Document:

Security Agreement

 Exhibit 10.3 
 SECURITY AGREEMENT 
 This SECURITY AGREEMENT dated as of March 26, 2007 is entered into
by and between ELECTROGLAS, INC., a Delaware corporation, ELECTROGLAS INTERNATIONAL, INC., a Delaware corporation (collectively, the “Grantor”) and THE BANK OF NEW YORK TRUST COMPANY, N.A., in its capacity as collateral agent (and
any successor collateral agent, the “Agent”) for the holders of the Notes (the “Holders”). 
 WITNESSETH:

 WHEREAS, pursuant to that certain Indenture dated as of the date hereof by and among the Grantor, Electroglas International, Inc. and The
Bank of New York Trust Company, N.A. (the “Trustee”), as from time to time amended, restated, supplemented or otherwise modified (the “Indenture”), the Grantor has authorized the issuance from time to time of 6.25%
Convertible Senior Subordinated Secured Notes due 2027 (the “Notes”); 
 WHEREAS, the Grantor has agreed to grant a
continuing second priority Lien on the Collateral (as hereinafter defined) to secure the Obligations (as hereinafter defined); 
 NOW,
THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 
 1. DEFINED TERMS. The following terms shall have the following respective meanings: 
 “Accounts” shall mean all present and future rights of the Grantor to payment of a monetary obligation, whether or not earned by
performance, which is not evidenced by chattel paper or an instrument: (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a
secondary obligation incurred or to be incurred, or (d) arising out of the use of a credit, charge or debit card along with all information contained on or for use with such card. 
 “Affiliate” shall mean, with respect to a specified Person, any other Person which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with such Person, and without limiting the generality of the foregoing, includes (a) any Person which beneficially owns or holds five percent (5%) or more of any
class of Voting Stock of such Person or other equity interests in such Person, (b) any Person of which such Person beneficially owns or holds five percent (5%) or more of any class of Voting Stock or in which such Person beneficially owns
or holds five percent (5%) or more of the equity interests and (c) any director or executive officer of such Person. For purposes of this definition, the term “control” (including, with correlative meanings, the terms
“controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by agreement or otherwise. 
  

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 “Agent’s Commercial Judgment” shall mean the commercially reasonable judgment of
the Agent as to credit or, where applicable, other matters, in each case exercised in good faith. 
 “Capital Stock” shall
mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person’s capital stock, or partnership, limited liability company or other equity interests at any time
outstanding, and any and all rights, warrants or options exchangeable for or convertible into such capital stock or other interests (but excluding any debt security that is exchangeable for or convertible into such capital stock). 
 “Code” shall mean the Internal Revenue Code of 1986, as the same now exists or may from time to time hereafter be amended, modified,
recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto. 
 “Collateral” shall have the meaning set forth in Section 2 hereof. 
 “Documents”
shall mean all documents as such term is defined in the UCC, including bills of lading, warehouse receipts or other documents of title, now owned or hereafter acquired by the Grantor. 
 “Equipment” shall mean all of the Grantor’s now owned and hereafter acquired equipment, wherever located, including machinery, data
processing and computer equipment and computer hardware and software, whether owned or licensed, and including embedded software, vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed thereto or used
in connection therewith, and substitutions and replacements thereof, wherever located. 
 “ERISA” shall mean the United
States Employee Retirement Income Security Act of 1974, as amended, modified, recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto. 
 “ERISA Affiliate” shall mean any person required to be aggregated with the Grantor or any Subsidiary of the Grantor under Sections
414(b), 414(c), 414(m) or 414(o) of the Code. 
 “Excluded Collateral” shall mean all of the following: 
 (a) any lease, license, contract, property right or agreement to which the Grantor is a party or any of the Grantor’s rights or interests thereunder
if and only for so long as the grant of a Lien under the Security Documents will constitute or result in a breach, termination or default under any such lease, license, contract, property right or agreement (other than to the extent that any such
term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code of any relevant jurisdiction or any other applicable law or principles of equity); provided that such lease, license,
contract, property right or agreement will be an Excluded Asset only to the extent and for so long as the consequences specified above will result and will cease to be an Excluded Asset and will become subject to the Lien granted under the Security
Documents, immediately and automatically, at such time as such consequences will no longer result; 
  

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 (b) real property acquired by the Grantor after the date of this Indenture that has a fair market value
not exceeding $100,000 in the aggregate, and any real property leased by the Grantor; 
 (c) one-third of the Capital Stock of each Foreign
Subsidiary; and 
 (d) any other property or assets in which a Lien cannot be perfected by the filing of a financing statement under the
Uniform Commercial Code of the relevant jurisdiction, so long as the aggregate fair market value of all such property and assets does not at any one time exceed $250,000. 
 “Foreign Subsidiaries” shall mean any direct Subsidiary of the Grantor other than a direct Subsidiary that was formed under the laws of the United States or any state of the United States or the
District of Columbia. 
 “Intellectual Property” shall mean all of the Grantor’s now owned and hereafter arising or
acquired: patents, patent rights, patent applications, copyrights, works which are the subject matter of copyrights, copyright registrations, trademarks, service marks, trade names, trade styles, trademark and service mark applications, and licenses
and rights to use any of the foregoing; all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing; all rights to sue for past, present and future infringement of any of the foregoing; inventions,
trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating standards; goodwill (including any goodwill associated with any trademark or the license of any trademark); customer and other
lists in whatever form maintained; and trade secret rights, copyright rights, rights in works of authorship, domain names and domain name registrations; software and contract rights relating to software, in whatever form created or maintained,
including, without limitation, that intellectual property listed in Schedule III and Schedule IV attached hereto. 
 “Instruments” shall mean all instruments as such term is defined in the UCC, now owned or hereafter acquired by the Grantor. 
 “Inventory” shall mean all of the Grantor’s now owned and hereafter existing or acquired goods, wherever located, which (a) are leased by the Grantor as lessor; (b) are held by the
Grantor for sale or lease or to be furnished under a contract of service; (c) are furnished by the Grantor under a contract of service; or (d) consist of raw materials, work in process, finished goods or materials used or consumed in its
business. 
 “Lien” shall mean, with respect to any asset, any mortgage, deed of trust, deed to secure debt, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement or any lease in the nature
thereof); provided that in no event shall an operating lease be deemed to constitute a Lien. 
  

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 “Multiemployer Plan” shall mean a “multi-employer plan” as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year or the immediately preceding six (6) years contributed to by the Grantor or any ERISA Affiliate. 
 “Obligations” shall mean any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the Notes, the Indenture, the Securities and all other obligations, liabilities and indebtedness of every kind, nature and description owing by the Grantor under the Securities, the Indenture, the Securities Purchase Agreement, and the
Registration Rights Agreement, in each case whether now or hereafter existing, direct or indirect, absolute or contingent, due or not due, primary or secondary, liquidated or unliquidated, renewed or restructured, whether or not from time to time
decreased or extinguished and later increased, created or incurred, whether or not arising on or after the commencement of a proceeding under Title 11, U.S. Code or any similar federal or state law for the relief of debtors (including
post-petition interest) and whether or not allowed or allowable as a claim in any such proceeding. 
 “Person” or
“person” shall mean any individual, sole proprietorship, partnership, corporation (including any corporation which elects subchapter S status under the Code), limited liability company, limited liability partnership, business trust,
unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality or political subdivision thereof. 
 “Plan” shall mean an employee benefit plan (as defined in Section 3(3) of ERISA) which the Grantor sponsors, maintains, or to which
it makes, is making, or is obligated to make contributions, or in the case of a Multiemployer Plan has made contributions at any time during the immediately preceding six (6) plan years. 
 “Real Property” shall mean all now owned and hereafter acquired real property of the Grantor, including leasehold interests, together
with all buildings, structures, and other improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located. 
 “Receivables” shall mean all of the following now owned or hereafter arising or acquired property of the Grantor: (a) all Accounts; (b) all interest, fees, late charges, penalties,
collection fees and other amounts due or to become due or otherwise payable in connection with any Account; and (c) all payment intangibles of the Grantor and other contract rights, chattel paper, instruments, notes, and other forms of
obligations owing to the Grantor, whether from the sale and lease of goods or other property, licensing of any property (including Intellectual Property or other general intangibles), rendition of services or from loans or advances by the Grantor or
to or for the benefit of any third person (including loans or advances to any Affiliates or Subsidiaries of the Grantor) or otherwise associated with any Accounts, Inventory or general intangibles of the Grantor (including, without limitation,
choses in action, causes of action, tax refunds, tax refund claims, any funds which may become payable to the Grantor in connection with the termination of any Plan or other employee benefit plan and any other amounts payable to the Grantor from any
Plan or other employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, casualty or any similar types of insurance and any proceeds thereof and proceeds
of insurance covering the lives of employees on which the Grantor is a beneficiary). 
  

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 “Records” shall mean all of the Grantor’s present and future books of account of
every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together
with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of the Grantor with respect to the foregoing maintained with or by any
other person). 
 “Required Holders” shall mean such Holder(s) as are entitled to take action or direct the Trustee pursuant
to the terms of the Indenture. 
 “Securities” shall have the meaning ascribed to it in the Securities Purchase Agreement.

 “Subsidiary” or “subsidiary” shall mean, with respect to any Person, any corporation, limited liability
company, limited liability partnership or other limited or general partnership, trust, association or other business entity of which an aggregate of at least a majority of the outstanding Capital Stock or other interests entitled to vote in the
election of the board of directors of such corporation (irrespective of whether, at the time, Capital Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency),
managers, trustees or other controlling persons, or an equivalent controlling interest therein, of such Person is, at the time, directly or indirectly, owned by such Person and/or one or more subsidiaries of such Person. 
 “UCC” means the Uniform Commercial Code, as in effect from time to time, of the State of New York or of any other state the laws of
which are required as a result of such law to be applied in connection with perfection of security interests. 
 “Uniform Commercial
Code jurisdiction” means any jurisdiction that has adopted “Revised Article 9” of the UCC on or after July 1, 2001. 
 “Voting Stock” shall mean with respect to any Person, (a) one (1) or more classes of Capital Stock of such Person having general voting powers to elect at least a majority of the board of directors, managers or
trustees of such Person, irrespective of whether at the time Capital Stock of any other class or classes have or might have voting power by reason of the happening of any contingency, and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into Capital Stock of such Person described in clause (a) of this definition. 
 All other capitalized terms used but not otherwise defined herein have the meanings given to them in the Indenture. All other undefined terms contained in this Security Agreement, unless the context indicates
otherwise, have the meanings provided for by the UCC to the extent the same are used or defined therein. 
  

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 2. GRANT OF LIEN. 
 As security for all Obligations, the Grantor hereby grants to the Agent, for the benefit of the Agent, the Trustee and the Holders, a continuing security
interest in and lien on all right, title and interest of the Grantor in all personal and real property and fixtures, whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the
Obligations at any time granted to or held or acquired by the Agent, collectively, the “Collateral”), including: 
 (a) all
Accounts; 
 (b) all general intangibles, including, without limitation, all Intellectual Property; 
 (c) all goods, including, without limitation, Inventory and Equipment; 
 (d) all Real Property and fixtures; 
 (e) all chattel paper (including all tangible and electronic chattel
paper); 
 (f) all Instruments (including all promissory notes); 
 (g) all Documents; 
 (h) all deposit
accounts; 
 (i) all letters of credit, banker’s acceptances and similar instruments and including all letter-of-credit rights;

 (j) all supporting obligations and all present and future liens, security interests, rights, remedies, title and interest in, to and in
respect of Receivables and other Collateral, including (i) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (ii) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (iii) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or
evidencing, Receivables or other Collateral, including returned, repossessed and reclaimed goods, and (iv) deposits by and property of account debtors or other persons securing the obligations of account debtors; 
 (k) all (i) investment property (including securities, whether certificated or uncertificated, securities accounts, security entitlements, commodity
contracts or commodity accounts) and (ii) monies, credit balances, deposits and other property of the Grantor now or hereafter held or received by or in transit to Agent, any Holder or any of their respective Affiliates or at any other
depository or other institution from or for the account of the Grantor, whether for safekeeping, pledge, custody, transmission, collection or otherwise; 
 (l) all commercial tort claims; 
  

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 (m) to the extent not otherwise described above, all Receivables; 
 (n) all Records; and 
 (o) all products and
proceeds of the foregoing, in any form, including insurance proceeds and all claims against third parties for loss or damage to or destruction of or other involuntary conversion of any kind or nature of any or all of the other Collateral.

 Notwithstanding the foregoing, “Collateral” shall not include the Excluded Collateral. 
 3. PERFECTION AND PROTECTION OF SECURITY INTEREST. 
 (a) The Grantor shall, at its own expense, perform all steps reasonably requested by the Agent at any time to perfect, maintain, protect, and enforce the
Agent’s Liens, including: (i) filing financing or continuation statements, and amendments thereof, in form and substance reasonably satisfactory to the Agent, including filing each of the Patent Agreement and the Trademark Agreement
with the United States Patent and Trademark Office substantially in the form of Exhibits A and B attached hereto; (ii) placing notations on the Grantor’s books of account to disclose the Agent’s security interest; and
(iii) taking such other steps as are reasonably deemed necessary or desirable to maintain and protect the Agent’s Liens. Notwithstanding the foregoing, the Grantor shall not be required to take any action to perfect the Agent’s Lien
(A) other than (1) filing a financing statement, if and to the extent such Lien can be perfected by such filing, and (2) using commercially reasonable efforts to deliver to the Agent, within 30 days after any written request therefor,
original share certificates for the capital stock of any Subsidiary of a Grantor to the extent such capital stock constitutes Collateral, together with appropriate stock powers, duly endorsed in blank, or (B) with respect to Excluded
Collateral. Within ninety (90) days after the end of each calendar year, the Company shall furnish the Agent an Opinion of Counsel pursuant to Section 17.4 of the Indenture, if and to the extent such Opinion of Counsel is required by the
TIA. The Grantor agrees that a carbon, photographic, photostatic, or other reproduction of this Security Agreement or of a financing statement is sufficient as a financing statement. 
 (b) The Grantor hereby irrevocably authorizes the Agent at any time and from time to time to file in any filing office in any Uniform Commercial Code
jurisdiction where filing is necessary to perfect the Agent’s Lien any initial financing statements and amendments thereto that (i) accurately describe the Collateral and (ii) contain any other information required by part 5 of
Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including whether the Grantor is an organization, the type of organization and any organization identification number issued to the
Grantor. The Grantor agrees to furnish any such information to the Agent promptly upon request. The Grantor also ratifies its authorization for the Agent to have filed in any Uniform Commercial Code jurisdiction any like initial financing
statements or amendments thereto if filed prior to the date hereof. 
 (c) Subject to Section 20(f), so long as the Indenture is
in effect and until all Obligations have been fully satisfied, the Agent’s Liens shall continue in full force and effect in all Collateral. 
  

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 (d) The Grantor acknowledges that it is not authorized to file any financing statement or amendment or
termination statement with respect to any financing statement filed to perfect the Agent’s Lien without the prior written consent of the Agent and agrees that it will not do so without the prior written consent of the Agent, subject to the
Grantor’s rights under Section 9-509(d)(2) of the UCC. 
 4. LOCATION OF GRANTOR; LOCATION OF COLLATERAL. The Grantor
represents and warrants to the Agent, the Trustee and the Holders that Schedule I is a correct and complete list of the location of its chief executive office and the location of its books and records. The locations of the Collateral as of
the date of this Agreement are as set forth on Schedule I hereto. 
 5. JURISDICTION OF ORGANIZATION. Grantor shall not
change its name or jurisdiction of organization without giving prior written notice to Agent. Schedule II hereto identifies the Grantor’s name as of the Closing Date as it appears in official filings in the state of its incorporation,
the type of entity of the Grantor (including corporation, partnership, limited partnership or limited liability company), organizational identification number issued by the Grantor’s state of incorporation or organization or a statement that no
such number has been issued and the jurisdiction in which the Grantor is incorporated or organized. The Grantor has only one state of incorporation or organization. 
 6. TITLE TO, LIENS ON, AND SALE AND USE OF COLLATERAL. The Grantor represents and warrants to the Agent, the Trustee and the Holders and agrees with the Agent, the Trustee and the Holders that:
(a) the Agent’s Liens in the Collateral will not be subject to any prior Lien except as set forth in the Indenture; and (b) the Grantor will use, store, and maintain the Collateral with all reasonable care and will use such Collateral
for lawful purposes only. 
 7. ACCESS AND EXAMINATION. After the occurrence and during the continuance of an Event
of Default, the Grantor shall permit representatives and independent contractors of Agent access to its properties and records from time to time upon the reasonable request of Agent. 
 8. COLLATERAL REPORTING. After the occurrence and during the continuance of an Event of Default, the Grantor shall provide the Agent
with such reports as to the Collateral as the Agent shall in the Agent’s Commercial Judgment request from time to time; together, in each case, with a certificate of the Grantor executed by an officer thereof certifying as to the accuracy and
completeness of the foregoing. 
 9. ACCOUNTS. The Grantor hereby represents and warrants to the Agent, the Trustee and the
Holders, with respect to the Grantor’s Accounts, that each existing Account represents, and each future Account will represent, a bona fide sale or lease and shipment of goods by the Grantor, or rendition of services by the Grantor, in the
ordinary course of the Grantor’s business. 
 10. INVENTORY. The Grantor represents and warrants to the Agent, the Trustee
and the Holders and agrees with the Agent, the Trustee and the Holders that all of the Inventory 
  

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owned by the Grantor is and will be held for sale or lease, or to be furnished in connection with the rendition of services, in the ordinary course of the
Grantor’s business, and is and will be fit for such purposes. The Grantor will keep its Inventory in good and marketable condition, except for damaged or defective goods arising in the ordinary course of the Grantor’s business. The Grantor
agrees that all Inventory produced by the Grantor in the United States of America will be produced in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and all rules, regulations, and orders thereunder. After the occurrence
and during the continuance of an Event of Default, the Grantor will conduct a physical count of the Inventory up to once each calendar quarter at such times as the Agent requests. 
 11. EQUIPMENT. 
 (a) The
Grantor represents and warrants to the Agent, the Trustee and the Holders and agrees with the Agent, the Trustee and the Holders that all of the Equipment owned by the Grantor is and will be used or held for use in the Grantor’s business (other
than obsolete Equipment), and is and will be fit for such purposes. The Grantor shall keep and maintain its Equipment in good operating condition and repair (ordinary wear and tear excepted) and shall make all necessary replacements thereof.

 (b) The Grantor will not, without the Agent’s prior written consent, alter or remove any identifying symbol or number on any of the
Grantor’s Equipment constituting Collateral. 
 12. DOCUMENTS, INSTRUMENTS, AND CHATTEL PAPER. The
Grantor represents and warrants to the Agent that all Documents, Instruments, and chattel paper describing, evidencing, or constituting Collateral, and all signatures and endorsements thereon, are and will be valid and genuine in all material
respects. 
 13. RIGHT TO CURE. The Agent may, in its discretion, and shall, at the direction of the Trustee (acting
at the direction of the Required Holders), pay any amount or do any act required of the Grantor hereunder or under the Indenture or any other Security Document in order to preserve, protect, maintain or enforce the Obligations, the Collateral or the
Agent’s Liens therein, and which the Grantor fails to pay or do, including payment of any judgment against the Grantor, any insurance premium, any warehouse charge, any finishing or processing charge, any landlord’s or bailee’s claim,
and any other Lien upon or with respect to the Collateral; provided, however, that the Agent shall be under no obligation to take any action which in its sole discretion would subject the Agent to personal or financial liability. Any payment made or
other action taken by the Agent under this Section 13 shall be without prejudice to any right to assert an Event of Default hereunder and to proceed thereafter as herein provided. 
 14. LIMITED POWER OF ATTORNEY. The Grantor hereby appoints the Agent and the Agent’s designee as the Grantor’s
attorney, with power after the occurrence and during the continuance of an Event of Default: (a) to endorse the Grantor’s name on any checks, notes, acceptances, money orders, or other forms of payment or security that come into the
Agent’s possession; (b) to sign the Grantor’s name on any invoice, bill of lading, warehouse receipt or other negotiable or non-negotiable Document constituting Collateral, on drafts against 
  

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customers, on assignments of Accounts, on notices of assignment, financing statements and other public records and to file any such financing statements by
electronic means with or without a signature as authorized or required by applicable law or filing procedure; (c) to notify the post office authorities to change the address for delivery of the Grantor’s mail to an address designated by
the Agent and to receive, open and dispose of all mail addressed to the Grantor; (d) to send requests for verification of Accounts to customers; (e) to complete in the Grantor’s name or the Agent’s name, any order, sale or
transaction, obtain the necessary Documents in connection therewith, and collect the proceeds thereof; (f) to clear Inventory through customs in the Grantor’s name, the Agent’s name or the name of the Agent’s designee, and to
sign and deliver to customs officials limited powers of attorney in the Grantor’s name for such purpose; (g) to the extent that the Grantor’s authorization given in Section 3 of this Security Agreement is not sufficient,
to file such financing statements with respect to this Security Agreement, with or without the Grantor’s signature, or to file a photocopy of this Security Agreement in substitution for a financing statement, as the Agent may deem appropriate
and to execute in the Grantor’s name such financing statements and amendments thereto and continuation statements which may require the Grantor’s signature; and (h) to do all things necessary to carry out the Indenture and this
Security Agreement. The Grantor ratifies and approves all acts of such attorney done after the occurrence and during the continuance of an Event of Default. None of Agent nor its attorneys will be liable for any acts or omissions or for any error of
judgment or mistake of fact or law except for their own willful misconduct. This power, being coupled with an interest, is irrevocable until the Indenture has been terminated and the Obligations have been fully satisfied. 
 15. THE AGENT’S AND HOLDERS’ RIGHTS, DUTIES AND LIABILITIES. 
 (a) Each Holder hereby appoints The Bank of New York Trust Company, N.A. to act as the Agent for such Person under this Security Agreement and the other
Security Documents. Each Holder hereby irrevocably authorizes the Agent to take such action on its behalf under the provisions of this Security Agreement and the other Security Documents and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of the Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto and the Agent shall hold all Collateral, charges and collections received
pursuant to this Security Agreement, for the ratable benefit of the Holders. The Agent may perform any of its duties hereunder by or through its agents or employees. As to any matters not expressly provided for by this Security Agreement (including
without limitation, collection of the Notes) the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Trustee or the Required Holders, and such instructions shall be binding; provided, however, that the Agent shall not be required to take any action which in the Agent’s reasonable discretion exposes it to liability
or which is contrary to this Security Agreement or the other Security Documents or applicable law unless the Agent is furnished with an indemnification reasonably acceptable to the Agent in its sole discretion with respect thereto and the Agent
shall not be responsible for any misconduct or negligence on the part of any agents appointed with due care by the Agent. The Agent shall have no duties or responsibilities except those expressly set forth in this Security Agreement and the other
Security Documents. The Agent shall not be under any obligation to any Holder to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Security Agreement or any of the other
Security Documents. The Agent 

  

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shall not have by reason of this Security Agreement a fiduciary relationship in respect of any Holder; and nothing in this Security Agreement, expressed or
implied, is intended to or shall be so construed as to impose upon the Agent any obligations in respect of this Security Agreement except as expressly set forth herein. 
 (b) The Grantor assumes all responsibility and liability arising from or relating to the use, sale, license or other disposition of the Collateral. The Obligations shall not be affected by any failure of the Agent,
the Trustee or any Holder to take any steps to perfect the Agent’s Liens or to collect or realize upon the Collateral, nor shall loss of or damage to the Collateral release the Grantor from any of the Obligations. After the occurrence and
during the continuation of an Event of Default, the Agent may (but shall not be required to), and at the direction of the Required Holders shall, without notice to or consent from the Grantor, sue upon or otherwise collect, extend the time for
payment of, modify or amend the terms of, compromise or settle for cash, credit, or otherwise upon any terms, grant other indulgences, extensions, renewals, compositions, or releases, and take or omit to take any other action with respect to the
Collateral, any security therefor, any agreement relating thereto, any insurance applicable thereto, or any Person liable directly or indirectly in connection with any of the foregoing, without discharging or otherwise affecting the liability of the
Grantor for the Obligations or under the Indenture or any other agreement now or hereafter existing between the Agent and/or the Trustee or any Holder and the Grantor. 
 (c) It is expressly agreed by the Grantor that, anything herein to the contrary notwithstanding, the Grantor shall remain liable under each of its contracts and each of its licenses to observe and perform all the
conditions and obligations to be observed and performed by it thereunder. None of the Agent, the Trustee nor any Holder shall have any obligation or liability under any contract or license by reason of or arising out of this Security Agreement or
the granting herein of a Lien thereon or the receipt by Agent, the Trustee or any Holder of any payment relating to any contract or license pursuant hereto. None of the Agent, the Trustee nor any Holder shall be required or obligated in any manner
to perform or fulfill any of the obligations of the Grantor under or pursuant to any contract or license, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any
performance by any party under any contract or license, or to present or file any claims, or to take any action to collect or enforce any performance or the payment of any amounts which may have been assigned to it or to which it may be entitled at
any time or times. 
 (d) In no event shall the Trustee or any Noteholder be responsible or liable for special, indirect, or consequential
loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action. 
 16. COST AND EXPENSES; INDEMNIFICATION. 
 (a) The Grantor agree to pay to the Agent, for its benefit, on demand, all reasonable costs and expenses that Agent pays or incurs in connection with the negotiation, preparation, administration, enforcement, and
termination of this Security Agreement or any of the other Security Documents, including: (i) all reasonable fees, expenses and disbursements of any law firm or other counsel engaged by the Agent; (ii) costs and expenses (including 

  

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reasonable attorneys’ and paralegals’ fees and disbursements) for any amendment, supplement, waiver, consent, or subsequent closing in connection
with the Security Documents and the transactions contemplated thereby; (iii) costs and expenses of lien searches; (iv) taxes, fees and other charges for filing financing statements and continuations, and other actions to perfect, protect,
and continue the Agent’s Liens (including costs and expenses paid or incurred by the Agent in connection with the consummation of this Security Agreement); (v) sums paid or incurred to pay any amount or take any action required of the
Grantor under this Agreement that the Grantor fails to pay or take; and (vi) costs and expenses of preserving and protecting the Collateral. The foregoing shall not be construed to limit any other directly contrary provisions of this Agreement
regarding costs and expenses to be paid by the Grantor. 
 (b) The Grantor will save, indemnify and keep Agent, the Trustee and the Holders
harmless from and against all expense (including reasonable attorneys’ fees and expenses), loss, claim, liability or damage arising out of their actions or inaction hereunder suffered by reason of any defense, setoff, counterclaim, recoupment
or reduction of liability whatsoever of any Person obligated on the Collateral, arising out of a breach by the Grantor of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to, or in favor
of, such obligor or its successors from the Grantor, except in the case of Agent, the Trustee or any Holder, to the extent such expense, loss, or damage is determined by a court of competent jurisdiction in a final nonappealable judgment to have
resulted from the gross negligence or willful misconduct of Agent, the Trustee or such Holder as finally determined by a court of competent jurisdiction. All such obligations of the Grantor shall be and remain enforceable against and only against
the Grantor and shall not be enforceable against Agent, the Trustee or any Holder. 
 (c) The benefits of this Section 16 shall
survive the termination of this Agreement. 
 17. REMEDIES; RIGHTS UPON DEFAULT. 
 (a) In addition to all other rights and remedies granted to it under this Security Agreement, the Indenture, and under any other instrument or agreement
securing, evidencing or relating to any of the Obligations, and subject to the terms of the Intercreditor Agreement, if any Event of Default shall have occurred and be continuing, the Agent may exercise all rights and remedies of a secured party
under the UCC. Without limiting the generality of the foregoing, the Grantor expressly agrees that in any such event the Agent, without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of
time and place of public or private sale) to or upon the Grantor or any other Person (all and each of which demands, advertisements and notices are hereby expressly waived to the maximum extent permitted by the UCC and other applicable law), may
forthwith enter upon the premises of the Grantor where any Collateral is located through self-help, without judicial process, without first obtaining a final judgment or giving the Grantor or any other Person notice and opportunity for a hearing on
the Agent’s claim or action and may collect, receive, assemble, process, appropriate and realize upon the Collateral, or any part thereof, and may forthwith sell, lease, license, assign, give an option or options to purchase, or sell or
otherwise dispose of and deliver the Collateral (or contract to do so), or any part thereof, in one or more parcels at a public or private sale or sales, at any exchange at such prices as it may deem acceptable, for cash or on credit or for 

  

 12 

 
future delivery without assumption of any credit risk. The Agent, the Trustee or any Holder shall have the right but not the obligation upon any such public
sale or sales and, to the extent permitted by law, upon any such private sale or sales, to purchase for the benefit of the Agent, the Trustee and Holders, the whole or any part of the Collateral so sold, free of any right or equity of redemption,
which equity of redemption the Grantor hereby releases. Such sales may be adjourned and continued from time to time with or without notice. The Agent shall have the right to conduct such sales on the Grantor’s premises or elsewhere and shall
have the right to use the Grantor’s premises without charge for such time or times as the Agent reasonably deems necessary or advisable. 
 (b) The Grantor further agrees, at the Agent’s request, to assemble the Collateral and make it available to the Agent at a place or places designated by the Agent which are reasonably convenient to the Agent and Grantor, whether at the
Grantor’s premises or elsewhere. Until the Agent is able to effect a sale, lease, or other disposition of Collateral, the Agent shall have the right to hold or use Collateral, or any part thereof, to the extent that it deems appropriate for the
purpose of preserving Collateral or its value or for any other purpose deemed appropriate by the Agent. The Agent shall have no obligation to the Grantor to maintain or preserve the rights of the Grantor as against third parties with respect to
Collateral while Collateral is in the possession of the Agent. The Agent may, if it so elects, seek the appointment of a receiver or keeper to take possession of Collateral and to enforce any of the Agent’s remedies (for the benefit of the
Agent, the Trustee and Holders), with respect to such appointment without prior notice or hearing as to such appointment. The Agent shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale to the
Obligations as provided herein, in the Intercreditor Agreement and in the Indenture, and only after so paying over such net proceeds, and after the payment by the Agent of any other amount required by any provision of law, need the Agent account for
the surplus, if any, to the applicable Grantor. To the maximum extent permitted by applicable law, the Grantor waives all claims, damages, and demands against the Agent, the Trustee or any Holder arising out of the repossession, retention or sale of
the Collateral except such as determined by a court of competent jurisdiction in a final nonappealable judgment to have resulted primarily from the gross negligence or willful misconduct of the Agent, the Trustee or such Holder. The Grantor agrees
that ten (10) days prior written notice by the Agent of the time and place of any public sale or of the time after which a private sale may take place is reasonable notification of such matters. The Grantor shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all Obligations, including any reasonable attorneys’ fees or other out-of-pocket expenses actually incurred by the Agent, the Trustee or any Holder
to collect such deficiency. 
 (c) Except as otherwise specifically provided herein, the Grantor hereby waives presentment, demand, protest
or any notice (to the maximum extent permitted by applicable law) of any kind in connection with this Security Agreement or any Collateral. 
 (d) To the extent that applicable law imposes duties on the Agent to exercise remedies in a commercially reasonable manner, the Grantor acknowledges and agrees that it is not commercially unreasonable for the Agent (a) to fail to incur
expenses reasonably deemed significant by the Agent to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (b) to 

  

 13 

 
fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental
or third party consents for the collection or disposition of Collateral to be collected or disposed of, (c) to fail to exercise collection remedies against account debtors or other Persons obligated on Collateral or to remove Liens on or any
adverse claims against Collateral, (d) to exercise collection remedies against account debtors and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (e) to advertise
dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact other Persons, whether or not in the same business as the Grantor, for expressions of
interest in acquiring all or any portion of such Collateral, (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (h) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets, (i) to dispose of assets in
wholesale rather than retail markets, (j) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (k) to purchase insurance or credit enhancements to insure the Agent against risks of loss, collection or
disposition of Collateral or to provide to the Agent a guaranteed return from the collection or disposition of Collateral, or (l) to the extent deemed appropriate by the Agent, to obtain the services of other brokers, investment bankers,
consultants and other professionals to assist the Agent in the collection or disposition of any of the Collateral. The Grantor acknowledges that the purpose of this Section 17(d) is to provide non-exhaustive indications of what actions
or omissions by the Agent would not be commercially unreasonable in the Agent’s exercise of remedies against the Collateral and that other actions or omissions by the Agent shall not be deemed commercially unreasonable solely on account of not
being indicated in this Section 17(d). Without limitation upon the foregoing, nothing contained in this Section 17(d) shall be construed to grant any rights to the Grantor or to impose any duties on Agent that would not have
been granted or imposed by this Security Agreement or by applicable law in the absence of this Section 17(d). 
 18. GRANT
OF LICENSE TO USE INTELLECTUAL PROPERTY. For the sole purpose of enabling the Agent to exercise rights and remedies under Section 17 hereof (including, without limiting the terms of Section 17 hereof, in order to take
possession of, hold, preserve, process, assemble, prepare for sale, market for sale, sell or otherwise dispose of Collateral) at such time as the Agent shall be lawfully entitled to exercise such rights and remedies, to the extent of the
Grantor’s legal and contractual rights to make such grant, the Grantor hereby grants to the Agent, for the benefit of the Agent, the Trustee and Holders, an irrevocable, nonexclusive license (exercisable without payment of royalty or other
compensation to the Grantor) to use, license or sublicense any Intellectual Property now owned or hereafter acquired by the Grantor, and wherever the same may be located, and including in such license access to all media in which any of the licensed
items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. 
 19.
LIMITATION ON AGENT’S AND HOLDERS’ DUTY IN RESPECT OF COLLATERAL. 
 (a) None of the Agent, the Trustee or any Holder
shall have any other duty as to any Collateral in its possession or control or in the possession or control of any agent or nominee of the Agent, the Trustee or such Holder, or as to the preservation of rights against prior parties or any other
rights pertaining thereto. 
  

 14 

 (b) The Agent shall not be responsible for filing any financing or continuation statements or recording
any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any security interest in the Collateral. The Agent shall be deemed to have exercised reasonable care in the custody of
the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property and shall not be liable or responsible for any loss or diminution in the value of any of the Collateral, by reason
of the act or omission of any carrier, forwarding agency or other agent or bailee selected by the Agent in good faith. 
 (c) The Agent shall
not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Liens in any of the Collateral, whether impaired by operation of law or by reason of any action or
omission to act on its part hereunder, except to the extent such action or omission constitutes gross negligence, bad faith or willful misconduct on the part of the Agent, for the validity or sufficiency of the Collateral or any agreement or
assignment contained therein, for the validity of the title of the Grantor to the Collateral, for insuring the Collateral or for the payment of taxes, charges, assessments or Liens upon the Collateral or otherwise as to the maintenance of the
Collateral. 
 20. MISCELLANEOUS. 
 (a) Reinstatement. This Security Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against the Grantor for liquidation or reorganization,
should the Grantor become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of the Grantor’s assets, and shall continue to be effective or
be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the
Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced,
restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. 
 (b) Notices. Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served
upon any of the parties by any other party, or whenever any of the parties desire to give and serve upon the other party any communication with respect to this Security Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be given in the manner, and deemed received, as provided for in the Indenture; provided, however that notice to the Agent shall be delivered to the following address or such other address as notified
by the Agent from time to time: 
 The Bank of New York Trust Company, N.A. 
  

 15 

 Attention: Corporate Trust Administration 
 700 S. Flower Street - Suite 500 
 Los
Angeles, CA 90017 
 Fax: 213-630-6298 
 (c) Severability. Whenever possible, each provision of this Security Agreement shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision of this Security
Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Security
Agreement. This Security Agreement is to be read, construed and applied together with the Indenture and the other Security Documents which, taken together, set forth the complete understanding and agreement of Agent, the Trustee, the Holders and the
Grantor with respect to the matters referred to herein and therein. 
 (d) No Waiver; Cumulative Remedies. Neither the Agent,
the Trustee nor any Holder shall by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder, and no waiver shall be valid unless in writing, signed by the Agent and then only to the extent therein set
forth. A waiver by the Agent of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Agent would otherwise have had on any future occasion. No failure to exercise nor any delay in
exercising on the part of the Agent, the Trustee or any Holder, any right, power or privilege hereunder, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or
future exercise thereof or the exercise of any other right, power or privilege. The rights and remedies hereunder provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights and remedies provided by law.
None of the terms or provisions of this Security Agreement may be waived, altered, modified or amended except by an instrument in writing, duly executed by the Agent and the Grantor. 
 (e) Limitation by Law. All rights, remedies and powers provided in this Security Agreement may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of law, and all the provisions of this Security Agreement are intended to be subject to all applicable mandatory provisions of law that may be controlling and to be limited to the extent
necessary so that they shall not render this Security Agreement invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable law. 
 (f) Termination of this Security Agreement. Subject to Section 20(a) hereof, this Security Agreement shall terminate upon the
payment in full in cash or satisfaction in full of all other Obligations (other than indemnification Obligations as to which no claim has been asserted). 
 (g) Intercreditor Agreement. Notwithstanding anything herein to the contrary, the lien and security interest granted to the Agent pursuant to this Agreement and the exercise of any right or remedy by the
Agent hereunder are subject to the provisions of the Intercreditor and Subordination Agreement dated as of even date herewith (the “Intercreditor 

  

 16 

 
Agreement”) among Comerica Bank, as Senior Agent, The Bank of New York Trust Company, N.A., as Trustee, and the Grantor. In the event of any
conflict between the terms of the Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern. 
 (h)
Successors and Assigns. This Security Agreement and all obligations of the Grantor hereunder shall be binding upon the successors and assigns of the Grantor (including any debtor-in-possession on behalf of the Grantor) and shall,
together with the rights and remedies of the Agent, for the benefit of the Agent, the Trustee and Holders, hereunder, inure to the benefit of the Agent, the Trustee and Holders, all future holders of any instrument evidencing any of the Obligations
and their respective successors and assigns. No sales of participations, other sales, assignments, transfers or other dispositions of any agreement governing or instrument evidencing the Obligations or any portion thereof or interest therein shall
in any manner affect the Lien granted to the Agent, for the benefit of the Agent, the Trustee and Holders, hereunder. Except as permitted by the Indenture, Grantor may not assign, sell, hypothecate or otherwise transfer any interest in or obligation
under this Security Agreement. 
 (i) Counterparts. This Security Agreement may be authenticated in any number of separate
counterparts, each of which shall collectively and separately constitute one and the same agreement. This Security Agreement may be authenticated by manual signature, facsimile or, if approved in writing by the Agent, electronic means, all of which
shall be equally valid. 
 (j) Governing Law. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE INDENTURE OF ANY OF THE
SECURITY DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS SECURITY AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. 
 (k) Waiver of Jury Trial. THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN THE AGENT AND THE GRANTOR ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS SECURITY AGREEMENT OR ANY OF THE OTHER SECURITY DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO. 
 (l) In no event shall the Agent be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control,
including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or
computer (software and hardware) services; it being understood that the Agent shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

  

 17 

 (m) Section Titles. The Section titles contained in this Security Agreement are and shall
be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 
 (n)
No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Security Agreement. In the event an ambiguity or question of intent or interpretation arises, this Security Agreement shall be
construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Security Agreement. 
 (o) Benefit of Holders. All Liens granted or contemplated hereby shall be for the benefit of the Agent, the Trustee and the Holders, and
all proceeds or payments realized from Collateral in accordance herewith shall be applied to the Obligations in accordance with the terms of the Indenture. 
 (p) Incorporation by Reference. All of the rights, protections, immunities and privileges granted to the Trustee under the Indenture are incorporated by reference herein and shall inure to the benefit of
the Agent herein. 
  

 18 

 IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be executed and delivered
by its duly authorized officer as of the date first set forth above. 
  

			
	ELECTROGLAS, INC., as a Grantor
		
	By:	 	 /s/ Thomas Brunton

	Name:	 	 Thomas Brunton

	Title:	 	 CFO

  

			
	ELECTROGLAS INTERNATIONAL,
INC., as a Grantor
		
	By:	 	 /s/ Thomas Brunton

	Name:	 	 Thomas Brunton

	Title:	 	 CFO

  

			
	THE BANK OF NEW YORK TRUST
COMPANY, N.A., as Agent
		
	By:	 	 /s/ Raymond Torres

	Name:	 	 Raymond Torres

	Title:	 	 Assistant Vice PresidentIntercreditor Agreement

 Exhibit 10.4 
 INTERCREDITOR AND SUBORDINATION AGREEMENT 
 This INTERCREDITOR AND SUBORDINATION AGREEMENT, dated as of
March 26, 2007, is entered into by and among Comerica Bank (“Bank”), The Bank of New York Trust Company, N.A., as trustee under the Indenture referred to below and collateral agent under the Security Agreement referred to below
(in both such capacities, herein, the “Trustee”), Electroglas, Inc., a Delaware corporation (“Electroglas”) and Electroglas International, Inc., a Delaware corporation (“International”). 

WITNESSETH: 
 WHEREAS, Bank and
Electroglas have entered into a Loan and Security Agreement dated as of July 16, 2004 pursuant to which Bank has agreed to extend and make available to the Electroglas certain advances of money upon the terms and conditions set forth therein
(as such agreement may be amended, restated, amended and restated, extended, supplemented or otherwise modified, from time to time at the option of the parties thereto, and any other agreements pursuant to which any of the indebtedness, commitments,
obligations, costs, expenses, fees, reimbursements, indemnities or other obligations payable or owing thereunder may be refinanced, restructured, renewed, extended, increased, refunded or replaced as any such other agreements may from time to time
at the option of the parties thereto be amended, restated, amended and restated, extended, supplemented or otherwise modified, being collectively referred to herein as the “Senior Facility”); 
 WHEREAS, the Electroglas, International and The Bank of New York Trust Company, N.A., in its capacity as Trustee, propose to enter into an Indenture,
dated as of March 26, 2007 (as such Indenture may be amended, restated, amended and restated, extended, supplemented or otherwise modified, from time to time at the option of the parties thereto, the “Indenture”), governing the
rights and duties of the Electroglas under the 6.25% Convertible Senior Subordinated Secured Notes due 2027 (the “Notes”); 
 WHEREAS, in connection with the Indenture, Electroglas, International and The Bank of New York Trust Company, N.A. (in its capacity as collateral agent and any successor collateral agent thereunder, the “Collateral Agent”)
propose to enter into a Security Agreement dated as of March 26, 2007 (as such Security Agreement may be amended, restated, amended and restated, extended, supplemented or otherwise modified, from time to time at the option of the parties
thereto, the “Noteholder Security Agreement”), with respect to the liens granted by the Borrower and International in favor of the Collateral Agent to secure the Obligations of the Borrower and International under and as defined in
the Indenture; 
 WHEREAS, Bank requires in connection with granting its consent to the Indenture and Noteholder Security Agreement that
certain amendments be made to the Senior Facility, that International guarantee the obligations of Borrower under the Senior Facility and grant a security interest in its assets to secured such guarantee, and that certain other Subsidiaries (as
defined herein) hereafter guaranty the Senior Facilities in the future (International and such future Subsidiaries as shall guarantee the Senior Facilities referred to herein as “Subsidiary Guarantors”, and together with
Electroglas referred to herein individually and collectively as “Borrower”); 

 WHEREAS, Bank requires that Trustee, on behalf of itself and the Noteholders (as defined herein)
subordinate, and the Trustee has agreed to subordinate, its rights to payment under the Notes, the Indenture and the documents entered into in connection therewith together with the security interest and lien of the Trustee in the Common Collateral
(as defined herein), to the security interest and lien of Bank in the Common Collateral, and to Bank’s rights and remedies as a secured party related thereto, all on the terms set forth herein; and 
 WHEREAS, it is a condition to the closing of the purchase and sale of the Notes under the Securities Purchase Agreement (as defined herein), that Bank
and the Trustee (for itself and for the benefit of the Noteholders) enter into this Agreement and the Borrower acknowledges and agrees to the same; 
 NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and obligations herein set forth and for other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, and in reliance upon the
representations, warranties and covenants herein contained, the parties hereto, intending to be legally bound, hereby agree as follows: 
 Section 1. Definitions. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and the plural form of the terms indicated):

 “Agreement” shall mean this Intercreditor and Subordination Agreement, as amended, restated, amended and restated,
extended, supplemented or otherwise modified, from time to time in accordance with the terms hereof. 
 “Bank” shall
include, in addition to Bank as referred to in the recitals hereto, the then acting collateral agent for Bank (or if there is more than one agent, a majority of them) under the Senior Lender Documents and any successor thereto exercising
substantially the same rights and powers, or if there is no acting agent under the Senior Facility, the lenders under the Senior Lender Documents having a majority in principal amount outstanding and committed thereunder. 
 “Bankruptcy Code” shall mean title 11 of the United States Code (11 U.S.C. 101 et seq.), as amended from time to time and any successor
statute. 
 “Collateral Agent” shall have the meaning set forth in the recitals hereto. 
 “Common Collateral” shall mean all of the assets of the Borrower or any of its Subsidiaries whether real, personal or mixed,
constituting both Senior Lender Collateral and Noteholder Collateral. 
 “Comparable Noteholder Collateral Document” shall
mean, in relation to any Common Collateral subject to any Senior Lender Collateral Document, that Noteholder Collateral Document which creates a security interest in the same Common Collateral, granted by the Borrower or its Subsidiaries.

  

 2 

 “DIP Financing” shall have the meaning set forth in Section 6.1 hereof. 

“Discharge of First Priority Lien Obligations” shall mean payment in full in cash of the principal of, interest and premium, if any,
on all First Priority Lien Obligations and the termination of any commitments of Bank under the Senior Facility. 
 “Equity
Interests” shall mean capital stock or warrants, options or other rights to subscribe for, acquire or receive capital stock (but excluding any debt security which is convertible into, or exchangeable for, capital stock). 
 “First Priority Lien Obligations” shall mean any principal, interest, penalties, fees, indemnifications, reimbursements, damages and
other obligations under the Senior Facility, including, without limitation, all interest accrued or accruing (or which would, absent the commencement of an Insolvency or Liquidation Proceeding, accrue) after the commencement of an Insolvency or
Liquidation Proceeding in accordance with and at the rate specified in the Senior Facility or other Senior Lender Documents whether or not the claim for such interest is allowed as a claim in such Proceeding; provided, however, that First Priority
Lien Obligations shall not include principal amounts outstanding to the extent the same shall exceed the Maximum Principal Amount. To the extent any payment with respect to the First Priority Lien Obligations (whether by or on behalf of Borrower, as
proceeds of security, enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential in any respect, set aside or required to be paid to a debtor in possession, trustee, receiver or similar Person, the obligation or
part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. For purposes of this definition, all references to indebtedness or obligations of the Borrower shall be deemed to
include any such indebtedness or obligations of its Subsidiaries as shall from time to time guarantee or otherwise become liable for the First Priority Lien Obligations of Electroglas. 
 “Indenture” shall have the meaning set forth in the recitals hereto. 
 “Insolvency or Liquidation Proceeding” shall mean (a) any voluntary or involuntary case or proceeding under the Bankruptcy Code
with respect to the Borrower or a Subsidiary of the Borrower, (b) any other voluntary or involuntary insolvency, reorganization or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or
proceeding with respect to the Borrower or a Subsidiary of the Borrower or with respect to any of its assets, (c) any liquidation, dissolution, reorganization or winding up of the Borrower or a Subsidiary of the Borrower whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy or (d) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Borrower or a Subsidiary of the Borrower. 
 “Lien” shall mean, with respect to any asset, any mortgage, deed of trust, deed to secure debt, lien, pledge, charge, security interest
or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement or any lease in the nature thereof); provided that in
no event shall an operating lease be deemed to constitute a Lien. 
  

 3 

 “Maximum Principal Amount” shall mean, as of the applicable date of determination,
(i) the aggregate principal amount (including the undrawn amount of all letters of credit) of indebtedness under the Senior Facility as of such date up to, but not in excess of $8,250,000 minus (ii) any permanent reductions in the
commitment under the Senior Facility after the date hereof in connection with a prepayment of indebtedness outstanding under the Senior Facility required by reason of any sale of assets by the Borrower and its Subsidiaries. 
 “Notes” shall have the meaning set forth in the recitals hereto. 
 “Noteholder” as applied to any Note, shall mean any Person in whose name at the time a particular Note is registered on the note
register maintained pursuant to the Indenture. 
 “Noteholder Collateral” shall mean all of the assets of the Borrower and
any of its Subsidiaries whether real, personal or mixed, in which the Noteholders or the Trustee or any of them now or hereafter holds a Lien as security for the Second Priority Lien Obligations.
 “Noteholder Collateral Documents” shall mean the Noteholder Security Agreement and any document or instrument executed and delivered
pursuant to any Noteholder Document at any time or otherwise pursuant to which a Lien is granted by the Borrower or its Subsidiaries to secure the Second Priority Lien Obligations or under which rights or remedies with respect to any such Lien are
governed, as the same may be amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time. 
 “Noteholder Documents” shall mean the Securities Purchase Agreement, the Registration Rights Agreement, the Indenture, the Notes, the Noteholder Collateral Documents, any guaranty and any other related document or
instrument executed and delivered pursuant to any Noteholder Document at any time or otherwise evidencing any Second Priority Lien Obligations, as the same may be amended, restated, amended and restated, extended, supplemented or otherwise modified
from time to time.
 “Noteholder Security Agreement” shall have the meaning set forth in the recitals hereto. 
 “Noteholders” shall mean the Persons holding the Notes or otherwise entitled to the benefit of the Second Priority Lien Obligations.

 “Payment Blockage Notice” shall have the meaning set forth in Section 2.5 hereof. 
 “Payment Blockage Period” shall have the meaning set forth in Section 2.5 hereof. 
 “Payment Default” shall have the meaning set forth in Section 2.5 hereof. 
 “Person” shall mean any person, individual, sole proprietorship, partnership, joint venture, limited liability company, corporation,
trust, unincorporated organization, association, institution, entity or other party, including, without limitation, any government and any political subdivision, agency or instrumentality thereof.
  

 4 

 “Recovery” shall have the meaning set forth in Section 6.6 hereof. 
 “Refinancing Senior Lenders” shall have the meaning set forth in Section 8.12 hereof. 
 “Registration Rights Agreement” shall mean that certain Registration Rights Agreement, dated as of March 26, 2007, among the
Borrower and the Buyers as defined therein, as such agreement may be amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time. 
 “Second Priority Lien Obligations” shall mean any principal, interest, penalties, fees, indemnifications, reimbursements, damages and
other liabilities payable under the Noteholder Documents, including without limitation, the Conversion Price (as defined in the Indenture), the Company Conversion Provisional Payment (as defined in the Indenture), the redemption price for Notes
called for redemption in accordance with Section 3.2 of the Indenture, the Repurchase Price (as defined in the Indenture) with respect to Notes submitted for repurchase in accordance with Section 16.1 of the Indenture, Extension Fees (as
defined in the Indenture), Liquidated Damages (as defined in the Indenture), expenses or any other amounts in respect of each and all of the Notes and all other obligations, liabilities and indebtedness of every kind, nature and description owing by
the Borrower under the Noteholder Documents in each case whether now or hereafter existing, direct or indirect, absolute or contingent, due or not due, primary or secondary, liquidated or unliquidated, renewed or restructured, whether or not from
time to time decreased or extinguished and later increased, created or incurred, whether or not arising on or after the commencement of a proceeding under Title 11, U.S. Code or any similar federal or state law for the relief of debtors
(including post-petition interest) and whether or not allowed or allowable as a claim in any such proceeding. For purposes of this definition, all references to indebtedness or obligations of the Borrower shall be deemed to include any such
indebtedness or obligations of the Subsidiaries. 
 “Securities Purchase Agreement” shall mean that certain Securities
Purchase Agreement, dated March 21, 2007, among the Borrower and the parties listed on the Schedule of Buyers attached thereto as Exhibit A, as such agreement may be amended, restated, amended and restated, extended, supplemented or otherwise
modified, from time to time. 
 “Senior Facility” shall have the meaning set forth in the recitals hereto. 
 “Senior Lender Collateral” shall mean all of the assets of the Borrower and any of its Subsidiaries whether real, personal or mixed,
which is the subject of a Lien that secures any First Priority Lien Obligation. 
 “Senior Lender Collateral Documents”
shall mean the Senior Facility and any other document or instrument pursuant to which a Lien is granted securing the First Priority Lien Obligations, as the same may be amended, restated, amended and restated, extended, supplemented or otherwise
modified, from time to time. 
  

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 “Senior Lender Documents” shall mean the Senior Facility, all documents and instruments
evidencing any other obligation under the Senior Facility or any First Priority Lien Obligation and any other related document or instrument executed or delivered pursuant to any Senior Lender Document at any time or otherwise evidencing any First
Priority Lien Obligations, as any such document or instrument may be amended, restated, amended and restated, extended, supplemented or otherwise modified from time to time. 
 “Subsidiary” shall mean a Person more than 50% of the outstanding voting stock or other Equity Interests of which is owned, directly or
indirectly, by the Borrower or by one or more of its Subsidiaries, or by the Borrower and one or more of its Subsidiaries. For the purposes of this definition, “voting stock” means stock which ordinarily has voting power for the election
of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. 
 “Trustee” shall include, in addition to the Trustee referred to in the recitals hereto, the then acting collateral agent under the Indenture and any successor thereto exercising substantially the same rights and powers, or
if there is no acting collateral agent under the Indenture, the Noteholders holding a majority in principal amount of Notes then outstanding. 
 “Uniform Commercial Code” or “UCC” shall mean the Uniform Commercial Code of the State of New York, as amended from time to time. 
 Section 2. Lien and Payment Priorities. 
 2.1 Lien Subordination. Notwithstanding the date, manner or order of grant, attachment or perfection of any Liens granted to the Trustee or the Noteholders on the Common Collateral or of any Liens
granted to Bank on the Common Collateral and notwithstanding any provision of the UCC, or any applicable law or the Noteholder Documents or the Senior Lender Documents or any other circumstance whatsoever, the Trustee, on behalf of itself and the
Noteholders, hereby agrees that: (a) any Lien on the Common Collateral securing the First Priority Lien Obligations now or hereafter held by Bank shall be senior and prior to any Lien on the Common Collateral securing the Second Priority Lien
Obligations; and (b) any Lien on the Common Collateral now or hereafter held by the Trustee or the Noteholders regardless of how acquired, whether by grant, statute, operation of law, subrogation or otherwise, shall be junior and subordinate in
all respects to all Liens on the Common Collateral securing the First Priority Lien Obligations. All Liens on the Common Collateral securing the First Priority Lien Obligations shall be and remain senior to all Liens on the Common Collateral
securing the Second Priority Lien Obligations for all purposes. For the avoidance of doubt, in the event the Trustee or any Noteholder becomes a judgment lien creditor in respect of Common Collateral as a result of its enforcement of its rights as
an unsecured creditor, such judgment lien shall be subordinated to the Liens securing First Priority Lien Obligations on the same basis as the other Liens securing the Second Priority Lien Obligations are so subordinated to such First Priority Lien
Obligations under this Agreement. The Trustee on behalf of itself and each Noteholder, agrees not to take or cause to be taken any action, the purpose or effect of which is to make any Lien in respect of any of the Common Collateral pari
passu with or senior to, or to give the 

  

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Trustee or any Noteholder any preference or priority relative to, the liens in favor of Bank in respect of the Senior Lender Collateral. For the purposes of
the foregoing allocation of priorities, any claim of a right of set-off shall be treated in all respects as a Lien, and no claimed right of set-off shall be asserted by the Trustee on behalf of itself or any Noteholder to defeat or diminish the
rights or priorities of the Lien of Bank provided for herein.
 2.2 Prohibition on Contesting Liens. Each of the Trustee, for
itself and on behalf of each Noteholder, and Bank agrees that it shall not (and hereby waives any right to) contest or support any other Person in contesting, in any proceeding (including, without limitation, any Insolvency or Liquidation
Proceeding), the unavoidability, priority, validity or enforceability of a Lien held by Bank in the Senior Lender Collateral or by the Trustee or Noteholders in the Common Collateral, as the case may be. 
 2.3 No New Liens. So long as the Discharge of First Priority Lien Obligations has not occurred, (a) the parties hereto agree that,
after the date hereof, if the Trustee shall hold any Lien on any assets of the Borrower or its Subsidiaries securing the Second Priority Lien Obligations that are not also Senior Lender Collateral, the Trustee, upon demand by Bank, will either
release such Lien or assign it to Bank as security for the First Priority Lien Obligations, (b) the parties hereto agree that, after the date hereof, if Bank shall hold any Lien on any assets of the Borrower or any of its Subsidiaries securing
the First Priority Lien Obligations that are not also Noteholder Collateral, if required by the Noteholder Security Agreement, the Borrower or its Subsidiaries, as applicable, shall grant a second-priority Lien on such assets to the Trustee as
security for the Second Priority Lien Obligations, and (c) the Borrower agrees not to grant or to permit any of its Subsidiaries to grant any Lien on any of their assets in favor of the Trustee or the Noteholders unless the Borrower or such
Subsidiary has granted a similar Lien on such assets in favor of Bank. 
 2.4 Subordination in Right of Payment. The Borrower
covenants and agrees, and the Trustee on behalf of itself and each Noteholder, likewise covenants and agrees, that all Notes shall be issued subject to the provisions of this Agreement and to the extent and in the manner hereinafter set forth in
this Agreement, the Second Priority Lien Obligations are hereby expressly made subordinate and junior and subject in right of payment to the prior payment in full in cash of all First Priority Lien Obligations now outstanding or hereinafter
incurred. 
 2.5 Payment Blockage after Default in First Priority Lien Obligations. No payment on account of the Second Priority Lien
Obligations shall be made, and no Notes shall be redeemed or purchased directly or indirectly by the Borrower (or any of its Subsidiaries), if at the time of such payment or purchase or immediately after giving effect thereto, (a) a default in
the payment of principal, premium, if any, interest or other obligations in respect of any First Priority Lien Obligations occurs and is continuing determined without regard to whether there is a grace period applicable to the payment of such First
Priority Lien Obligations (a “Payment Default”), unless and until such Payment Default shall have been cured or waived or shall have ceased to exist or (b) the Borrower and Trustee shall have received notice (a “Payment
Blockage Notice”) from Bank that there exists under First Priority Lien Obligations a default, which shall not have been cured or waived, permitting Bank to declare such First Priority Lien Obligations due and payable, but only for the
period (the “Payment Blockage Period”) commencing on the date of receipt of the Payment Blockage Notice and ending on the earlier of (i) the date such 

  

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default shall have been cured or waived, or (ii) the 180th day immediately following the Trustee’s receipt of such Payment Blockage Notice. The
Borrower shall resume payments on and distributions in respect of the Notes, including any past scheduled payments of the principal of (and premium, if any) and interest on such Notes to which the holders of the Notes would have been entitled but
for the provisions of this Section 2.5 in the case of a Payment Default, on the date upon which such Payment Default is cured or waived or ceases to exist. In addition, notwithstanding clauses (a) and (b), unless the holders of First
Priority Lien Obligations shall have accelerated the maturity of such First Priority Lien Obligations or there is a Payment Default, the Borrower shall resume payments on the Note after the end of each Payment Blockage Period. Not more than one
Payment Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to First Priority Lien Obligations during such period. 
 2.6 Payments on Notes. The Borrower may make regularly scheduled payments of the principal of, and any interest or premium on, the Notes, if at
the time of payment, and immediately after giving effect thereto, there exists no Payment Default or Payment Blockage Period, provided, however, that nothing in this Agreement shall permit the Borrower to make any payment in respect of the Notes
that would result in a default or event of default arising under the Senior Lender Documents. 
 2.7 Certain Conversions Deemed
Payment. For the purposes hereof (a) the issuance and delivery of junior securities upon conversion of Notes in accordance with Article XV of the Indenture shall not be deemed to constitute a payment or distribution on account of the
principal of or interest on Notes or on account of the purchase or other acquisition of Notes, and (b) the payment, issuance or delivery of cash (except in satisfaction of fractional shares pursuant to Section 15.4 of the Indenture),
property or securities (other than junior securities) upon conversion of a Note shall be deemed to constitute payment on account of the principal of such Note. For the purposes of this 2.7, the term “junior securities” means
(y) shares of any stock of any class of the Borrower, or (z) securities of the Borrower which are subordinated in right of payment to all First Priority Lien Obligations which may be outstanding at the time of issuance or delivery of such
securities to substantially the same extent as, or to a greater extent than, the Notes are so subordinated as provided herein. Nothing contained in this Agreement is intended to or shall impair, as among the Borrower, its creditors other than Bank
and the Trustee and the Noteholders, the right, which is absolute and unconditional, of the holder of any Note to convert such Note in accordance with Article XV of the Indenture. 
 2.8 Subrogation. Subject to the prior Discharge of First Priority Lien Obligations, the rights of the Noteholders shall be subrogated to the
rights of the holders of First Priority Lien Obligations to receive payments or distributions of the assets of the Borrower made on such First Priority Lien Obligations until all Second Priority Lien Obligations shall be paid in full; and for
purposes of such subrogation, no payments or distributions to the holders of First Priority Lien Obligations of any cash, property or securities to which any Noteholder would be entitled except for this Agreement shall, as between the Noteholders
and the Borrower and/or its creditors other than the holders of the First Priority Lien Obligations, be deemed to be a payment on account of the First Priority Lien Obligations. 
  

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 2.9 Rights of Holders Unimpaired. The provisions of this Agreement are and are intended solely for
the purposes of defining the relative rights of the Trustee and the Noteholders of the Notes and Bank and nothing in this Agreement shall (a) impair, as between the Borrower and the Trustee and Noteholders, the obligation of the Borrower, which
is unconditional and absolute, to pay to the Trustee and Noteholders the Second Priority Lien Obligations in accordance with the terms of the Noteholder Documents or (b) impair, as between the Borrower and Bank, the obligation of the Borrower,
which is unconditional and absolute, to pay to Bank the First Priority Lien Obligations, in accordance with the terms of the Senior Lender Documents. 
 2.10 Holders of First Priority Lien Obligations. This Agreement will constitute a continuing offer to all Persons who, in reliance upon this Agreement, become holders of, or continue to hold, First Priority
Lien Obligations; such provisions are made for the benefit of the holders of First Priority Lien Obligations, and such holders are hereby made obligees under such provisions to the same extent as if they were named therein, and they or any of them
may proceed to enforce such subordination and no amendment or modification of the provisions contained herein shall diminish the rights of such holders unless such holders have agreed in writing thereto. 
 2.11 Rights of Trustee and Noteholders as Holder of Senior Indebtedness; Preservation of Rights. The Trustee in its individual capacity and each
Noteholder shall be entitled to all the rights set forth in this Agreement with respect to any First Priority Lien Obligations which may at any time be held by it, to the same extent as any other holder of First Priority Lien Obligations, and
nothing in this Indenture shall deprive the Trustee or any Noteholder of any of its rights as such holder. 
 2.12 Proceeds Held in
Trust. In the event that notwithstanding the foregoing, any payment or distribution of assets of the Borrower of any kind or character, whether in cash, property or securities (including, without limitation, by way of setoff or otherwise)
prohibited by the provisions of the Agreement shall be received by the Trustee or any Noteholder before there shall have occurred a Discharge of First Priority Lien Obligations, such payment or distribution shall be held in trust for the benefit of
and shall be paid over or delivered to Bank for application to, or to be held as collateral for, the payment of any First Priority Lien Obligations remaining unpaid to the extent necessary to pay all First Priority Lien Obligations in full after
giving effect to any concurrent payment or distribution to Bank. 
 2.13 Blockage of Remedies. During any Payment Default or any
Payment Blockage Period and subject in all events to the limitations of Section 3 below, if an Event of Default has occurred under the Indenture, the Trustee, on behalf of itself and each of the Noteholders, agrees not to commence or join with
any creditor of the Borrower or any of its Subsidiaries in asserting or commencing any proceedings to collect or enforce their rights under the Noteholder Documents or take any action to foreclose or realize upon the indebtedness thereunder for a
period beginning on the date of such Event of Default and ending on the first to occur of (a) the date that is 180 days following the date of such Event of Default or (b) the date such Payment Default is cured, waived or ceases to exist or
the date such Payment Blockage Period ends, as the case may be. 
  

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 2.14 Notice of Acceleration. The Trustee, on behalf of itself and each of the Noteholders, agrees,
solely for the benefit of the holders of First Priority Lien Obligations, not to declare the unpaid principal amount of any Note to be due and payable pursuant to Section 7.1 of the Indenture unless the Trustee shall, concurrent with such
declaration or acceleration, give Bank written notice such declaration of acceleration. In addition, the Borrower, forthwith upon receipt of any such declaration of acceleration, shall send a copy thereof to Bank. 
 2.15 Notice to Trustee. The Borrower shall give prompt written notice to the Trustee of any Payment Default under and as defined in the Indenture.
Failure to give such notice shall not affect the subordination of the Notes to the First Priority Lien Obligations. Notwithstanding the provisions of this Agreement or any provision of the Indenture, the Trustee shall not be charged with knowledge
of the existence of any facts that would prohibit the making of any payment to or by the Trustee in respect of the Notes, unless and until the Trustee shall have received written notice thereof at the address specified on the signature pages hereto
from the Borrower or Bank; and, prior to the receipt of any such written notice, the Trustee shall be entitled in all respects to assume that no such facts exist; provided, however, that if a Responsible Officer (as defined in the
Indenture) of the Trustee shall not have received, at least one business day prior to the date upon which by the terms of the Indenture any such money may become payable for any purpose (including, without limitation, payment on account of principal
of, premium, if any, or interest on the Notes, the redemption price for Notes called for redemption in accordance with Section 3.2 of the Indenture, the Repurchase Price with respect to Notes submitted for repurchase in accordance with
Section 16.1 of the Indenture, the Conversion Price, the Company Conversion Provisional Payment, Extension Fees, Liquidated Damages (as each such term is defined in the Indenture), fees, expenses and any other payment payable with respect to
the Notes pursuant to the provisions of the Indenture), a notice of a Payment Default or a Payment Blockage Notice, then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such
money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it less than one business day prior to such date. 
 The Trustee shall be entitled to conclusively rely on the delivery to it of a written notice by a person representing itself to be Bank to establish that
such notice has been given by Bank. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any person as a holder of First Priority Lien Obligations to participate in any payment or
distribution pursuant to this Section 2, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of First Priority Lien Obligations held by such person, the extent to which such
person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such person under this Section 2, and if such evidence is not furnished, the Trustee may defer any payment which it may be required
to make for the benefit of such person pursuant to the terms of this Agreement pending judicial determination as to the rights of such person to receive such payment. 
  

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 2.16 Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or
distribution of assets of the Borrower referred to in Section 4.3 of the Indenture, the Trustee and the Holders of the Notes shall be entitled to conclusively rely upon any order or decree entered by any court of competent jurisdiction in which
such Insolvency or Liquidation Proceeding is pending, or a certificate of the trustee in bankruptcy, liquidating trustee, Custodian, receiver, assignee for the benefit of creditors, agent or other person making such payment or distribution,
delivered to the Trustee or to the Noteholders, for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the holders of First Priority Lien Obligations and other indebtedness of the Borrower, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 2. 
 Section 3. Enforcement. 
 3.1 Exercise of Remedies. 
 (a) So long as the Discharge of First Priority Lien Obligations has not occurred, whether or not any Insolvency or Liquidation Proceeding has been
commenced by or against the Borrower or any Subsidiary of the Borrower, (i) the Trustee and the Noteholders will not exercise or seek to exercise any rights or remedies (including setoff) with respect to any Common Collateral, institute any
action or proceeding with respect to such rights or remedies, including, without limitation, any action of foreclosure, contest, protest or object to any foreclosure proceeding or action brought by Bank, or any other exercise by any such party, of
any rights and remedies relating to the Common Collateral under the Senior Lender Documents or otherwise, or object to the forbearance by Bank from bringing or pursuing any foreclosure proceeding or action or any other exercise of any rights or
remedies relating to the Common Collateral and (ii) Bank shall have the exclusive right to enforce rights, exercise remedies (including, without limitation, setoff and the right to credit bid its debt) and make determinations regarding release,
disposition, or restrictions with respect to the Common Collateral without any consultation with or the consent of the Trustee or any Noteholder (and the Trustee and Noteholders shall be deemed to have consented to any such enforcement, exercise or
determination). Notwithstanding the foregoing, (iii) in any Insolvency or Liquidation Proceeding commenced by or against the Borrower or any Subsidiary of the Borrower, the Trustee may file a claim or statement of interest with respect to the
Second Priority Lien Obligations, (iv) in the event a Payment Blockage Notice shall have been delivered pursuant to Section 2.5 above and the Payment Blockage Period has expired but no Payment Default shall exist, the Trustee may seek to
enforce its remedies, and (v) in the event Bank shall have accelerated the First Priority Lien Obligations without taking any other enforcement remedy, the Trustee may similarly accelerate the Second Priority Lien Obligations without taking any
other enforcement remedy. In exercising rights and remedies with respect to the Common Collateral, Bank may enforce the provisions of the Senior Lender Documents and exercise remedies thereunder, all in such order and in such manner as it may
determine in the exercise of its sole discretion. Such exercise and enforcement shall include, without limitation, the rights of an agent appointed by it to sell or otherwise dispose of Common Collateral upon foreclosure, to incur expenses in
connection with such sale or disposition, and to exercise all the rights and remedies of a secured lender under the Uniform Commercial Code of any applicable jurisdiction and of a secured creditor under bankruptcy or similar laws of any applicable
jurisdiction. 
  

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 (b) The Trustee, on behalf of itself and the Noteholders, agrees that it will not take or receive
any Common Collateral or any proceeds of Common Collateral in connection with the exercise of any right or remedy (including setoff) with respect to any Common Collateral, unless and until the Discharge of First Priority Lien Obligations has
occurred. Without limiting the generality of the foregoing, unless and until the Discharge of First Priority Lien Obligations has occurred, except as expressly provided in the proviso in Section 3.1(a) (ii) above, the sole right of the
Trustee and the Noteholders with respect to the Common Collateral is to hold a Lien on the Common Collateral pursuant to the Noteholder Documents for the period and to the extent granted therein and to receive a share of the proceeds thereof, if
any, after the Discharge of First Priority Lien Obligations has occurred. 
 (c) Subject to the proviso in Section 3.1(a)
(ii) above, (i) the Trustee, for itself or on behalf of the Noteholders, agrees that the Trustee and the Noteholders will not take any action that would hinder any exercise of remedies undertaken by Bank under the Senior Loan Documents,
including any sale, lease, exchange, transfer or other disposition of the Common Collateral, whether by foreclosure or otherwise, and (ii) the Trustee, for itself and on behalf of the Noteholders, hereby waives any and all rights it or the
Noteholders may have as a junior lien creditor or otherwise to object to the manner in which Bank seeks to enforce or collect the First Priority Lien Obligations or the Liens granted in any of the Senior Lender Collateral. 
 3.2 Cooperation. Subject to the proviso in Section 3.1(a)(ii) above, the Trustee, on behalf of itself and the Noteholders, agrees
that, unless and until the Discharge of First Priority Lien Obligations has occurred, it will not commence, or join with any Person (other than Bank upon the request thereof) in commencing any enforcement, collection, execution, levy or foreclosure
action or proceeding with respect to any Lien held by it under any of the Noteholder Documents or otherwise. 
 3.3 Actions in Violation
of Agreement. If the Trustee or any Noteholder, in violation of this Agreement, exercises or seeks to exercise any rights or remedies in respect of the Common Collateral against the Borrower or any Subsidiary with respect to the Second Priority
Secured Obligations without the prior written consent of Bank, Bank may interpose as a defense or dilatory plea the making of this Agreement and may intervene and interpose such defense or plea in its name or in the name of the Borrower or any
Subsidiary. Should the Trustee or any Noteholder, in violation of this Agreement, in any way take, or attempt to or threaten to take any action with respect to any Common Collateral in violation of this Agreement (including, without limitation, any
attempt to realize upon or enforce any remedy with respect to the Noteholder Documents in violation of this Agreement), or fail to take any action required by this Agreement, Bank (in its own name or in the name of the Borrower or any Subsidiary)
may obtain relief against the Trustee or such Noteholder by injunction, specific performance and/or other appropriate equitable relief, it being understood and agreed by the Trustee, on behalf of itself and each Noteholder, that (a) Bank’s
damages from its actions may at that time be difficult to ascertain and may be irreparable, and (b) the Trustee, on behalf of itself and each Noteholder, waives any defense that the Borrower, any Subsidiary or Bank cannot demonstrate damage
and/or be made whole by the awarding of damages. 
  

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 Section 4. Payments. 
 4.1 Application of Proceeds. As long as the Discharge of First Priority Lien Obligations has not occurred, the cash proceeds of Common
Collateral received in connection with the sale of, or collection on, such Common Collateral upon the exercise of remedies, shall be applied by Bank to the First Priority Lien Obligations in such order as specified in the Senior Facility. Upon
Discharge of the First Priority Lien Obligations, Bank shall deliver to the Trustee any proceeds of Common Collateral held by it in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise
direct or as may otherwise be required by applicable law. 
 4.2 Payments Over. Any Common Collateral or proceeds thereof
received by the Trustee or any Noteholder in connection with the exercise of any right or remedy (including setoff) relating to the Common Collateral in contravention of this Agreement shall be segregated and held in trust and forthwith paid over to
Bank in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct. Bank is hereby authorized to make any such endorsements as agent for the Trustee or any such Noteholder. This
authorization is coupled with an interest and is irrevocable. 
 Section 5. Other Agreements. 
 5.1 Releases. 
 (a) If in
connection with: 
 (i) the exercise of Bank’s rights or remedies in respect of the Common Collateral provided for
in Section 3.1 above, including any sale, lease, exchange, transfer or other disposition of such Common Collateral; 
 (ii) any sale, lease, exchange, transfer or other disposition of Common Collateral permitted under the terms of the Senior Facility (whether or not an event of default under, and as defined therein, has occurred and is continuing); or

 (iii) any agreement between Bank and the Borrower to release Bank’s Lien on any portion of the Common Collateral;

 the Bank releases any of its Liens on any part of the Common Collateral, the Liens, if any, of the Trustee, for itself or for the benefit of the
Noteholders, on such Common Collateral shall be automatically, unconditionally and simultaneously released and the Trustee, for itself or on behalf of any such Noteholder, promptly shall execute and deliver to Bank or the Borrower such termination
statements, releases and other documents as Bank or the Borrower may request to effectively confirm such release; provided, however, that the proceeds of any sale or disposition of the Common Collateral shall be applied to repay the First Priority
Lien Obligations. 
  

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 (b) The Trustee, for itself and on behalf of the Noteholders, hereby irrevocably constitutes and
appoints Bank, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Trustee or such holder or in own name, from time to time in Bank’s discretion, for
the purpose of carrying out the terms of this Section 5.1, to take any and all appropriate action and to execute and file or record any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this
Section 5.1, including, without limitation, any termination statements, endorsements or other instruments or transfer or release. 
 5.2 Insurance. Unless and until the Discharge of First Priority Lien Obligations has occurred, Bank shall have the sole and exclusive right, subject to the rights of the Borrower under the Senior Lender Documents, to adjust
settlement for any insurance policy covering the Common Collateral in the event of any loss thereunder and to approve any award granted in any condemnation or similar proceeding affecting the Common Collateral. Unless and until the Discharge of
First Priority Lien Obligations has occurred, all proceeds of any such policy and any such award if in respect to the Common Collateral shall be paid to Bank to the extent required under the Senior Facility and thereafter to the Trustee for the
benefit of the Noteholders to the extent required under the applicable Noteholder Documents and then to the owner of the subject property or as a court of competent jurisdiction may otherwise direct or as may otherwise be required by applicable
law. If the Trustee or any Noteholder shall, at any time, receive any proceeds of any such insurance policy or any such award in contravention of this Agreement, it shall pay such proceeds over to Bank in accordance with the terms of
Section 4.2 above. 
 5.3 Amendments to Noteholder Documents. 
 (a) Without the prior written consent of Bank, neither the Notes, the Indenture nor any Noteholder Collateral Document may be amended, restated, amended
and restated, extended, supplemented or otherwise modified. 
 (b) In the event Bank enters into any amendment, waiver or consent in
respect of any of the Senior Lender Collateral Documents for the purpose of adding to, or deleting from, or waiving or consenting to any departures from any provisions of, any Senior Lender Collateral Document or changing in any manner the rights of
Bank or the Borrower thereunder, then such amendment, waiver or consent shall apply automatically to any comparable provision of the Comparable Noteholder Collateral Document without the consent of the Trustee or the Noteholders and without any
action by the Trustee, the Noteholders or the Borrower; provided, however, (i) that no such amendment, waiver or consent shall have the effect of removing assets subject to the Lien of the Noteholder Collateral Documents, except to the extent
that a release of such Lien is permitted by Section 5.1 above and (ii) notice of such amendment, waiver or consent shall have been given to the Trustee prior to its effectiveness, provided that the failure to give such notice shall not
affect the effectiveness and validity thereof. 
 5.4 Relative Rights. Nothing in this Agreement modifies any rights or
remedies (a) Bank may have with respect to the Senior Lender Collateral or (b) except as expressly set 

  

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forth herein, the Trustee or Noteholders may have with respect to the Noteholder Collateral. The rights of Bank under this Agreement are in addition to, and
not in derogation of, its rights under Article IV of the Indenture. 
 5.5 Bailee for Perfection. 
 (a) Bank agrees to hold the Common Collateral that is part of the Common Collateral in its possession or control (or in the possession or control of
its agents or bailees) as bailee for the Trustee and any assignee solely for the purpose of perfecting the security interest granted in such Collateral pursuant to the Noteholder Security Agreement, subject to the terms and conditions of this
Section 5.5. 
 (b) Until the Discharge of First Priority Lien Obligations has occurred, Bank shall be entitled to deal with the
Common Collateral in its possession or control in accordance with the terms of the Senior Lender Collateral Documents as if no bailee arrangement with the Trustee existed. The rights of the Trustee shall at all times be subject to the terms of this
Agreement and to Bank’s rights under the Senior Lender Documents. 
 (c) Bank shall have no obligation whatsoever to the Trustee or
any Noteholder to assure that the Common Collateral in its possession or control is genuine or owned by the Borrower or one of its Subsidiaries or to preserve rights or benefits of any Person except as expressly set forth in this Section 5.5.
The duties or responsibilities of Bank under this Section 5.5 shall be limited solely to holding the Common Collateral in its possession or control as bailee for the Trustee for purposes of perfecting the Lien held by the Trustee. 

(d) Bank shall not have by reason of the Noteholder Security Agreement or this Agreement or any other document a fiduciary relationship in
respect of the Trustee or any Noteholder. Bank makes no representations as to the value or condition of the Common Collateral or any part thereof, as to the title of the Borrower or any Subsidiary to the Common Collateral, as to the security
afforded by this Agreement or any other document relating to the Common Collateral or, as to the validity, execution, enforceability, legality or sufficiency of this Agreement or any other document relating to the Common Collateral, and Bank shall
incur no liability or responsibility in respect of any such matters. Bank shall not be responsible for insuring the Common Collateral, for the payment of taxes, charges, assessments or liens upon the Common Collateral or otherwise as to the
maintenance of the Common Collateral. Bank shall have no duty to the Borrower or any Subsidiary or, except as expressly provided above, to the Trustee or any Noteholder, as to any Common Collateral in its possession or control or in the
possession or control of any agent or nominee of Bank or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. 
 (e) Upon the Discharge of First Priority Lien Obligations, the Bank shall deliver to the Trustee the Common Collateral in its possession or control
together with any necessary endorsements (or otherwise allow the Trustee to obtain control of such Collateral) or as a court of competent jurisdiction may otherwise direct or as may otherwise be required by applicable law. 
  

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 5.6 Additional Covenants of Trustee. The Trustee, on behalf of itself and the Noteholders, also
covenants and agrees that it: 
 (a) has not granted and will not grant any subordinations with respect to the Second Priority Lien
Obligations or its Lien in the Common Collateral other than pursuant to the Indenture and this Agreement as in effect on the date hereof; 
 (b) will place a legend on the Noteholder Documents to state that the Second Priority Lien Obligations are subordinate to the First Priority Lien Obligations and are subject to the terms and conditions of this Agreement; and 
 (c) will give Bank prompt (and in no event later than 10 days) notice of any written notice of any notice of default or event of default delivered to the
Borrower or its Subsidiaries under the Indenture. 
 5.7 Purchase Option. Notwithstanding anything herein to the contrary, the Trustee
on behalf of the Noteholders or its assignee shall have the option to purchase all, but not less than all, of the First Priority Lien Obligations exercisable at the Trustee’s option (i) within the 60 day period following that day that is 120
days after a Payment Blockage Notice has been received or a Payment Default has occurred, provided that the default giving rise to such Payment Blockage Notice or Payment Default has not then been cured or waived. Such option shall be exercised by
giving ten (10) business days prior written notice to Bank of the intent of Trustee to exercise such option. Upon receipt of such notice of intent to exercise such option, Bank shall provide to Trustee in writing the aggregate amount of First
Priority Lien Obligations outstanding, including principal (which shall be purchased at par), accrued interest, fees, expenses, breakage fees, any prepayment penalty or premium, and any other amount owing by the borrower under the Senior Lender
Documents, but excluding any unasserted contingent and indemnity obligations (collectively, the “Payoff Amount”). The purchase price for the First Priority Lien Obligations shall equal the Payoff Amount as of the date of the
purchase and sale plus Bank’s good faith estimate of the other First Priority Lien Obligations. 
 (a) The purchase price for the First
Priority Secured Obligations shall be payable by wire transfer in federal funds, at such time as all conditions to the purchase other than the payment of the purchase price, have been satisfied, to such bank account as Bank may designate in writing
to the Trustee for such purpose on the date of purchase. Interest shall be calculated to but excluding the day on which such purchase and sale shall occur if the amounts are received in the designated bank account prior to 12 noon, Pacific time, and
interest shall be calculated to and including such day if the amounts are received later than 12 noon, Pacific time. The sale of the First Priority Lien Obligations shall be without recourse and without any representation or warranty whatsoever,
whether as to the enforceability of any Senior Lender Documents or the validity, enforceability, perfection, priority or sufficiency of any lien securing or guarantee or other supporting obligation for the First Priority Lien Obligations or as to
any other matter whatsoever, except only the representation and warranty that the transferor owns free and clear of all liens and encumbrances, and has good right to convey, whatever claims and interests it may have in respect of First Priority Lien
Obligations and the rights created under the Senior Lender Documents. 
  

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 (b) The sale of the First Priority Lien Obligations shall occur within ten (10) business days after
Bank’s receipt of notice exercising the applicable option (and the parties hereto shall reasonably cooperate with one another and take all actions reasonably required of them to effect such sale within such period). 
 (c) On the date of such purchase and sale, 
 (i) Bank shall deliver to the Trustee all evidence of the First Priority Lien Obligations, endorsed to such purchaser or endorsed in blank or endorsed in accordance with such purchaser’s instruction; and shall transfer and assign to
such purchaser all of Bank’s right, title and interest in and to the Senior Lender Documents and the collateral securing the payment and performance of the First Priority Lien Obligations, and shall otherwise execute such documents and take
such action as may be reasonably requested by the purchaser to consummate the purchase in accordance herewith; and 
 (ii) the purchaser
shall furnish cash collateral to Bank in such amounts as Bank determines to be reasonably necessary to provide security in connection with any outstanding letters of credit (such collateral not to be required to exceed 110% of the amount of such
letters of credit). Bank shall be entitled to hold such security for so long as such letters of credit are outstanding. 
 Section 6. Insolvency or Liquidation Proceedings. 
 6.1 Financing Issues. If the Borrower or any
Subsidiary of the Borrower shall be subject to any Insolvency or Liquidation Proceeding and Bank shall desire to permit the use of cash collateral or to permit the Borrower or such Subsidiary to obtain financing under section 363 or section 364 of
the Bankruptcy Code on terms approved by Bank (“DIP Financing”), then the Trustee, on behalf of itself and the Noteholders, agrees that it will raise no objection to such use or DIP Financing or offer a competing debtor in
possession financing proposal and will not request adequate protection or any other relief in connection therewith (except to the extent permitted by Section 6.3 below) and, if the Liens securing the First Priority Lien Obligations are made
subordinate or pari passu with such DIP Financing, will subordinate its Liens in the Common Collateral to such DIP Financing (and all obligations relating thereto) on the same basis as the other Liens securing the Second Priority Lien Obligations
are so subordinated to First Priority Lien Obligations under this Agreement. The Trustee, on behalf of itself and the Noteholders, agrees that 3 business days notice of any proposal to provide DIP Financing shall be considered reasonable notice f
the same. 
 6.2 Relief from the Automatic Stay. Until the Discharge of First Priority Lien Obligations has occurred, the
Trustee, on behalf of itself and the Noteholders, agrees that none of them shall seek relief from the automatic stay or any other stay in any Insolvency or Liquidation Proceeding in respect of the Common Collateral, without the prior written consent
of Bank. 
 6.3 Disposition of Assets. In connection with any Insolvency or Liquidation Proceeding, until Discharge of the
First Priority Lien Obligations, the Trustee, on behalf of itself and the Noteholders, agrees that none of them will raise any objection to and will not contest (or support any person in objecting to or contesting) any sale or disposition of any
assets of the 

  

 17 

 
Borrower or any Subsidiary that is supported by Bank, and the Trustee and Noteholders will be deemed to have consented under Section 363 of the
Bankruptcy Code (and otherwise) to any sale supported by Bank and to have released their Liens, if any, in such assets upon the consummation of such sale so long as the Lien of the Trustee and the Noteholders on the Common Collateral attaches to the
proceeds from such sale or disposition subject to the prior lien of Bank. The Trustee, on behalf of itself and the Noteholders, agrees not to credit bid at any sale or disposition of the assets of any Loan Party under Section 363 of the
Bankruptcy Code. 
 6.4 Adequate Protection. The Trustee, on behalf of itself and the Noteholders, agrees that none of them
shall contest (or support any other Person contesting) (a) any request by Bank for adequate protection or (b) any objection by Bank to any motion, relief, action or proceeding based on Bank claiming a lack of adequate protection.
Notwithstanding the foregoing contained in this Section 6.4, in any Insolvency or Liquidation Proceeding, (i) if the Bank is granted adequate protection in the form of additional collateral in connection with any DIP Financing or use of
its cash collateral under section 363 or section 364 of the Bankruptcy Code, then the Trustee, on behalf of itself or any of the Noteholders, may seek or request adequate protection in the form of a replacement Lien on such additional collateral,
which Lien is subordinated to the Liens securing the First Priority Lien Obligations and such DIP Financing (and all obligations relating thereto) on the same basis as the other Liens securing the Second Priority Lien Obligations are so subordinated
to the First Priority Lien Obligations under this Agreement, and (ii) in the event the Trustee, on behalf of itself and the Noteholders, seeks or requests adequate protection and such adequate protection is granted in the form of additional
collateral, then the Trustee, on behalf of itself or any of the Noteholders, agrees that Bank shall also be granted a senior Lien on such additional collateral as security for the First Priority Lien Obligations and any such DIP Financing and that
any Lien on such additional collateral securing the Second Priority Lien Obligations shall be subordinated to the Liens on such collateral securing the First Priority Lien Obligations and any such DIP Financing (and all obligations relating thereto)
and any other Liens granted to Bank as adequate protection on the same basis as the other Liens securing the Second Priority Lien Obligations are so subordinated to such First Priority Lien Obligations under this Agreement. 
 6.5 No Waiver. Nothing contained herein shall prohibit or in any way limit Bank from objecting in any Insolvency or Liquidation
Proceeding or otherwise to any action taken by the Trustee or any of the Noteholders, including, without limitation, the seeking by the Trustee or any Noteholder of adequate protection or the asserting by the Trustee or any Noteholder of any of its
rights and remedies under the Noteholder Documents or otherwise. No failure or delay on the part of any party hereto in the exercise of any power, right, remedy or privilege under this Agreement shall impair such power, right, remedy or privilege or
shall operate as a waiver thereof; nor shall any single or partial exercise of any such power, right or privilege preclude any other or further exercise of any other power, right or privilege. The waiver of any such right, power, remedy or privilege
with respect to particular facts and circumstances shall not be deemed to be a waiver with respect to other facts and circumstances. 
 6.6 Preference Issues. If Bank is required in any Insolvency or Liquidation Proceeding or otherwise to turn over or otherwise pay to the estate of the Borrower or any Subsidiary of the Borrower any amount (a
“Recovery”), then the First Priority Lien Obligations 

  

 18 

 
shall be reinstated to the extent of such Recovery and Bank shall be entitled to a Discharge of First Priority Lien Obligations with respect to all such
recovered amounts. If this Agreement shall have been terminated prior to such Recovery, this Agreement shall be reinstated in full force and effect, and such prior termination shall not diminish, release, discharge, impair or otherwise affect the
Second Priority Lien Obligations of the parties hereto from such date of reinstatement. 
 6.7 No Objection to Certain Other Matters.
In connection with any Insolvency or Liquidation Proceeding, until the Discharge of the First Priority Lien Obligations, the Trustee on behalf of itself and the Noteholders, agrees that none of them will raise any objection to and will not contest
(or support any person in objecting to or contesting) (a) to the extent constituting First Priority Lien Obligations, the payment of interest, fees, expenses or other amounts to the Bank under Section 506(b) or 506(c) of the Bankruptcy
Code or otherwise, and (b) any “carve-out” for professional and United States Trustee fees agreed to by Bank. 
 6.8 Proofs of Claim and Plans of Reorganization. Notwithstanding anything to the contrary
in this Section 6, in any Insolvency or Liquidation Proceeding, the Trustee and the Noteholders may (a) file any necessary responsive or defensive pleadings in opposition to any motion, claim, adversary proceeding or other pleading made by
any person objecting to or otherwise seeking the disallowance of the claims of the Trustee and the Noteholders, including any claims secured by the Common Collateral, if any, in each case in accordance with the terms of this Agreement (it being
agreed nothing in the foregoing permits the Trustee or any Noteholder to file any pleadings adverse to Bank), (b) vote on any plan of reorganization, provided that the Trustee and the Noteholders will not vote to accept (and will be deemed to
have voted to reject) any plan of reorganization which either (i) does not pay the First Priority Lien Obligations in full in cash or (ii) is not accepted by Bank, (c) file any proof of claim, make other filings and make any arguments
and motions that are, in each case, in accordance with the terms of this Agreement, with respect to the Second Priority Lien Obligations and the Common Collateral, or propose debtor in possession financing if debtor in possession financing is not
then being proposed by Bank or by a source approved by Bank, and (iv) cash bid at any Section 363 hearing or with respect to any other disposition of Common Collateral. Notwithstanding clause (c) above, in the event the Trustee and
the Noteholders have not filed a proof of claim prior to the tenth (10th) business day prior to the date claims
may last be filed in any such Insolvency or Liquidation Proceeding, Bank may file such proof of claim on behalf of the Trustee and the Noteholders and is hereby authorized to do so. To the extent the Trustee or any Noteholder attempts to vote or
votes in favor of any plan or reorganization in a manner inconsistent with this Section 6.8, the Trustee and such Noteholder irrevocably agree that Bank shall be, and shall be deemed, such party’s “authorized agent” under
Bankruptcy Rules 3018(c) and 9010, and that Bank shall be authorized and entitled to submit a superseding ballot on behalf of the Trustee and the Noteholders that is consistent herewith. Nothing in this Section 6.8 shall be deemed to be a
waiver by Bank of any restriction which may otherwise be set forth herein on the filing of any pleadings adverse to Bank. 
 6.9 Separate
Classification of Obligations. The Trustee, on behalf of itself and each Noteholder, acknowledges and agrees that (a) the grants of Liens pursuant to the Senior Lender Collateral Documents and the Noteholder Collateral Documents constitute
two separate and 

  

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distinct grants of liens and (b) because of, among other things, their differing rights in the Common Collateral, the claims of the Trustee and the
Noteholders are fundamentally different from the claims of Bank and must be separately classified in any plan of reorganization proposed or adopted in an Insolvency or Liquidation Proceeding. To further effectuate the intent of the parties as
provided in the immediately preceding sentence, if it is held that the claims of Bank and the Trustee or Noteholders in respect of the Common Collateral constitute only one secured claim (rather than separate classes of senior and junior secured
claims), then the Trustee, on behalf of itself and the Noteholders, hereby acknowledges and agrees that all distributions shall be made as if there were separate classes of senior and junior secured claims against the Borrower and its Subsidiaries
in respect of the Common Collateral with the effect being that, to the extent that the aggregate value of the Common Collateral is sufficient (for this purpose ignoring all claims held by the Trustee and the Noteholders), Bank shall be entitled to
receive, in addition to amounts distributed to it in respect of principal, pre-petition interest and other claims, all amounts owing in respect of post-petition interest, to the extent that such amounts constitute First Priority Lien Obligations,
before any distribution is made in respect of the claims held by the Trustee and the Noteholders, with the Trustee, on behalf of itself and the Noteholders, hereby acknowledging and agreeing to turn over to Bank amounts otherwise received or
receivable by them to the extent necessary to effectuate the intent of this sentence, even if such turnover has the effect of reducing the claim or recovery of the Trustee and the Noteholders. 
 6.10 Section 363 and Section 364 Rights. To the extent that the Trustee or a Noteholder has or acquires rights under Section 363 or
Section 364 of the Bankruptcy Code with respect to any of the Common Collateral, the Trustee, on behalf of itself and the Noteholders, hereby agrees not to assert any of such rights without the prior written consent of Bank; provided that if
requested by Bank, the Trustee shall timely exercise such rights in the manner requested by Bank, including any rights to payments in respect of such rights. 
 6.11 Subordination Agreement under Bankruptcy Code. This Agreement and each of the provisions hereof, each which the parties hereto expressly acknowledge is a “subordination agreement” under
Section 510(a) of the Bankruptcy Code, shall be effective before and after the commencement of an Insolvency or Liquidation Proceeding. 
 Section 7. Reliance; Waivers; etc. 
 7.1 Reliance. 
 (a) The consent by Bank to the execution and delivery of the Noteholder Documents and the grant to the Trustee on behalf of the Noteholders of a Lien
on the Common Collateral and all loans and other extensions of credit made or deemed made on and after the date hereof by Bank to the Borrower shall be deemed to have been given and made in reliance upon this Agreement.
 (b) Bank acknowledges that it has, independently and without reliance on the Trustee or any Noteholder, and based on documents and information
deemed by it appropriate, made its own credit analysis and decision to enter into this Agreement and the transactions contemplated hereby and by the Senior Lender Documents and it will continue to make its own credit decisions in taking or not
taking any action under the Senior Lender Documents or this Agreement. 
  

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 7.2 No Warranties or Liability.
 (a) The Trustee, on behalf of itself and the Noteholders, acknowledges and agrees that Bank has made no express or implied representation or
warranty, including, without limitation, with respect to the execution, validity, legality, completeness, collectability or enforceability of any of the Senior Lender Documents. Bank will be entitled to manage and supervise its loans and
extensions of credit to the Borrower in accordance with law and as it may otherwise, in its sole discretion, deem appropriate, and Bank may manage its loans and extensions of credit without regard to any rights or interests that the Trustee or any
of the Noteholders have in the Common Collateral or otherwise, except as otherwise provided in this Agreement. Bank shall not have any duty to the Trustee or any of the Noteholders to act or refrain from acting in a manner which allows, or results
in, the occurrence or continuance of an event of default or default under any agreements with the Borrower (including, without limitation, the Noteholder Documents), regardless of any knowledge thereof which it may have or be charged with.

 (b) Bank acknowledges and agrees that each of the Trustee and the Noteholders have made no express or implied representation or
warranty, including, without limitation, with respect to the execution, validity, legality, completeness, collectability or enforceability of any of the Noteholder Documents. 
 7.3 No Waiver of Lien Priorities. 
 (a) No right of Bank to enforce any provision of this Agreement shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Borrower or by any act or failure to act by Bank, or by any
noncompliance by any Person with the terms, provisions and covenants of this Agreement, any of the Senior Lender Documents or any of the Noteholder Documents, regardless of any knowledge thereof which Bank, or any of them, may have or be otherwise
charged with. 
 (b) Without in any way limiting the generality of the foregoing paragraph (but subject to the rights of the Borrower
under the Senior Lender Documents), the Bank may, at any time and from time to time, without the consent of, or notice to, the Trustee or any Noteholder, without incurring any liabilities to the Trustee or any Noteholder and without impairing or
releasing the lien priorities and other benefits provided in this Agreement (even if any right of subrogation or other right or remedy of the Trustee or any Noteholder is affected, impaired or extinguished thereby) do any one or more of the
following: 
 (i) change the manner, place or terms of payment or change or extend the time of payment of, or renew,
exchange, amend, increase or alter, the terms of the Senior Lender Documents or any Lien in any Senior Lender Collateral or guaranty thereof or any liability of the Borrower, or any liability incurred directly or indirectly in respect thereof
(including, without limitation, any 

  

 21 

 
increase in or extension of the First Priority Lien Obligations, without any restriction as to the amount, tenor or terms of any such increase or extension)
or otherwise amend, renew, exchange, extend, modify or supplement in any manner any Liens held by Bank, the First Priority Lien Obligations or any of the Senior Lender Documents; 
 (ii) sell, exchange, release, surrender, realize upon, enforce or otherwise deal with in any manner and in any order any part of the
Senior Lender Collateral or any liability of the Borrower or its Subsidiaries to Bank, or any liability incurred directly or indirectly in respect thereof; 
 (iii) settle or compromise any First Priority Lien Obligations or any other liability of the Borrower or its Subsidiaries or any security therefor or any liability incurred directly or indirectly in respect
thereof and apply any sums by whomsoever paid and however realized to any liability (including, without limitation, the First Priority Lien Obligations) in any manner or order; and 
 (iv) exercise or delay in or refrain from exercising any right or remedy against the Borrower or its Subsidiaries or any security or
any other Person, elect any remedy and otherwise deal freely with the Borrower or its Subsidiaries and the Senior Lender Collateral and any security and any guarantor or any liability of the Borrower or any guarantor to the Bank or any liability
incurred directly or indirectly in respect thereof. 
 (c) The Trustee, on behalf of itself and the Noteholders, also agrees that Bank
shall have no liability to the Trustee or any Noteholder, and the Trustee, on behalf of itself and the Noteholders, hereby waives any claim against Bank, arising out of any and all actions which Bank may take or permit or omit to take with respect
to: (i) the Senior Lender Documents, (ii) the collection of the First Priority Lien Obligations, or (iii) the foreclosure upon, or sale, liquidation or other disposition of, the Senior Lender Collateral. The Trustee, on behalf of
itself and the Noteholders, agrees that Bank has no duty to them in respect of the maintenance or preservation of the Senior Lender Collateral, the First Priority Lien Obligations or otherwise. 
 (d) The Trustee, on behalf of itself and the Noteholders, agrees not to assert and hereby waives, to the fullest extent permitted by law, any right
to demand, request, plead or otherwise assert or otherwise claim the benefit of, any marshalling, appraisal, valuation or other similar right that may otherwise be available under applicable law or any other similar rights a junior secured creditor
may have under applicable law. 
 7.4 Obligations Unconditional. All rights, interests, agreements and obligations of Bank
and the Trustee and the Noteholders, respectively, hereunder shall remain in full force and effect irrespective of: 
 (a) any lack of
validity or enforceability of the Senior Lender Documents or any Noteholder Documents; 
  

 22 

 (b) any change in the time, manner or place of payment of, or in any other terms of, all or any of
the First Priority Lien Obligations or Obligations, or any amendment or waiver or other modification, including, without limitation, any increase in the amount thereof up to the Maximum Amount, whether by course of conduct or otherwise, of the terms
of the Senior Facility or any other Senior Lender Document or of the terms of the Indenture or any other Noteholder Document; 
 (c) any
exchange of any security interest in any Common Collateral or any other collateral, or any amendment, waiver or other modification, whether in writing or by course of conduct or otherwise, of all or any of the First Priority Lien Obligations or
Obligations or any guarantee thereof; 
 (d) the commencement of any Insolvency or Liquidation Proceeding in respect of the Borrower or
any Subsidiary of the Borrower; or 
 (e) any other circumstances which otherwise might constitute a defense available to, or a
discharge of, the Borrower or any Subsidiary of the Borrower in respect of the First Priority Lien Obligations, or of the Trustee or any Noteholder in respect of this Agreement. 
 Section 8. Miscellaneous. 
 8.1 Conflicts. In the event of any conflict between the provisions of this Agreement and the provisions of the Senior Lender Documents or the Noteholder Documents, the provisions of this Agreement shall govern. 

8.2 Continuing Nature of this Agreement. This Agreement shall continue to be effective until the Discharge of First Priority Lien
Obligations shall have occurred. This is a continuing agreement of lien subordination and Bank may continue, at any time and without notice to the Trustee or any Noteholder, to extend credit and other financial accommodations and lend monies to or
for the benefit of the Borrower constituting First Priority Lien Obligations on the faith hereof. The Trustee, on behalf of itself and the Noteholders, hereby waives any right it may have under applicable law to revoke this Agreement or any of the
provisions of this Agreement. The terms of this Agreement shall survive, and shall continue in full force and effect, in any Insolvency or Liquidation Proceeding. 
 8.3 Amendments; Waivers. No amendment, modification or waiver of any of the provisions of this Agreement by the Trustee or Bank shall be deemed to be made unless the same shall be in writing signed on
behalf of the Noteholders by the Trustee or a majority in interest of principal amount outstanding under the Notes or by the Bank or their authorized agents and each waiver, if any, shall be a waiver only with respect to the specific instance
involved and shall in no way impair the rights of the parties making such waiver in any other respect or at any other time. The Borrower shall not have any right to amend, modify or waive any provision of this Agreement without the consent of the
Trustee or a majority in interest in principal amount of the Notes outstanding or Bank, as applicable, nor shall any consent or signed writing be required of Borrower to effect any amendment, modification or waiver of any provision of this
Agreement, except that no amendment, modification or waiver affecting any obligation or right of the Borrower hereunder shall be made without the consent of the Borrower. 
  

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 8.4 Information Concerning Financial Condition of the Borrower and its
Subsidiaries. Bank shall be responsible for keeping itself informed of (a) the financial condition of the Borrower and its Subsidiaries and all endorsers and/or guarantors of the Second Priority Lien Obligations or the First Priority
Lien Obligations and (b) all other circumstances bearing upon the risk of nonpayment of the Second Priority Lien Obligations or the First Priority Lien Obligations. The Bank shall have no duty to advise the Trustee or any Noteholder of
information known to it regarding such condition or any such circumstances or otherwise. In the event the Bank in its sole discretion undertakes at any time or from time to time to provide any such information to the Trustee or any Noteholder, it
shall be under no obligation (x) to provide any additional information or to provide any such information on any subsequent occasion, (y) to undertake any investigation or (z) to disclose any information which, pursuant to accepted or
reasonable commercial finance practices, such party wishes to maintain confidential. 
 8.5 Subrogation. The Trustee, on
behalf of itself and the Noteholders, hereby waives any rights of subrogation it may acquire as a result of any payment hereunder until the Discharge of First Priority Lien Obligations has occurred. 
 8.6 Application of Payments. All payments received by Bank may be applied, reversed and reapplied, in whole or in part, to such part of
the First Priority Lien Obligations as Bank, in its sole discretion, deems appropriate. 
 8.7 Consent to Jurisdiction; Waivers.
The parties hereto consent to the exclusive jurisdiction of any state and federal courts located in the County of Santa Clara, State of California, and consent that all service of process may be made by registered mail directed to such party as
provided in Section 8.8 below for such party. The parties hereto waive any objection to any action instituted hereunder based on forum non conveniens, and any objection to the venue of any action instituted hereunder. Each of the parties hereto
waives any right it may have to trial by jury in respect of any litigation based on, or arising out of, under or in connection with this Agreement, or any course of conduct, course of dealing, verbal or written statement or action of any party
hereto. 
 8.8 Notices. All notices to the Noteholders and Bank permitted or required under this Agreement may be sent to
the Trustee and Bank, respectively. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telecopied, electronically mailed or sent
by courier service or U.S. mail and, subject to Section 8.18 below, shall be deemed to have been given when delivered in person or by courier service, upon receipt of a telecopy or electronic mail or, as to notice provided to Borrower, four
business days after deposit in the U.S. mail (registered or certified, with postage prepaid and properly addressed). For the purposes hereof, the addresses of the parties hereto shall be as set forth below each party’s name on the signature
pages hereto, or, as to each party, at such other address as may be designated by such party in a written notice to all of the other parties. 
  

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 8.9 Further Assurances. The Trustee, on behalf of itself and the Noteholders, agrees
that it shall take such further action and shall execute and deliver to Bank such additional documents and instruments (in recordable form, if requested) as Bank may reasonably request to effectuate the terms of and the lien priorities contemplated
by this Agreement. 
 8.10 Governing Law; Jury Waiver.
 (a) This Agreement shall be interpreted, and the rights and liabilities of the parties bound hereby determined, in accordance with the laws of the State
of New York. 
 (b) THE UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE BUT THAT IT MAY BE WAIVED UNDER
CERTAIN CIRCUMSTANCES. TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, WAIVES ANY RIGHT TO
TRIAL BY JURY IN THE EVENT OF LITIGATION ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER DOCUMENT, INSTRUMENT OR AGREEMENT BETWEEN THE UNDERSIGNED PARTIES. 
 8.12 Refinancing of First Priority Lien Obligations. In the event that any person(s) (“Refinancing Senior Lenders”) at any time hereafter extends credit to the Borrower and the proceeds of
such extension of credit are applied to the payment and performance in full of all of the First Priority Lien Obligations then all indebtedness and liabilities of the Borrower and the Subsidiaries to the Refinancing Senior Lenders shall be entitled
to the benefits of this Agreement to the same extent as the First Priority Lien Obligations and Bank, provided such Refinancing Senior Lenders (or Refinancing Senior Lender) agree in writing to be bound hereby, and the Trustee, the Noteholders, and
the Borrower shall promptly execute and deliver any agreement which the Refinancing Senior Lenders shall reasonably request with respect thereto confirming the terms and conditions of this Agreement in favor of the Refinancing Senior Lenders. Any
reference contained in this Agreement to “Bank” shall be deemed to include any holder of First Priority Lien Obligations at any time, including, without limitation, any Refinancing Senior Lender. 
 8.13 Section Titles; Time Periods. The section titles contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of this Agreement. In the computation of time periods, unless otherwise specified, the word “from” means “from and including” and each of the words “to” and
“until” means “to but excluding” and the word “through” means “to and including”. 
 8.14 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be an original and all of which shall together constitute one and the same document. 
  

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 8.15 Authorization. By its signature, each Person executing this Agreement on behalf of
a party hereto represents and warrants to the other parties hereto that it is duly authorized to execute this Agreement. 
 8.16 No
Third Party Beneficiaries. This Agreement and the rights and benefits hereof shall inure to the benefit of Bank and its successors and assigns and, to the extent applicable, the Trustee and the Noteholders and their respective permitted
successors and assigns. No other Person, including the Borrower and its Subsidiaries, shall have or be entitled to assert rights or benefits hereunder.
 8.17 Effectiveness. This Agreement shall become effective when executed and delivered by the parties hereto. This Agreement shall be effective both before and after the commencement of any
Insolvency or Liquidation Proceeding. All references to the Borrower shall include the Borrower as debtor and debtor-in-possession and any receiver or trustee for the Borrower in any Insolvency or Liquidation Proceeding. 
 8.18 Trustee. The Trustee shall not be deemed to owe any fiduciary duty to Bank. The Trustee shall not be liable to any Noteholders if the
Trustee in good faith mistakenly pays over or distributes to Bank or to any other person cash, property or securities to which any holders of First Priority Lien Obligations shall be entitled by virtue of this Agreement or otherwise. With respect to
Bank, the Trustee undertakes to perform or to observe only those covenants and obligations specifically set forth in this Agreement and no implied covenants or obligations shall be read into this Agreement against the Trustee. The
Trustee hereby disclaims any representation or warranty to Bank concerning the perfection of the liens and security interests granted hereunder or in the value of any of the Common Collateral. Bank agrees that it will give the Trustee
prompt notice of the occurrence of the Discharge of the First Priority Lien Obligations; provided, however, the failure to give such notice will not impair any rights of Bank hereunder or the duties and obligations of the Trustee
hereunder. Notwithstanding the provisions of Section 8.8 above, any notice to the Trustee will be effective only upon receipt. 
 8.19 Severability. Wherever possible, each provision hereof shall be interpreted in such a manner as to be effective and valid under applicable law. In case any one or more of the provisions contained herein shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such provision or provisions shall be ineffective to the extent, but only to the extent, of such invalidity, illegality or unenforceability, and the remainder of the provisions of this
Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party
hereto. 
 8.20 Trustee Protections. In connection with its execution hereof and acting hereunder, each of the Trustee and the
Collateral Agent, is entitled to all of the rights, privileges, protections, immunities, benefits and indemnities provided to each of them by Borrower under the Indenture and the Noteholder Security Agreement, provided, however, that none of the
afore-mentioned rights, duties, privileges, protections, immunities and indemnities shall (i) impose any obligations on Bank, (ii) limit any obligations owing by any party to Bank, nor (iii) act as a limitation any rights or remedies
of Bank hereunder. 
  

 26 

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

  

			
	COMERICA BANK, as Bank
		
	By:	 	 /s/ Robert Shutt

	Name:	 	 Robert Shutt

	Title:	 	 SVP

	
	 Address: 75 East Trimble Road
 Mail Code
4770
 San Jose, CA 95131

	FAX: (408) 556-5091
	
	with a copy to:
	
	 Comerica Bank
 226 Airport Parkway, Suite
100
 San Jose, CA 95110

	Attn: Robert Shutt, Senior Vice President and Manager
	FAX: (408) 451-8568
	Attn: Portfolio Manager
	
	THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee and as Collateral Agent
		
	By:	 	 /s/ Raymond Torres

	Name:	 	 Raymond Torres

	Title:	 	 Assistant Vice President

	
	 Address:
 The Bank of New York
 101 Barclay Street
 New York, New York 10286

  

 27 

			
	Telephone:
	Facsimile:
	
	ELECTROGLAS, INC., as Borrower
		
	By:	 	 /s/ Tom Brunton

	Name:	 	 Tom Brunton

	Title:	 	 CFO

	
	 Address:
 5729 Fontanoso Way
 San Jose, CA 95138
 Attn: Chief Financial Officer

	FAX: (408) 528-3562
	
	ELECTROGLAS INTERNATIONAL, INC.
		
	By:	 	 /s/ Tom Brunton

	Name:	 	 Tom Brunton

	Title:	 	 CFO

	
	 Address:
 5729 Fontanoso Way
 San Jose, CA 95138
 Attn: Chief Financial Officer

	FAX: (408) 528-3562

  

 28

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