE>

CONSENT AND AGREEMENT OF PARTICIPANT

          The undersigned Participant hereby consents to the execution and
delivery of this Agreement and the modifications and amendments provided
therein. Participant hereby ratifies and confirms in all respects the
Participation Agreement, and agrees that its obligations and covenants
thereunder shall continue in full force and effect.

                                      THE INDUSTRIAL BANK OF JAPAN

                                      By:   /s/ Masao Nakagawa
                                         ---------------------------------
                                      Name:  Masao Nakagawa
                                      Title: Senior Vice President and
                                             General Manager

<PAGE>

                                   Schedule 2

                               FINANCIAL COVENANTS

        This Schedule 2 is attached to and made a part of (a) the Lease
Agreement (as amended, the "LEASE") dated effective March 31, 1997, between BNP
Paribas Leasing Corporation, a Delaware corporation ("BNPPLC") and Electroglas,
Inc., a Delaware corporation ("ELECTROGLAS"), and (b) the Pledge Agreement (as
amended, the "PLEDGE AGREEMENT") dated effective March 31, 1997, among BNPPLC,
Electroglas, BNP Paribas, as a Participant and as agent for any financial
institutions that become Participants thereunder from time to time, Wells Fargo
Bank, N.A. and The Industrial Bank of Japan, as Participants.

                             PART I - DEFINED TERMS

        In this Schedule 2, capitalized terms used but not defined herein shall
have the meaning assigned to them in the Lease or the List of Defined Terms
attached to the Lease; and the following capitalized terms shall have the
following meanings:

        "COLLATERAL" shall have the meaning assigned to it in the body of the
        Pledge Agreement.

        "CONSOLIDATED TANGIBLE NET WORTH" means, with respect to any Person, the
        excess of the total assets of such Person and its Subsidiaries
        (determined on a consolidated basis) over the total Liabilities of such
        Person and its Subsidiaries (determined on a consolidated basis);
        provided, however, that Intangible Assets on such date shall be excluded
        from any determination of consolidated total assets on such date.

        "CURRENT LIABILITIES" means, with respect to any Person, all liabilities
        of such Person treated as current liabilities in accordance with GAAP,
        including without limitation (a) all obligations payable on demand or
        within one year after the date in which the determination is made and
        (b) installment and sinking fund payments required to be made within one
        year after the date on which determination is made, but excluding all
        such liabilities or obligations which are renewable or extendable at the
        option of such Person to a date more than one year from the date of
        determination.

        "INTANGIBLE ASSETS" means, as of the date of any determination thereof,
        the total amount of all assets of Electroglas and its consolidated
        Subsidiaries that are properly classified as "INTANGIBLE ASSETS" in
        accordance with GAAP and, in any event, shall include, without
        limitation, goodwill, patents, trade names, trademarks, copyrights,
        franchises, experimental expense, organization expense, unamortized debt
        discount and expense, and deferred charges other than prepaid insurance
        and prepaid taxes and current deferred taxes which are classified on the
        balance sheet of Electroglas and its consolidated Subsidiaries as a
        current asset in accordance with GAAP and in which classification
        Electroglas' independent public accountants concur.

<PAGE>

        "LIABILITIES" means, with respect to any Person, the sum (without
        duplication of any item) of (A) all liabilities of such Person and its
        Subsidiaries (determined on a consolidated basis), determined in
        accordance with GAAP, and (B) the obligations of such Person and its
        Subsidiaries (determined on a consolidated basis), contingent or
        otherwise, under any lease of real property or related documents
        (including a separate purchase agreement) which provide that such Person
        or its Subsidiaries must purchase or cause another to purchase any
        interest in the leased property and thereby guarantee a minimum residual
        value of the leased property to the lessor. For purposes of this
        definition (and for purposes of determining the amount of "Debt"
        relevant to any requirements established by this Schedule 2), the amount
        of the obligations described in clause (B) of the preceding sentence
        with respect to any lease classified according to GAAP as an "operating
        lease," shall equal the sum of (1) the present value of rentals and
        other minimum lease payments required in connection with such lease
        [calculated in accordance with FASB Statement 13 and other GAAP relevant
        to the determination of the whether such lease must be accounted for as
        an operating lease or capital lease], plus (2) the fair value of the
        property covered by the lease; provided, however, that such amount shall
        not exceed the price for which the lessee can purchase the leased
        property pursuant to any valid ongoing purchase option if, upon such a
        purchase, the lessee shall be excused from paying rentals or other
        minimum lease payments that would otherwise accrue after the purchase.

        "LONG-TERM INVESTMENTS" means those investments described below (to the
        extent that they are not classified as short term investments in
        accordance with GAAP), provided that such investments shall have
        maturities of not longer than two years, and shall be rated not less
        than A- by Standard & Poor's Corporation or less than A by Moody's
        Investors Service, Inc.:

               (1) Securities issued or fully guaranteed or fully insured by the
        United States government or any agency thereof and backed by the full
        faith and credit of the United States;

               (2) Certificates of deposit, time deposits, eurodollar time
        deposits, repurchase agreements, or banker's acceptances that are issued
        by either one of the 50 largest (in assets) banks in the United States
        or by one of the 100 largest (in assets) banks in the world; and

               (3) Notes and municipal bonds.

        "MANDATORY COLLATERAL PERIOD" means the remainder of the Term, during
        which, notwithstanding any contrary designation of a Collateral
        Percentage by Electroglas under the Pledge Agreement, the Collateral
        Percentage for purposes of the Pledge Agreement shall be one hundred
        percent (100%).

<PAGE>

        "QUICK ASSETS" means the sum (without duplication of any item) of the
        Collateral held subject to a Qualified Pledge under and as defined in
        the Pledge Agreement, plus unencumbered cash, plus unencumbered short
        term cash investments, plus other unencumbered marketable securities
        which are classified as short term investments according to GAAP, plus
        the fair market value of unencumbered Long-Term Investments, plus
        unencumbered current net accounts receivable.

                PART II - FINANCIAL COVENANTS FOR LEASE AGREEMENT

1.      Quick Ratio. Electroglas shall maintain a ratio of (a) Quick Assets of
        Electroglas and its Subsidiaries (determined on a consolidated basis) to
        (b) Current Liabilities of Electroglas and its Subsidiaries (determined
        on a consolidated basis), of not less than 2.50 to 1.00.

2.      Maximum Ratio of Liabilities to Tangible Net Worth. Electroglas shall
        maintain a ratio of (a) the Liabilities of Electroglas to (b) the
        Consolidated Tangible Net Worth of Electroglas, of not more than 0.70 to
        1.00.

3.      Minimum Tangible Net Worth. Electroglas shall not permit its
        Consolidated Tangible Net Worth, at the end of any fiscal quarter of
        Electroglas, to be less than the sum of: (a) $155,347,000; plus (b)
        seventy-five percent of Electroglas' net income (computed without
        deduction for net losses in any fiscal quarter) earned in each fiscal
        quarter of Electroglas after June 30, 2001; plus (c) one-hundred percent
        of the net proceeds of sales of stock in Electroglas after June 30,
        2001; less (d) non-cash charges relating to acquisitions after June 30,
        2001 that do not exceed an aggregate, cumulative amount of fifteen
        percent of Electroglas' Consolidated Tangible Net Worth at the end of
        such fiscal quarter.

4.      Minimum Unencumbered Cash and Cash Equivalents. Electroglas shall not
        permit the sum (without duplication of any item) of all unencumbered and
        unrestricted cash, short term cash investments and marketable securities
        classified as short term investments according to GAAP of Electroglas
        and its Subsidiaries (determined on a consolidated basis) to be less
        than $40,000,000.

5.      No Repurchase of Stock. Electroglas shall not redeem, retire, repurchase
        or otherwise acquire any shares of any class of Electroglas stock now or
        hereafter outstanding unless Electroglas has attained positive net
        income in each of the preceding two consecutive quarters, and
        Electroglas has provided BNPLC satisfactory prior written evidence
        thereof. In addition, if Electroglas has satisfied the conditions of the
        preceding sentence, Electroglas shall nevertheless not redeem, retire,
        repurchase or otherwise acquire more than $10,000,000 worth of any
        shares of any class of Electroglas stock now or hereafter outstanding in
        any twelve month period.

<PAGE>

                     PART III - MANDATORY COLLATERAL PERIODS

1.      Commencing on June 30, 2001, the remainder of the Term shall constitute
        a Mandatory Collateral Period.

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